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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on October 18, 2017.

Registration No. 333-            

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



SendGrid, Inc.
(Exact name of registrant as specified in its charter)



Delaware
(State or other jurisdiction of
incorporation or organization)
  7372
(Primary Standard Industrial
Classification Code Number)
  27-0554600
(I.R.S. Employer
Identification Number)



1801 California Street, Suite 500
Denver, CO 80202
(888) 985-7363

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)



Sameer Dholakia
Chief Executive Officer
1801 California Street, Suite 500
Denver, CO 80202
(888) 985-7363

(Name, address, including zip code and telephone number, including area code, of agent for service)

Copies to:

Michael L. Platt
Eric C. Jensen
Matthew P. Dubofsky
Cooley LLP
380 Interlocken Crescent, Suite 900
Broomfield, CO 80021
(720) 566-4000

 

Michael Tognetti
General Counsel
SendGrid, Inc.
1801 California Street, Suite 500
Denver, CO 80202
(888) 985-7363

 

Sarah K. Solum
Davis Polk & Wardwell LLP
1600 El Camino Real
Menlo Park, CA 94025
(650) 752-2000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.



           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:     o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o   Accelerated filer  o   Non-accelerated filer  ý
(Do not check if a
smaller reporting company)
  Smaller reporting company  o

Emerging growth company  ý

           If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.     o



CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities
being Registered

  Proposed
Maximum Aggregate
Offering Price (1)(2)

  Amount of
Registration
Fee

 

Common Stock, $0.001 par value per share

  $100,000,000   $12,450

 

(1)
Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act, as amended.

(2)
Includes the aggregate offering price of additional shares that the underwriters have the option to purchase to cover over-allotments, if any.



            The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


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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 we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)
Issued October 18, 2017

                         Shares

LOGO

COMMON STOCK



SendGrid, Inc. is offering                             shares of its common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $               and $               per share.



We have applied to list our common stock on the New York Stock Exchange under the symbol "SEND."



We are an "emerging growth company" as defined under the federal securities laws. Investing in our common stock involves risks. See "Risk Factors" beginning on page 14.



PRICE $               A SHARE



 
 
Price to
Public
 
Underwriting
Discounts and
Commissions (1)
 
Proceeds to
SendGrid

Per Share

  $             $             $          

Total

  $                      $                      $                   

(1)
See "Underwriters" for a description of the compensation payable to the underwriters.

We have granted the underwriters the right to purchase up to an additional                           shares of common stock to cover over-allotments.

The Securities and Exchange Commission and any state securities regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on                           , 2017.

Morgan Stanley

  J.P. Morgan


William Blair

 

KeyBanc Capital Markets

 

Piper Jaffray

 

Stifel

   

                           , 2017


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GRAPHIC


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TABLE OF CONTENTS

 
  Page  

Prospectus Summary

    1  

Risk Factors

    14  

Special Note Regarding Forward-Looking Statements

    47  

Market and Industry Data

    49  

Use of Proceeds

    50  

Dividend Policy

    51  

Capitalization

    52  

Dilution

    55  

Selected Consolidated Financial Data

    57  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    61  

Letter from Our CEO

    88  

Business

    92  

Management

    111  

Executive Compensation

    119  

Certain Relationships and Related Party Transactions

    131  

Principal Stockholders

    134  

Description of Capital Stock

    137  

Shares Eligible for Future Sale

    142  

Material U.S. Federal Income Tax Considerations for Certain Non-U.S. Holders

    144  

Underwriters

    148  

Legal Matters

    156  

Experts

    156  

Where You Can Find Additional Information

    156  

Index to Financial Statements

    F-1  



        Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations, and prospects may have changed since that date.

         Until                    , 2017 (25 days after the commencement of this offering), all dealers that buy, sell, or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

        For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.

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PROSPECTUS SUMMARY

         This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our common stock. You should carefully consider, among other things, our consolidated financial statements and related notes and the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. Unless the content otherwise requires, the terms "SendGrid," "company," "our," "us," and "we" in this prospectus refer to SendGrid, Inc. and where appropriate our consolidated subsidiaries.


SENDGRID, INC.

Overview

        We are a leading digital communication platform, enabling businesses to engage with their customers via email reliably, effectively and at scale. Our cloud-based platform allows for frictionless adoption and immediate value creation for businesses, providing their developers and marketers with the tools to seamlessly and effectively reach their customers using email. Since our inception we have processed more than one trillion emails.

        Increasingly, today's transactions are digital. They happen online and are often automatic and recurring. Consumers want a seamless experience and have come to expect that their online activity will be recorded in their email inbox. Email serves as the system of record for a consumer's digital life, delivering purchase receipts, shipping notifications, account information, social media updates, reservations and website login data. Email is the primary communication channel in the digital world, with an estimated 125 billion commercial emails sent every day, according to a 2017 Radicati Group report. Email is also a trusted marketing tool for businesses. An email-based promotion can reach the right user at the right time, with a high degree of certainty that the user will see it. According to The Inbox Report 2017 , in 2016 nearly 80% of Americans checked their email daily. According to a 2015 Direct Marketing Association report, email demonstrated the highest return on investment among all forms of digital communication, generating $38 in revenue for every $1 invested.

        While email offers a compelling value proposition for businesses, effective email delivery at scale is complex and difficult. Inbox service providers, including Google Gmail, Microsoft Outlook and Yahoo! Mail, evaluate incoming email and block the delivery of harmful or unwanted email. However, these filters can also prevent the delivery of wanted email. According to a 2017 Return Path report, only 80% of wanted email reached its intended recipient. To manage email delivery on their own, businesses must understand the complexities associated with both sending millions or billions of transactional and marketing emails and the unique dynamics of numerous inbox service providers. Dedicated servers and databases, domain expertise, continuous monitoring of email protocols, and a team of people are all necessary to maintain a robust internally-developed email communications system. The use of developer resources in this effort can reduce businesses' investment in product innovation and other priorities. Without an effective, easy to use system, marketers seeking to reach customers via email can also expend significant time and resources without accomplishing their marketing goals.

        SendGrid was founded by developers who were frustrated with their own experiences in managing email delivery. They wanted to build a system "that just worked" for developers and allowed them to focus on strategic business activities. They developed a robust technology platform incorporating their domain expertise and created an application programming interface, or API, that allowed for easy integration by businesses. We built our business model around serving the developer, including self-service adoption and a frictionless user experience. We have extended this platform over time to serve the similar email delivery needs of marketers.

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        We offer our customers three services: our Email API; Marketing Campaigns; and Expert Services. Our Email API service allows developers to use our API in their preferred development framework to leverage our platform to add email functionality to their applications within minutes. This service enables businesses to send thousands or billions of emails, all with the same high level of service and reliability, and incorporates proprietary technology and domain expertise to significantly improve deliverability rates. Our Marketing Campaigns service allows marketers to upload and manage customer contact lists, create and test email templates, and then execute and analyze multi-faceted email campaigns that engage customers and drive growth. Our Expert Services help businesses further optimize their email delivery. With our platform, businesses can achieve industry leading email deliverability that translates into higher brand engagement with their customers.

        Our category leadership, self-service model and company culture have enabled us to attract and retain customers and employees, and continue to develop innovative solutions for email delivery. We deliver our services through a self-service cloud-based subscription model, where businesses primarily sign up for our services through our website. We offer transparent and affordable pricing, generally on a per month basis by volume of email and typically paid by credit card. In addition, we have robust documentation for onboarding and ongoing usage. This self-service delivery model has enabled us to rapidly attract customers while operating our business efficiently.

        Businesses of all sizes and across industries depend on our digital communication platform. As of June 30, 2017, we had over 55,000 customers globally, an increase of 38% year over year. We believe a relatively small number of businesses have more than one unique paying account with us, and we count each of these accounts as a separate customer. While we serve large enterprises, we primarily serve small and midmarket businesses, or SMBs, that rely on email to power their businesses and are rapidly adopting cloud services. Our self-service model has allowed us to efficiently acquire SMB customers that historically have not been a focus for companies that depend on large enterprise sales forces. Our robust platform and the increasing breadth of our services allow us to scale with our customers as they grow.

        We have achieved significant growth in recent periods. For 2014, 2015, 2016 and the six months ended June 30, 2017:

    our total revenue was $42.8 million, $58.5 million, $79.9 million, and $51.8 million, respectively;

    our net loss was $13.0 million, $5.9 million, $3.9 million, and $3.1 million, respectively;

    our adjusted net income (loss) was $(12.2) million, $(4.5) million, $(1.4) million, and $0.6 million, respectively;

    our net cash flows from operating activities were $(9.6) million, $1.2 million, $9.7 million, and $5.1 million, respectively; and

    our free cash flow was $(13.6) million, $(4.0) million, $(2.5) million, and $(0.9) million, respectively.

        See "Selected Consolidated Financial Data" for more information on our adjusted net income (loss) and free cash flow and a reconciliation to net income (loss) and net cash flows from operating activities, respectively.

Industry Trends

    Email Is the Primary Commercial Communications Channel in the Digital World

        Businesses increasingly interact with their customers through digital channels. Many emerging businesses are digital first. They primarily engage with customers through online and mobile channels. Customers of these businesses rarely interact with sales people, collect paper receipts, track orders over the phone or mail in their bills. These customers depend on automatic email notification of their transactions and rely on email as their system of record for their transactions.

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        Businesses engage with their customers through email because they can reach a wide audience and personalize interactions, while trusting emails will reach their target recipients. Businesses now analyze demographic information, buying behavior and preferences generated by the digital footprints of consumers in order to create unique digital experiences. These dynamics have created the opportunity for more frequent customer engagement through more personalized, targeted marketing.

    Email Is Highly Effective at Driving Customer Engagement and Revenue

        Email accounts are widespread and each is personal to its owner and consistent across time, making email a highly effective method of communication between businesses and consumers. Many individuals change their home address more frequently than their email address. Furthermore:

    The number of email users worldwide will exceed 3.7 billion in 2017 (source: Radicati Group 2017 report).

    The estimated average number of email accounts per email user in 2017 was 1.7 (source: Radicati Group 2017 report).

    67% of consumers between the ages of 13-50 believe that email is essential to their lives and 74% said email is their preferred communication method with companies (source: 2017 SendGrid commissioned report).

        Marketers rely on email because it is effective at driving revenue.

    The median return on investment for email marketing is nearly five times higher than the median return on investment for social media marketing (source: eMarketer 2016).

    Email generates $38 in revenue for every $1 spent on email marketing (source: Direct Marketing Association 2015).

    Effective Email Delivery Is Difficult

        While email offers a compelling value proposition, businesses struggle to achieve effective email delivery due to a number of factors.

    The Email Recipient's Side

        Inbox service providers, including Google Gmail, Microsoft Outlook and Yahoo! Mail, use sophisticated filters to analyze incoming email and prevent the delivery of harmful or unwanted email, often blocking wanted email as well. The cost of delivery failure includes not only the infrastructure expense associated with processing the email, but more importantly, the lost revenue for a business from a new or existing customer.

    The Email Sender's Side

        Maintaining an email delivery system is complex. Domain expertise, dedicated resources and the need to satisfy complex technical requirements are all required to operate an effective email delivery system, particularly at scale.

        To deliver email at scale, businesses need expertise and dedicated resources. The complexities of email delivery include building and maintaining a sender reputation and navigating that reputation across inbox service providers, spam houses, blacklist managers and industry watchdogs. Email delivery at scale also requires dedicated infrastructure and management of contact lists as well as an understanding of protocols to communicate with the recipient servers.

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    Businesses Are Adopting Cloud Services to Reduce Complexity and Focus on Core Functions

        Technological innovation has enabled businesses to improve efficiency, but it has also lowered barriers to entry. Businesses of all sizes must adapt quickly to changing market needs in order to grow and compete. As a result, businesses are turning to cloud services to manage complex and costly parts of their IT infrastructure and operations. Cloud services can seamlessly provide many of the critical, but non-core, components for a business, allowing it to maximize the value of internal resources by focusing on its core differentiating competencies.

    Frictionless, Self-Service Models Are Driving High Adoption of Cloud Services

        The ease of cloud service delivery is driving a move from multi-million-dollar capital purchases of on-premises IT infrastructure to recurring lower-cost subscriptions for cloud services. This change has increased the influence of line of business owners, developers and marketers in technology purchasing decisions compared to a traditional CIO-led purchasing process. With cloud services, developers and marketers exert greater control over how they allocate their resources.

    Businesses Need to Effectively and Efficiently Send Wanted Email at Scale

        Email is critical to building and growing customer relationships but requires significant resources and expertise to manage the complex underlying infrastructure. The developers and marketers who are driving purchasing decisions of cloud services need a transactional and marketing email solution that possesses the following characteristics:

    Reliability : continuous uptime to send secure emails at any time

    Effectiveness : high delivery rates and high consumer engagement

    Scalability : ability to send billions of emails across a range of customer use cases, with the same level of effectiveness

    Ease of Adoption and Integration : self-service onboarding and integration

    Affordability : lower, predictable cost versus an internal system and accessible to businesses of all sizes

    Platform Extensibility : integrated transactional and marketing email capabilities

    Services and Support : expert help to obtain desired outcomes and enhance email marketing capabilities

Our Market Opportunity

        Businesses of all sizes and across industries use email to communicate with customers and can benefit from an easy to use, highly effective email service. While we have customers of various sizes, the majority of our customers today are SMBs that are digital first and rely on cloud services to operate their businesses.

        We estimate our total addressable market for both transactional and marketing emails was $11 billion in 2016. See the sections titled "Market and Industry Data" and "Business—Our Market Opportunity."

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Benefits of Our Solution

        Key benefits of our solution include:

    Platform Reliability

        Businesses rely on our platform to power their customer email communications. We utilize a robust global infrastructure that includes multiple co-located data centers and public cloud resources to host our platform. In 2016, our platform was available for our customers to send email 99.995% of the time.

    Proprietary Technology and Domain Expertise Enables Effective Email Delivery

        We significantly improve email deliverability through embedded intellectual property in our platform and industry-leading domain expertise. Our platform is designed to operate at scale across multiple inbox service providers. In the first six months of 2017, we estimate that we achieved a delivery rate of 94%, as compared to a general delivery rate for wanted email of 80% for the 12-month period ended June 30, 2017, as reported by Return Path in 2017. Our delivery rates for 2014, 2015 and 2016 were consistent with our delivery rate for the first six months of 2017. We also offer Expert Services to help our customers achieve the best outcomes for their individual needs.

    Ability to Scale With Customers As They Grow

        Our communication platform provides the same high-quality service to a wide range of businesses, from startups to large enterprises that send significant email volumes. Our Email API service starts with entry-level pricing that supports up to 40,000 emails per month and scales up from there. Our largest customers send more than one billion emails per month.

    Frictionless Adoption for Developers and Marketers

        We make it easy for developers and marketers to adopt our platform using a self-service model. We provide a flexible API setup to easily add email functionality to their applications, as well as comprehensive documentation to help developers write code in their preferred development framework. We have a community of over 2.5 million active users that serves as a resource for questions about our platform. Once a business is using our API for transactional email delivery, it is simple for that business to also use our platform for promotional and personalized email marketing.

    Affordable and Accessible to Businesses of All Sizes

        We offer our Email API service as a monthly subscription, with pricing based on email volume. Businesses can tailor the use of our services for their individual needs, without the need to commit to expensive, multi-year contracts. Our cloud-based services generally provide significant cost savings compared to an internally-developed system and free up internal resources for other tasks.

    Extensible Communications Platform

        Our platform incorporates extensible technology that allows our customers to expand their use cases to improve their customer communications. Our customers benefit from having a single platform for transactional and marketing email, enabling them to manage their customer contact data in a single place, leverage universal design templates and testing systems, and ensure high email deliverability.

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Competitive Strengths

        Our competitive strengths include:

    Easy to Adopt, Self-Service Model

        Our Email API and Marketing Campaigns services are designed to be accessed from our website and immediately useable. By reducing the friction that typically accompanies the purchase of business software and eliminating the need for complicated and costly implementation and training, we believe we attract more customers to try, buy and derive value from our platform. Our self-service model has allowed us to grow our customer base while avoiding the expensive customer acquisition costs typical of high-touch enterprise sales models.

    Market Leadership in Email Service with Strong Brand Association

        We pioneered the market for a cloud-based email API service and continue to invest significant resources to extend our technology leadership and brand awareness in our industry. We believe that the SendGrid brand has become synonymous with email delivery and is recognized as the industry standard for scalability, reliability and deliverability.

    Significant Domain Expertise Around Email

        We have processed over one trillion emails since inception, including over 210 billion emails in the first six months of 2017. We have longstanding relationships and integrations with all major inbox service providers and email industry organizations. These relationships provide us with real-time intelligence and performance feedback that enable us to optimize the deliverability of the emails that we send and anticipate changes in email handling policies.

    Large, Growing and Happy Global Customer Base

        As of June 30, 2017, we had over 55,000 customers globally. Our broad customer base provides us with insight into digital communication trends and activity and results in word-of-mouth recognition that drives traffic to our website.

    Proven and Well-Regarded Leadership Team

        Our senior leadership team has a strong record of success of starting and scaling technology companies, including publicly-traded software companies. We have received numerous external accolades related to our workplace culture, including a 4.8/5.0 rating on Glassdoor as of August 2017.

The SendGrid Culture Defines Who We Are and How We Engage with Customers

        SendGrid's "4H" culture has allowed us to become a dynamic industry creator that attracts great people and consistently ranks as a top place to work. We strive to create an environment where people can have a career-defining experience and do their best work. Our culture is the sum of our values, traditions, beliefs, interactions, behaviors and attitudes, and it is through our culture that we recruit and retain top talent. Our culture is in our "4H's": "Happy," "Hungry," "Humble" and "Honest."

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Our Growth Strategies

        Key components of our growth strategy include:

    Continue to Add Customers to Our Platform

        We believe there is substantial opportunity to expand our customer base both in the United States and internationally as the ubiquity of email and the digital transformation of businesses continue to drive market adoption of our services.

    Expand Platform Features and Functionality and Grow Our Marketing Campaigns Service

        We intend to grow our Marketing Campaigns service by cross-selling into our existing Email API service customer base, acquiring new customers and adding new capabilities and features. Furthermore, while we do not currently provide services in other emerging communications channels, such as messaging/chat platforms, in-app messages, online ads, browser and push notifications, and SMS, we believe that the proliferation of these channels creates further potential growth opportunities over time for us to help our customers optimize their communications across those channels.

    Expand our Strategic Partner Channel

        We have built and plan to continue investing in channel relationships with our strategic partners in order to complement the reach of our own customer acquisition efforts.

    Continue to Grow Internationally

        We generated more than 36% of our revenue in each of the last three years from customers located in international geographies despite having limited international infrastructure and no product localization. We intend to add more physical infrastructure as well as localized platform content and support that will enhance our attractiveness to international customers.

    Pursue Select Acquisitions to Augment Our Features and Functionality

        We intend to continue pursuing acquisitions that we believe will be complementary. For example, we may pursue acquisitions that we believe will enhance our services, accelerate customer acquisition, introduce different distribution channels and add talent and expertise to our organization.

Selected Risks Affecting Our Business

        Investing in our common stock involves risk. You should carefully consider all of the information in this prospectus prior to investing in our common stock. These risks are discussed more fully in the section titled "Risk Factors" beginning on page 14 immediately following this prospectus summary. These risks and uncertainties include, but are not limited to, the following:

    Our recent growth may not be indicative of our future growth and, if we continue to grow, we may not be able to manage our growth effectively.

    If we are unable to sustain our revenue growth rate, we may not achieve or maintain profitability in the future.

    If we are unable to attract new customers, retain existing customers or increase sales both to new and existing customers, our business and results of operations will be affected adversely.

    Our limited operating history in new and developing markets and our rapid growth make it difficult to evaluate our current business and future prospects.

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    If we are unable to increase adoption of our platform through our self-service model, our business, results of operations and financial condition may be adversely affected.

    Our growth depends in part on the success of our strategic relationships with third parties to sell our services.

    Our future success depends in part on our ability to continue to drive adoption of our platform and services by international customers, and our international operations and sales to customers with international operations expose us to risks inherent in international sales.

    If we are not able to maintain and enhance our brand and maintain and increase market awareness of our company and services, then our business, results of operations and financial condition may be adversely affected.

    The market in which we participate is highly competitive and, if we do not compete effectively, our operating results could be harmed.

    If our security measures are breached or unauthorized access to our or our customers' private or proprietary data is otherwise obtained, our platform or services may be perceived as not being secure, our reputation may be severely harmed, customers may reduce the use of or stop using our platform or services, we may incur significant liabilities and we may lose the ability to offer our customers a credit card payment option.

    Our customers' and other users' violation of our policies or other misuse of our platform to transmit offensive or illegal messages, spam, website links to harmful applications or for other fraudulent activity could damage our reputation, and we may face liability for unauthorized, inaccurate or fraudulent information distributed via our platform.

    We have experienced losses in the past, and we may not achieve or sustain profitability in the future.

    Our future quarterly results may fluctuate significantly, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

Corporate Information

        We were incorporated in Delaware in July 2009. Our principal executive offices are located at 1801 California Street, Suite 500, Denver, CO 80202, and our telephone number is (888) 985-7363.

        Our website address is http://sendgrid.com . The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus.

        "SendGrid," the SendGrid logo and other trademarks or service marks of SendGrid appearing in this prospectus are our property. This prospectus contains additional trade names, trademarks, and service marks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies' trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.

Implications of Being an Emerging Growth Company

        The Jumpstart Our Business Startups Act, or the JOBS Act, was enacted in April 2012 with the intention of encouraging capital formation in the United States and reducing the regulatory burden on newly public companies that qualify as "Emerging Growth Companies." We are an emerging growth company within the meaning of the JOBS Act. As an emerging growth company, we may take advantage of certain exemptions from various public reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, certain requirements related to the disclosure

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of executive compensation in this prospectus and in our periodic reports and proxy statements, and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an emerging growth company. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

        We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies, which may make comparison of our financials to those of other public companies more difficult. Additionally, because we have taken advantage of certain reduced reporting requirements, the information contained herein may be different from the information you receive from other public companies in which you hold stock.

        We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a "large accelerated filer," with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of our initial public offering.

        For certain risks related to our status as an emerging growth company, see "Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—We are an 'emerging growth company,' and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors."

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THE OFFERING

Common stock

                      shares

Over-allotment option

 

                    shares

Common stock to be outstanding after this offering

 

                        shares (                        shares, if the underwriters exercise their over-allotment option in full)

Use of proceeds

 

We estimate that the net proceeds from the sale of shares of our common stock that we are selling in this offering will be approximately $             million (or approximately $             million if the underwriters' over-allotment option to purchase additional shares in this offering is exercised in full), based upon an assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

We intend to use the net proceeds we receive from this offering for working capital and other general corporate purposes. We may also use a portion of the net proceeds to make acquisitions or strategic investments, although we do not have any plans for such acquisitions or investments. See the section titled "Use of Proceeds" for additional information.

Concentration of Ownership

 

Our officers, directors and their affiliated funds and each of our stockholders who own greater than 5% of our outstanding common stock and their affiliates, in the aggregate, will beneficially own an aggregate of approximately        % of our outstanding common stock following this offering, assuming no exercise of the underwriters' option to purchase additional shares. As a result, if some of these persons or entities act together, they will have significant influence over the outcome of matters submitted to our stockholders for approval.

Proposed New York Stock Exchange symbol

 

"SEND"

        The number of shares of our common stock that will be outstanding after this offering is based on 32,488,855 shares of our common stock outstanding as of June 30, 2017, and excludes:

    10,057,096 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2017, with a weighted average exercise price of $2.58 per share;

    54,269 shares of our common stock issuable upon conversion of shares of our convertible preferred stock that are subject to an outstanding warrant as of June 30, 2017, with an exercise price of $2.764 per share;

    466,571 shares of our common stock reserved for issuance to fund and support the operations of SendGrid.org, of which none were issued and outstanding as of June 30, 2017;

    617,455 shares of our common stock issuable upon the vesting and settlement of Restricted Stock Units, or RSUs, outstanding as of June 30, 2017;

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                        shares of our common stock to be reserved and available for future issuance under our 2017 Equity Incentive Plan, or 2017 Plan, which will become effective immediately prior to the date of the underwriting agreement for this offering (as more fully described in the section titled "Executive Compensation—Equity Incentive Plans"), including:

    an aggregate of 1,594,046 shares of our common stock reserved for future grants under our 2012 Equity Incentive Plan, or 2012 Plan, which will be added to the shares reserved under our 2017 Plan, plus

    any automatic increases in the number of shares of our common stock reserved for future issuance under our 2017 Plan; and

                        shares of our common stock reserved for issuance under our 2017 Employee Stock Purchase Plan, or 2017 ESPP, which will become effective immediately prior to the date of the underwriting agreement for this offering and contains provisions that automatically increase its share reserve each year, as more fully described in the section titled "Executive Compensation—Equity Incentive Plans."

        Except as otherwise indicated, all information in this prospectus assumes:

    the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 24,535,227 shares of our common stock immediately upon the closing of this offering;

    the conversion of an outstanding warrant to purchase shares of our convertible preferred stock into a warrant to purchase 54,269 shares of our common stock immediately upon the closing of this offering;

    no exercise of outstanding stock options or the outstanding warrant and no settlement of outstanding RSUs after June 30, 2017;

    the filing and effectiveness of our amended and restated certificate of incorporation and the effectiveness of our amended and restated bylaws, each of which will occur in connection with the closing of this offering; and

    no exercise by the underwriters of their option to purchase up to an additional                    shares of our common stock from us to cover over-allotments.

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SUMMARY CONSOLIDATED FINANCIAL DATA

        The following tables summarize our historical consolidated financial data. We have derived the historical consolidated statements of operations data for the years ended December 31, 2014, 2015, and 2016, from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the historical consolidated statements of operations data for the six months ended June 30, 2016 and 2017, and the historical consolidated balance sheet data as of June 30, 2017, from our unaudited interim consolidated financial statements included elsewhere in this prospectus. In management's opinion, we have prepared our unaudited interim consolidated financial statements on the same basis as our audited consolidated financial statements and have included all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial information set forth in those statements. The following summary consolidated financial data should be read in conjunction with the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future and our results for the six months ended June 30, 2017, are not necessarily indicative of the results that may be expected for the full year or any other period.

 
  For the Year Ended December 31,   For the Six Months
Ended June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (In thousands, except per share amounts)
 

Consolidated Statements of Operations Data:

                               

Revenue

  $ 42,776   $ 58,476   $ 79,929   $ 36,157   $ 51,843  

Cost of revenue (1)

    15,187     18,961     21,605     10,603     13,745  

Gross profit

    27,589     39,515     58,324     25,554     38,098  

Operating expenses: (1)

                               

Research and development

    15,290     18,959     21,178     10,343     13,663  

Selling and marketing

    15,260     13,737     21,800     9,954     13,458  

General and administrative

    9,550     12,477     18,920     8,499     13,538  

Loss on disposal of assets

    63     1     27     27     2  

Total operating expenses

    40,163     45,174     61,925     28,823     40,661  

Loss from operations

    (12,574 )   (5,659 )   (3,601 )   (3,269 )   (2,563 )

Other income (expense), net

    (386 )   (195 )   (307 )   (212 )   (571 )

Net loss before provision for income taxes

    (12,960 )   (5,854 )   (3,908 )   (3,481 )   (3,134 )

Provision for income taxes

                     

Net loss

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

Weighted average shares used in computing net loss per share, basic and diluted (1)

    5,194     7,091     7,521     7,476     7,896  

Net loss per share, basic and diluted (1)

  $ (2.50 ) $ (0.83 ) $ (0.52 ) $ (0.47 ) $ (0.40 )

Pro forma weighted average shares outstanding (unaudited) (1)

                29,921           32,431  

Pro forma net loss per share (unaudited) (1)

              $ (0.13 )       $ (0.08 )

Other Data:

                               

Adjusted net income (loss) (2)

    (12,190 )   (4,460 )   (1,440 )   (2,365 )   576  

Free cash flow (3)

    (13,584 )   (3,965 )   (2,462 )   (1,005 )   (889 )

(1)
See Notes 2 and 13 to our consolidated financial statements for an explanation of the method used to calculate basic and diluted and pro forma net loss per common share attributable to common stockholders.

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(2)
We define adjusted net income (loss) as U.S. generally accepted accounting principles (GAAP) net income (loss), excluding stock-based compensation expense, restructuring expense, costs associated with mergers and acquisitions, warrant interest expense and non-capitalizable costs associated with this initial public offering. For more information about our adjusted net income (loss) and a reconciliation of our adjusted net income (loss) to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, see the section titled "Selected Consolidated Financial Data."

(3)
We define free cash flow as GAAP net cash flows from operating activities, reduced by purchase of property and equipment, and principal payments on capital lease obligations. For more information about our free cash flow and a reconciliation of our free cash flow to net cash flows from operating activities, the most directly comparable financial measure calculated in accordance with GAAP, see the section titled "Selected Consolidated Financial Data."
 
  As of June 30, 2017  
 
  Actual   Pro Forma (1)   Pro Forma
As Adjusted (2)(3)
 
 
  (In thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 37,625   $ 37,625   $    

Working capital

    29,436     29,436        

Property and equipment, net

    24,924     24,924        

Total assets

    73,394     73,394        

Convertible preferred stock warrant liability

    719            

Convertible preferred stock

    80,688            

Total stockholders' equity (deficit)

    (38,832 )   42,575        

(1)
The pro forma column in the consolidated balance sheet data table above reflects (i) the automatic conversion of all outstanding shares of our convertible preferred stock as of June 30, 2017, into an aggregate of 24,535,227 shares of our common stock, which conversion will occur immediately upon the closing of this offering, (ii) the conversion of an outstanding warrant to purchase shares of our convertible preferred stock into a warrant to purchase 54,269 share of our common stock upon the closing of this offering, and (iii) the resulting classification of the preferred stock warrant liability to additional paid-in capital, as if such conversion and reclassification had occurred on June 30, 2017.

(2)
The pro forma as adjusted column gives effect to (i) the pro forma adjustments set forth above and (ii) the sale and issuance by us of             shares of our common stock in this offering at the assumed initial public offering price of $        per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions.

(3)
Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets, and total stockholders' equity (deficit) by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

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RISK FACTORS

         An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below before making a decision to invest in our common stock. Our business, operating results, financial condition or prospects could be materially and adversely affected by any of these risks and uncertainties. In that case, the trading price of our common stock could decline and you might lose all or part of your investment. In addition, the risks and uncertainties discussed below are not the only ones we face. Our business, operating results, financial condition or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material, and these risks and uncertainties could result in a complete loss of your investment. In assessing the risks and uncertainties described below, you should also refer to the other information contained in this prospectus (as supplemented or amended), including our consolidated financial statements and the related notes thereto, before making a decision to invest in our common stock.

Risks Related to our Business

Our recent growth may not be indicative of our future growth and, if we continue to grow, we may not be able to manage our growth effectively.

        We have recently experienced a period of rapid growth in our headcount and operations. In particular, we grew from 58 employees as of December 31, 2011, to 384 fulltime employees as of June 30, 2017, and we have also significantly increased the number of emails processed by our platform over the last several years. We anticipate that we will continue to significantly expand our operations and headcount in the near term. Our growth has placed, and future growth will place, a significant strain on our management, technical, administrative, operational and financial infrastructure. Our success will depend in part on our ability to manage this growth effectively. To manage the expected growth of our operations and personnel, we will need to continue to improve our management, technical, administrative, operational and financial controls and our reporting systems and procedures. Failure to effectively manage our growth could result in difficulty or delays in effectively scaling our platform to handle increased email volumes, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties. Any of these difficulties could adversely impact our business and results of operations.

If we are unable to sustain our revenue growth rate, we may not achieve or maintain profitability in the future.

        We have experienced rapid revenue growth over recent years, with revenue of $42.8 million, $58.5 million and $79.9 million in 2014, 2015 and 2016, respectively. Although we have experienced rapid revenue growth historically, we may not continue to grow as rapidly in the future and our revenue growth rates may decline. Any success that we may experience in the future will depend in large part on our ability to, among other things:

    maintain and expand our customer base;

    increase revenue from existing customers through increased or broader use of our platform within their organizations;

    improve the performance and capabilities of our platform through research and development;

    continue to successfully expand our business domestically and internationally; and

    successfully compete with other companies.

        If we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile or decline, and we may not achieve or maintain profitability. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth.

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If we are unable to attract new customers, retain existing customers or increase sales both to new and existing customers, our business and results of operations will be affected adversely.

        To succeed, we must continue to attract and retain customers and increase sales to new and existing customers. We price our services on a tiered subscription model based on the customer's use of our services (principally, email volumes), and therefore the revenue we generate from our customers depends on their use of our services. We have only a limited salesforce and to date have relied primarily on our self-service model to generate our revenue. The amount that new and existing customers purchase, renew and use our services depends on a number of factors, including those outside of our control.

        We may fail to attract new customers, retain existing customers or increase sales to new or existing customers as a result of a number of factors, including: reductions in our current or potential customers' spending levels; competitive factors affecting the cloud-based business software market, including the introduction of competing platforms, discount pricing and other strategies that may be implemented by our competitors; our ability to execute on our growth strategy and operating plans; a decline in our customers' level of satisfaction with our platform and customers' usage of our platform or an increased perception by our customers' that they can manage their email distribution and marketing efforts internally or otherwise without use of our platform; reductions in the use of email as a digital communication channel; the difficulty and cost to switch to a competitor may not be significant for many of our customers; changes in our relationships with third parties, including our strategic partners and payment processors; the timeliness and success of new services and functionality we may offer now or in the future, including our Marketing Campaigns service that we introduced in late 2015; concerns relating to actual or perceived security breaches; the frequency and severity of any system outages; and technological changes or problems. In addition, we believe a relatively small number of businesses have more than one unique paying account with us, and we count each of these accounts as a separate customer. We believe our number of customers is an important measure for evaluating our business. Because some businesses have more than one unique paying account with us and we count each of these accounts as a separate customer, the number of our customers set forth in this prospectus for any period is not necessarily indicative of the number of unique businesses from which we received revenue during any such period. We rely on our reputation and recommendations from key customers in order to promote our platform. The loss of any of our key customers could have a significant impact on our business reputation and our ability to obtain new customers. In addition, acquisitions of our customers could lead to cancellation of our contracts with those customers or by the acquiring companies.

        Failure to attract new customers, retain existing customers or increase sales to customers will harm our business and results of operations.

Our limited operating history in new and developing markets and our rapid growth make it difficult to evaluate our current business and future prospects.

        We introduced our Email API service in 2009, our Marketing Campaigns service in late 2015 and our Expert Services in 2016. The majority of our revenue growth has occurred in the last few years and was derived from the sale of subscriptions to our Email API service. This short operating history and our rapid growth make it difficult to evaluate our future prospects. Our ability to forecast our future operating results is subject to a number of uncertainties, including our ability to plan for and model future growth, particularly with respect to our most recently introduced services. If our assumptions regarding these uncertainties are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our historical and expected operating and financial results, our business could suffer and the trading price of our stock may decline.

        We also operate in new and developing markets that may not continue to develop as we expect. You should consider our future prospects in light of the challenges and uncertainties that we face, including the

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fact that our business has grown rapidly and it may not be possible to discern fully the trends that we are subject to, that we operate in new and developing markets and that elements of our business strategy are new and subject to ongoing development. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increasing and unforeseen expenses as we continue to grow our business. If we do not manage these risks successfully, our business and results of operations will be harmed.

If we are unable to increase adoption of our platform through our self-service model, our business, results of operations and financial condition may be adversely affected.

        Historically, we have relied on the adoption of our platform through our self-service model for a significant majority of our revenue. We have only a limited salesforce. Although we believe our business model can continue to scale without a significantly larger salesforce, our self-service model may not continue to be as effective as we anticipate, and the absence of a large direct sales function may impede our future growth.

        As we continue to scale our business, we may choose to invest in a larger direct salesforce to reach additional customers and grow our revenue. Our ability to manage a larger direct salesforce is uncertain. Identifying and recruiting additional qualified sales personnel and managing and training them once hired would require significant time, expense and attention and would significantly impact our business model. In addition, adding additional salesforce would considerably change our cost structure and results of operations, and we may have to reduce other expenses, such as our research and development expense, in order to accommodate a corresponding increase in marketing and sales expense and attain and maintain profitability. If our lack of a large direct salesforce limits us from reaching additional customers and growing our revenue and we are unable to hire, develop and retain talented sales personnel in the future, our revenue growth and results of operations may be harmed.

Our growth depends in part on the success of our strategic relationships with third parties to sell our services.

        We have established strategic relationships with a number of other companies, including public cloud infrastructure providers and ecommerce platforms, software vendors that offer complementary products and with which we co-sell our services and digital marketing agencies that resell our services to their clients. In order to grow our business, we anticipate that we will continue to establish and maintain these strategic relationships. Identifying strategic partners, and negotiating and documenting relationships with them, requires significant time and resources. Our competitors may be effective in providing incentives to third parties to favor their products or services over ours or to prevent or reduce subscriptions to our platform. In addition, acquisitions of our strategic partners by our competitors, or acquisition of our competitors by our strategic partners, could result in a decrease in the number of our current and potential customers, as our strategic partners may no longer facilitate the adoption of our platform by potential customers.

        If we are unsuccessful in establishing or maintaining our strategic relationships with third parties, our ability to compete or to grow our revenues could be impaired and our operating results could suffer. Even if we are successful in our strategic relationships, we cannot assure you that these relationships will result in increased usage of our services or increased revenues.

Our future success depends in part on our ability to continue to drive adoption of our platform and services by international customers, and our international operations and sales to customers with international operations expose us to risks inherent in international sales.

        We generated more than 36% of our revenue in each of the last three years from customers located outside the United States. The future success of our business will depend, in part, on our ability to continue to expand our customer base worldwide and to sell additional services to international customers.

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If we are unable to successfully market our platform to or localize our services for international customers, then our business, results of operations and financial condition may be adversely affected and our growth may be constrained.

        We have limited experience operating in international markets where the challenges of conducting our business can be significantly different from those we have faced in the United States and the existing markets in which we operate and where business practices may create internal control risks. We have only recently established operations outside of the United States, with the opening of an office in London. We may open additional non-U.S. offices in the future. There are a number of risks inherent in conducting international business, including:

    fluctuations in foreign currency exchange rates;

    the burden of complying with a wide variety of laws and regulatory regimes, including those relating to labor matters, consumer and data protection, privacy, network security, encryption and taxes;

    tariffs, export and import restrictions, restrictions on foreign investments, sanctions, and other trade barriers or protection measures;

    costs and difficulties of localizing our services;

    lack of acceptance of our localized services;

    difficulties in and costs of staffing, managing, and operating our international operations;

    tax issues, including restrictions on repatriating earnings and with respect to our corporate operating structure and intercompany arrangements;

    weaker intellectual property protection;

    economic weakness or currency related crises;

    limitations on the ability of our self-service sales model to attract international customers;

    our limited historical sale experience outside the United States;

    our ability to adapt to our marketing and selling efforts to different cultures and customer requirements;

    common local business behaviors that are in direct conflict with our policies and codes of conduct and ethics;

    corporate espionage; and

    political instability and security risks in the countries where we are doing business.

        If we are unable to effectively manage these risks, our relationships with our existing and prospective customers, strategic partners and employees and our operations outside of the United States may be adversely affected.

If we are not able to maintain and enhance our brand and maintain and increase market awareness of our company and services, then our business, results of operations and financial condition may be adversely affected.

        We believe that maintaining and enhancing the "SendGrid" brand identity and maintaining and increasing market awareness of our company and services is critical to achieving widespread acceptance of our platform, to strengthen our relationships with our existing customers and to our ability to attract new customers. The successful promotion of our brand will depend largely on our continued marketing efforts, our ability to continue to offer high quality services, our ability to be thought leaders in our industry and our ability to successfully differentiate our platform and services from competing products and services. For example, we rely on both algorithmic and purchased listings displayed by search engines to attract a

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significant percentage of the customers. Algorithmic listings cannot be purchased, and instead are determined and displayed solely by a set of formulas designed by the search engine. Purchased listings can be purchased by advertisers in order to attract customers to their websites, but the cost of purchased search listing advertising may increase as demand for these channels grows. If search engines on which we rely for algorithmic listings modify their algorithms in an attempt to optimize their search listings, this could result in fewer potential customers clicking through to our website, requiring us to resort to additional purchased listings or other costly advertisements to attempt to replace this traffic. If one or more search engines on which we rely for purchased listings modifies or terminates its relationship with us, or increases the amounts it charges us, our expenses could rise. Any such increases could negatively affect market awareness of our brand and our business, results of operations and financial condition.

        In addition, independent industry analysts often provide reviews of our services and competing products and services, which may significantly influence the perception of our services in the marketplace. If these reviews are negative or not as strong as reviews of our competitors' products and services, then our brand may be harmed. This may cause us to lose existing customers, decrease the number of new customers that we are able to attract or lower our pricing model, each of which would likely harm our results of operations.

        From time to time, our customers and other third parties have complained about our platform, such as complaints about our pricing and customer support or the use of our platform to transmit spam, phishing scams, website links to harmful applications or other harmful or illegal material. If we do not handle customer and other complaints effectively, then our brand and reputation may suffer, our customers may lose confidence in us and our customers may reduce or cease their use of our services. In addition, many of our customers post about and discuss Internet-based products and services, including our platform and services, on social media. Our success depends, in part, on our ability to generate positive customer feedback and minimize negative feedback on social media channels where existing and potential customers seek and share information. If actions we take or changes we make to our platform or services, particularly as our platform continues to scale, upset these customers then their online commentary could negatively affect our brand and reputation. Complaints or negative publicity about us, our platform or our services could materially and adversely impact our ability to attract and retain customers, our business, results of operations and financial condition.

        The promotion of our brand also requires us to make substantial expenditures, and we anticipate that these expenditures will increase as our market becomes more competitive and as we expand into new markets. To the extent that these activities increase revenue, this revenue still may not be enough to offset the increased expenses we incur. If we do not successfully maintain and enhance our brand, then our business may not grow, we may see our pricing power reduced relative to competitors and we may lose customers, all of which would adversely affect our business, results of operations and financial condition.

The market in which we participate is highly competitive and, if we do not compete effectively, our operating results could be harmed.

        We provide cloud-based services that enable businesses to reach their customers using email for both transactional and marketing purposes. The market for providing these services is fragmented, with some vendors addressing transactional email services, some vendors addressing email marketing services and other vendors providing a broad array of services that include transactional and marketing services as part of a software suite or broader portfolio of software offerings. Notwithstanding the availability of third-party software services, some businesses rely on internally-developed solutions for their email communications needs. The market for digital communications services is rapidly evolving, creating opportunity for new competitors to enter the market with point product solutions or addressing specific

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segments of the market. In addition, in some instances, we have strategic or other commercial relationships with companies with which we also compete, such as Amazon Web Services. Our competitors include:

    Companies that offer transactional email services, including Amazon, Mailgun, Oracle and SparkPost; and

    Companies that offer email marketing services, including Adobe, Campaign Monitor, Endurance, IBM, MailChimp, Oracle and Salesforce.

        We believe the principal factors on which we compete include: completeness of offering; credibility with developers and marketers; global reach; ease of adoption; features and functionality; platform scalability, reliability, security and performance; brand awareness and reputation; integration with third-party applications and data sources; customer support; and the total cost of deployment and ownership. Our current and potential competitors may develop and market new technologies with similar or superior functionality to our platform or at a cheaper price point that render our existing or future services less competitive or obsolete, and we may need to decrease the prices or accept less favorable terms for subscriptions for our services in order to remain competitive. If we are unable to maintain our pricing due to competitive pressures, our margins will be reduced and our operating results will be negatively affected.

        Our current and potential competitors also may have significantly more financial, technical, marketing and other resources than we have, may be able to devote greater resources to the development, promotion, sale and support of their products and services, may have more extensive customer bases and broader customer relationships and may have longer operating histories and greater name recognition. As a result, these competitors may respond faster to new technologies and undertake more extensive marketing programs for their products or services. If these companies decide to further invest in and develop, market or resell competitive products or services, or acquire or form a strategic alliance with one of our other competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed. In a few cases, these vendors may offer competitive products or services at little or no additional cost by bundling it with their existing suite of applications. To the extent any of our competitors has existing relationships with potential customers for either email software or other applications, those customers may be unwilling to purchase our platform because of their existing relationships with our competitor. If we are unable to compete with such companies, the demand for our platform and services could substantially decline.

If our security measures are breached or unauthorized access to our or our customers' and their end customers' private or proprietary data is otherwise obtained, our platform or services may be perceived as not being secure, our reputation may be severely harmed, customers may reduce the use of or stop using our services, we may incur significant liabilities and we may lose the ability to offer our customers a credit card payment option.

        Our operations involve the storage and transmission of data of our customers and their end customers, including personally identifiable information. Security breaches or other incidents could result in unauthorized access to, loss of or unauthorized disclosure of this information, litigation, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair our sales and harm our customers and our business. Cyberattacks and other malicious Internet-based activity continue to increase generally, and cloud-based service providers like us are regularly targeted. For example, in 2013, we suffered a distributed denial of service attack, whereby a cybercriminal gained access to our webpage and, in 2015, a cybercriminal gained unauthorized access to several of our internal systems, including those containing sensitive and confidential customer data. It is possible that we may face increased risk of cybersecurity attacks as compromising our platform may allow cybercriminals to send a large number of phishing emails that bypasses end users' spam filters. If our security measures are compromised as a result of third-party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liability. In addition, if the security measures of our customers

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are compromised, even without any actual compromise of our own systems, we may face negative publicity or reputational harm if our customers or anyone else incorrectly attributes the blame for such security breaches to us or our systems. We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage our systems because they change frequently and generally are not detected until after an incident has occurred. As we increase our customer base and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our security systems or gain unauthorized access to our customers' data. Further, as we rely more on third-party and public-cloud infrastructure, such as Amazon Web Services, we will become more dependent on third-party security measures to protect against unauthorized access, cyberattacks and the mishandling of customer data. Any security breach, whether actual or perceived, would harm our reputation, and we could lose customers and fail to acquire new customers. In addition, many governments have enacted laws requiring companies to notify individuals of data security incidents involving certain types of personal data and any mandatory disclosures we may make regarding a security breach would likely lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures. It is also possible that security breaches sustained by our competitors could result in negative publicity for our entire industry that indirectly harms our reputation and diminishes demand for our services.

        Furthermore, failure to maintain compliance with the data protection policy standards adopted by the major credit card issuers and other payment processors may limit our ability to offer our customers a credit card or online payment option. Any loss of our ability to offer our customers a credit card payment or online payment option would harm our reputation and make our platform and services less attractive to many organizations by negatively impacting our customer experience and significantly increasing our administrative costs related to customer payment processing.

        Our existing general liability insurance may not cover any, or cover only a portion of any, potential claims related to security breaches to which we are exposed or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed. In addition, there can be no assurance that the limitations on liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities with respect to any particular claim. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage would increase our operating expenses and reduce our net income.

Our customers' and other users' violation of our policies or other misuse of our platform to transmit offensive or illegal messages, phish, spam, website links to harmful applications or for other fraudulent activity could damage our reputation, and we may face liability for unauthorized, inaccurate or fraudulent information distributed via our platform.

        Despite our ongoing and substantial efforts to limit such use, a portion of our customers use our platform to transmit offensive or illegal messages, spam, phishing scams and website links to harmful applications, reproduce and distribute copyrighted material or the trademarks of others without permission, and report inaccurate or fraudulent data or information. These issues also arise with respect to a portion of those users who use our platform on a free trial basis. These actions are in violation of our policies. However, our efforts to defeat spamming attacks and other fraudulent activity will not prevent all such attacks and activity, such use of our platform could damage our reputation and we could face claims for damages, copyright or trademark infringement, defamation, negligence or fraud. Moreover, our customers' and other users' promotion of their products and services through our platform might not comply with federal, state and foreign laws. We rely on contractual representations made to us by our customers that their use of our platform will comply with our policies and applicable law, including, without limitation, our email policy. Although we retain the right to verify that customers and other users are abiding by our email policy and to review their email and email lists, our customers and other users are ultimately responsible for compliance with our policies, and we do not systematically audit our customers or other users to confirm compliance with our policies. We cannot predict whether our role in facilitating

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our customers' or other users' activities would expose us to liability under applicable law. Even if claims asserted against us do not result in liability, we may incur substantial costs in investigating and defending such claims. If we are found liable for our customers' or other users' activities, we could be required to pay fines or penalties, redesign business methods or otherwise expend resources to remedy any damages caused by such actions and to avoid future liability.

Real or perceived errors, failures, vulnerabilities or bugs in our software could adversely affect our business, results of operations, financial condition and growth prospects.

        Our platform is complex, and therefore, undetected errors, failures or bugs may occur, particularly as we continue to scale our platform to accommodate future growth. Our platform may be used in IT environments with different operating systems, system management software, applications, devices, databases and equipment and networking configurations, which may cause errors or failures of our platform or other aspects of the IT environment into which it is deployed. Despite testing by us, errors, failures or bugs may not be found until our platform is used by our customers. Real or perceived errors, failures or bugs in our platform or services could result in negative publicity, loss of or delay in market acceptance of our platform or services, weakening of our competitive position, claims by customers for losses sustained by them or failure to meet any stated service level commitments in our customer agreements. For example, in May 2017, we experienced an error with a database that stores customers' Marketing Campaigns contact information that resulted in delayed email sending for several hours. Correcting any of these problems could require significant expenditures of our capital and other resources and could cause interruptions, delays or cessation in the sale of our services, which could cause us to lose existing or potential customers and adversely affect our business, results of operations, and financial condition.

Our platform and services and our business are subject to a variety of U.S. and international laws and regulations, including those regarding privacy, data protection and information security. Any failure by us or our third-party service providers, as well as the failure of our platform or services to comply with applicable laws and regulations would harm our business, results of operations and financial condition.

        We are subject to a variety of laws and regulations, including regulation by various federal government agencies, including the U.S. Federal Trade Commission, or FTC, and state and local agencies. The United States and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information of individuals, and the FTC and many state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data. Self-regulatory obligations, other industry standards, policies and other legal obligations may apply to our collection, distribution, use, security or storage of personally identifiable information or other data relating to individuals. In addition, the federal government and many states and foreign governments have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. These obligations may be interpreted and applied in an inconsistent manner from one jurisdiction to another and may conflict with one another, other regulatory requirements or our internal practices. Any failure or perceived failure by us to comply with United States, European Union or other foreign privacy or security laws, regulations, policies, industry standards or legal obligations or any security incident that results in the unauthorized access to, or acquisition, release or transfer of, personally identifiable information or other customer data may result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

        We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and

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standards may have on our business. For example, in May 2018, the general data protection regulation, or GDPR, will come into force, bringing with it a complete overhaul of E.U. data protection laws: the new rules will supersede current E.U. data protection legislation, impose more stringent E.U. data protection requirements, and provide for greater penalties for noncompliance. Changing definitions of personal data and information may also limit or inhibit our ability to operate or expand our business, including limiting strategic partnerships that may involve the sharing of data. Also, some jurisdictions require that certain types of data be retained on servers within these jurisdictions. Our failure to comply with applicable laws, directives and regulations may result in enforcement action against us, including fines and imprisonment, and damage to our reputation, any of which may have an adverse effect on our business and operating results. Further, in October 2015, the European Court of Justice issued a ruling invalidating the U.S.-E.U. Safe Harbor Framework, which facilitated personal data transfers to the United States in compliance with applicable E.U. data protection laws. In July 2016, the European Union and the United States political authorities adopted the E.U.-U.S. Privacy Shield, or Privacy Shield, replacing the Safe Harbor Framework and providing a new mechanism for companies to transfer E.U. personal data to the United States. U.S. organizations wishing to self-certify under the Privacy Shield have to pledge their compliance with its seven core and sixteen supplemental principles, which are based on European Data Protection Law. We have assessed the requirements of Privacy Shield and are implementing changes internally in order to meet the requirements. We plan to complete this process, submit our application and become self-certified under the Privacy Shield, by the end of this year.

        We publicly post our privacy policies and practices concerning our processing, use and disclosure of the personally identifiable information provided to us by our website visitors. Our publication of our privacy policies and other statements we publish that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive or misrepresentative of our practices.

        If our service is perceived to cause, or is otherwise unfavorably associated with, violations of privacy or data security requirements, it may subject us or our customers to public criticism and potential legal liability. Existing and potential privacy laws and regulations concerning privacy and data security and increasing sensitivity of consumers to unauthorized processing of personal information may create negative public reactions to technologies, products and services such as ours. Public concerns regarding personal information processing, privacy and security may cause some of our customers' end users to be less likely to visit their websites or otherwise interact with them. If enough end users choose not to visit our customers' websites or otherwise interact with them, our customers could stop using our platform. This, in turn, may reduce the value of our services and slow or eliminate the growth of our business.

        Evolving and changing definitions of what constitutes "Personal Information" and "Personal Data" within the European Union, the United States and elsewhere, especially relating to the classification of internet protocol, or IP, addresses, machine or device identification numbers, location data and other information, may limit or inhibit our ability to operate or expand our business. Future laws, regulations, standards and other obligations could impair our ability to collect or use information that we utilize to provide email delivery and marketing services to our customers, thereby impairing our ability to maintain and grow our customer base and increase revenue. Future restrictions on the collection, use, sharing or disclosure of our customers' data or additional requirements for express or implied consent of customers for the use and disclosure of such information limit our ability to develop new services and features.

United States federal legislation and the laws of many foreign countries impose certain obligations on the senders of commercial emails, which could minimize the effectiveness of our platform, and establish financial penalties for non-compliance, which could increase the costs of our business.

        The Federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act, establishes certain requirements for commercial email messages and transactional email messages and specifies penalties for the transmission of email messages that are intended to deceive the

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recipient as to source or content. The CAN-SPAM Act, among other things, obligates the sender of commercial emails to provide recipients with the ability to opt out of receiving future commercial emails from the sender. In addition, some states have passed laws regulating commercial email practices that are significantly more restrictive and difficult to comply with than the CAN-SPAM Act. For example, Utah and Michigan prohibit the sending of email messages that advertise products or services that minors are prohibited by law from purchasing (e.g., alcoholic beverages, tobacco products, illegal drugs) or that contain content harmful to minors (e.g., pornography) to email addresses listed on specified child protection registries. Some portions of these state laws may not be preempted by the CAN-SPAM Act. In addition, certain foreign jurisdictions, such as Australia, Canada and the European Union, have enacted laws that regulate sending email, and some of these laws are more restrictive than U.S. laws. For example, some foreign laws prohibit sending broad categories of email unless the recipient has provided the sender advance consent to receipt of such email, or in other words has "opted-in" to receiving such email. If we were found to be in violation of the CAN-SPAM Act, applicable state laws governing email not preempted by the CAN-SPAM Act or foreign laws regulating the distribution of email, whether as a result of violations by our customers or our own acts or omissions, we could be required to pay large penalties, which would adversely affect our financial condition, significantly harm our business and injure our reputation. The terms of injunctions, judgments, consent decrees or settlement agreements entered into connection with enforcement actions or investigations against our company in connection with any of the foregoing laws may also require us to change one or more aspects of the way we operate our business, which could impair our ability to attract and retain customers or could increase our operating costs.

The standards that private entities and inbox service providers use to regulate the use and delivery of email have in the past interfered with, and may in the future interfere with, the effectiveness of our platform and our ability to conduct business.

        Our customers rely on email to communicate with their existing or prospective customers. Various private entities attempt to regulate the use of email for commercial solicitation. These entities often advocate standards of conduct or practice that significantly exceed current legal requirements and classify certain email solicitations that comply with current legal requirements as spam. Some of these entities maintain "blacklists" of companies and individuals, and the websites, inbox service providers and IP addresses associated with those entities or individuals that do not adhere to those standards of conduct or practices for commercial email solicitations that the blacklisting entity believes are appropriate. If a company's IP addresses are listed by a blacklisting entity, emails sent from those addresses may be blocked if they are sent to any internet domain or internet address that subscribes to the blacklisting entity's service or uses its blacklist.

        From time to time, some of our IP addresses have become, and we expect will continue to be, listed with one or more blacklisting entities due to the messaging practices of our customers and other users. We may be at an increased risk of having our IP addresses blacklisted due to our scale and volume of email processed, compared to our smaller competitors. While the overall percentage of such email solicitations that our individual customers send may be at or below reasonable standards, the total aggregate number of all emails that we process on behalf of our customers may trigger increased scrutiny from these blacklisting entities. There can be no guarantee that we will be able to successfully remove ourselves from those lists. Because we fulfill email delivery on behalf of our customers, blacklisting of this type could undermine the effectiveness of our customers' transactional email, email marketing programs and other email communications, all of which could have a material negative impact on our business and results of operations.

        Additionally, inbox service providers can block emails from reaching their users. While we continually improve our own technology and work closely with inbox service providers to maintain our deliverability rates, the implementation of new or more restrictive policies by inbox service providers may make it more difficult to deliver our customers' emails, particularly if we are not given adequate notice of a change in

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policy or struggle to update our platform or services to comply with the changed policy in a reasonable amount of time. In addition, some inbox service providers categorize as "promotional" emails that originate from email service providers and, as a result, direct them to an alternate or "tabbed" section of the recipient's inbox. If inbox service providers materially limit or halt the delivery of our customers' emails, or if we fail to deliver our customers' emails in a manner compatible with inbox service providers' email handling or authentication technologies or other policies, or if the open rates of our customers' emails are negatively impacted by the actions of inbox service providers to categorize emails, then customers may question the effectiveness of our platform and cancel their accounts. This, in turn, would harm our business and financial condition.

We are subject to governmental export controls and economic sanctions and anti-corruption laws and regulations that could impair our ability to compete in international markets and subject us to liability if we are not in compliance with applicable laws.

        Various of our operations and services may be subject to export control and economic sanctions regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department's Office of Foreign Assets Controls. The provision of our services must be made in compliance with these laws and regulations. Obtaining the necessary authorizations, including any required license, for a particular deployment may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. In addition, changes in our platform capabilities or services, or changes in applicable export or economic sanctions regulations may create delays in the introduction and deployment of our platform and services in international markets, or, in some cases, prevent the provision of our services to certain countries or end users. Any change in export or economic sanctions regulations, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could also result in decreased use of our platform and services, or in our decreased ability to provide our services to existing or prospective customers with international operations. Any decreased use of our platform and services or limitation on our ability to provide our services could adversely affect our business, results of operations and financial condition.

        Furthermore, U.S. export control laws and economic sanctions prohibit the exportation of certain products and services to countries, territories, governments and persons targeted by U.S. sanctions. While we are currently taking precautions to prevent our platform from being accessed by persons targeted by U.S. sanctions, including IP address blocking, such measures may be circumvented. Given the technical limitations in developing measures that will prevent access to internet based services from particular geographies or by particular individuals, we have previously identified and expect we will continue to identify customer accounts for our platform and services that originate or that we suspect originate from countries that are subject to U.S. embargoes.

        We are aware that trials of and subscriptions to our platform have been initiated by persons and organizations in countries that are the subject of U.S. embargoes. Our provision of services in these instances was likely in violation of trade sanctions laws. We have terminated the accounts of such persons and organizations as we have become aware of them. We filed an initial voluntary self-disclosure with the U.S. Department of Treasury's Office of Foreign Assets Control, or OFAC, in February 2016 concerning these potential violations and we filed a subsequent voluntary disclosure with OFAC concerning these potential violations in May 2017. We received and responded to questions from OFAC in July 2017. We cannot predict when OFAC will complete its review and determine whether any violations occurred or levy penalties.

        Our failure to comply with U.S. sanctions or export control laws or regulations could cause us and certain of our employees to be subject to substantial civil or criminal penalties, including the possible loss of export privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. Each instance in which we allow

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access to our platform may constitute a separate violation of these laws. We may also suffer reputational harm.

        Further, we incorporate encryption technology into certain of our platform functions and services. Various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our customers' ability to import our services into those countries. Encryption products and the underlying technology may also be subject to export control restrictions. Governmental regulation of encryption technology and regulation of exports of encryption products, or our failure to obtain required approval for our services, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable regulatory requirements regarding the provision of our services, including with respect to new services, may create delays in the introduction of our services in international markets, prevent our customers with international operations from deploying our platform and using our services throughout their globally-distributed systems or, in some cases, prevent the provision of our services to some countries altogether.

        Additionally, we are subject to the Foreign Corrupt Practices Act, or FCPA, the U.K. Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions both domestic and abroad. We and our third-party business partners and intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners, and agents, even if we do not explicitly authorize such activities. While we have policies and procedures in place to address compliance with such laws, we cannot assure you that all of our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions, or suspension or debarment from U.S. government contracts, all of which may have an adverse effect on our reputation, business, operating results and prospects.

If we are unable to develop and release enhancements to our platform and services or new services and functionality to respond to rapid technological change in a timely and cost-effective manner, our business, operating results, and financial condition could be adversely affected.

        The market for our platform and services is characterized by rapid technological change, frequent new product and service introductions and enhancements, changing customer demands, and evolving industry standards. The introduction of products and services embodying new technologies can quickly make existing products and services obsolete and unmarketable. For example, new Internet standards and technologies or new standards in the field of operating system support could emerge that are incompatible with customer deployments of our platform. The success of any enhancements or improvements to our platform or any new services or functionality depends on several factors, including timely completion, competitive pricing, adequate quality testing, integration with existing technologies and our platform, and overall market acceptance. We cannot be sure that we will succeed in developing, marketing and delivering on a timely and cost-effective basis enhancements or improvements to our platform or any services or functionality that respond to technological change or new customer requirements, nor can we be sure that any enhancements or improvements to our platform will achieve market acceptance. For example, we introduced our Marketing Campaigns service in late 2015 and the service may not achieve broad market acceptance or be cost-effective in the long term.

        Further, our success depends on meeting customer demands and expectations both with respect to the ability of our API to integrate within their applications and the speed, reliability and effectiveness of our platform. For example, if we are unable to adapt our platform on a timely basis to new email or operating system protocols or we fail to effectively integrate our API with new technologies and standards, the ability

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of our platform to integrate with our customers' systems or satisfy our customers' needs may be impaired. In addition, because we use both co-located data centers and public cloud resources to host our platform, we need to continually enhance and improve our platform to keep pace with changes in Internet-related hardware, software, communications, and database technologies and standards. As we transition to Amazon Web Services to host a portion of our platform, we will become more dependent on third parties to keep pace with such changes. If we cannot deliver technologically competitive services, we could lose customers and our revenues and stock price may decline.

        Any new services or functionality that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the broad market acceptance necessary to generate sufficient revenue. Moreover, even if we introduce new services or functionality, we may experience a decline in revenue of our existing services that is not offset by revenue from the new services or functionality. For example, customers may delay making purchases of new services to permit them to make a more thorough evaluation of these services or until industry and marketplace reviews become widely available. In addition, we may lose existing customers that choose a competitor's products and services or that choose to rely on an internally-developed solution, rather than migrate to our new services. Similarly, if we offer a bundle of our services that our customers and prospective customers do not find compelling, our business will be harmed. This could result in a temporary or permanent revenue shortfall and adversely affect our business.

We may not be able to scale our technology infrastructure and platform quickly enough to meet our customers' growing needs and if we are not able to grow efficiently, our operating results could be harmed.

        As usage of our platform grows, we will need to continue making significant investments to develop and implement new technologies in our infrastructure operations to support our growth. In addition, we will need to appropriately scale our internal business systems and our services organization, including basic customer support and our Expert Services team, to serve our growing customer base. Any failure of, or delay in, these efforts could impair the performance of our platform and reduce customer satisfaction and reduce our growth. Even if we are able to upgrade our systems and expand our staff, any such expansion may be expensive and complex. To the extent that we do not effectively scale our platform and infrastructure to meet the growing needs of our customers or are not able to manage that growth effectively, we may not be able to grow as quickly as we anticipate, our customers may reduce or stop use of our services, we may be unable to compete effectively and our business and operating results may be harmed.

We are primarily dependent on a single service, our Email API service, and the lack of continued market acceptance of our Email API service could cause our operating results to suffer.

        Sales of our Email API service account for a substantial majority of our revenue. We expect that we will be substantially dependent on our Email API service to generate revenue for the foreseeable future. As a result, our operating results could suffer due to:

    any decline in demand for our Email API service;

    the failure of our Email API service to achieve continued market acceptance;

    the market for our Email API service not continuing to grow, or growing more slowly than we expect;

    the introduction or increase in popularity of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our Email API service;

    technological innovations or new standards that our Email API service does not address;

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    sensitivity to current or future prices offered by us or competing solutions;

    our inability to release enhanced versions of our Email API service on a timely basis; and

    the continued use and ubiquity of email in commercial transactions and applications.

        If the market for our Email API service grows more slowly than anticipated or if demand for our Email API service does not grow as quickly as anticipated, we may not be able to grow our revenue.

Our services are sold on a short-term basis, such that subscription renewal or usage rates can decrease rapidly, and if we do not accurately predict these rates, our future revenue and operating results may be harmed.

        We charge our customers based on their use of our services. We generally enter into monthly subscription agreements with our customers and, therefore, most of our customers may reduce or cease their use of our services on a monthly basis without penalty or termination charges. Our retention of customers and our customers' use of our services are used to determine our subscription net dollar retention rate. We believe subscription net dollar retention rate is an important measure for evaluating our business. Additionally, our subscription agreements for use of our Email API service include a fixed fee that covers a specified number of email credits in the applicable month. If our customers lower the number of email credits they purchase in any month, then the fixed fees we charge will decrease. We have historically experienced customer turnover as a result of many of our customers being SMBs in the entrepreneurial stage of their development that are more susceptible than larger businesses to general economic conditions and other risks affecting their businesses. We cannot accurately predict customers' usage levels on a monthly basis and the loss of customers or reductions in their usage levels of our services may each have a negative impact on our business, results of operations and financial condition, including our subscription net dollar retention rate and our subscription gross dollar churn rate, which is a component of our subscription net dollar retention rate.

Any failure to offer high-quality support may harm our relationships with our customers and have a negative impact on our business and financial condition.

        Our customers depend on our customer support team to resolve technical and operational issues relating to our platform. Our ability to provide effective customer support is largely dependent on our ability to attract, train, and retain qualified personnel with experience in supporting customers on platforms such as ours. Our customer base has grown significantly and that has and will put additional pressure on our customer support team. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support. We also may be unable to modify the scope and delivery of our support to compete with changes in the support provided by our competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect our operating results. In addition, as we continue to grow our operations and expand internationally, we need to be able to provide efficient customer support that meets our customers' needs globally at scale and our customer support team will face additional challenges, including those associated with delivering support and documentation in languages other than English. If we are unable to provide efficient customer support globally at scale, our ability to grow our operations may be harmed and we may need to hire additional support personnel, which could negatively impact our operating results. In addition, we provide self-service support resources to our customers, such as our best practice guides and webcasts hosted on our website. We also rely on our user community to serve as a resource for questions on any part of our platform. Members of our user community are not obligated to participate in discussions with other users, and to the extent they do not our customers' ability to find answers to questions about our platform of services may suffer. If we are unable to develop self-service support resources that are easy to use and that our customers utilize to resolve their technical issues or if our customers choose not to take advantage of these self-service support services, customers may continue to direct support requests to our customer support team instead of relying on our self-service support resources and our customers' experience with

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our platform may be negatively impacted. Any failure to maintain high-quality support, or a market perception that we do not maintain high-quality support, could harm our reputation, our ability to sell our services to existing and prospective customers, and our business, operating results, and financial condition.

To deliver our services, we rely on internet service providers for network connectivity and co-location facilities and public cloud infrastructure to host our platform.

        We interconnect with internet service providers around the world to enable the use of our platform by our customers and we expect that we will continue to rely heavily on internet service providers for network connectivity going forward. Our reliance on internet service providers reduces our control over quality of service and exposes us to potential service outages and rate fluctuations. If a significant portion of our internet service providers stop providing us with access to their network infrastructure, fail to provide access on a cost-effective basis, cease operations, or otherwise terminate access, the delay caused by qualifying and switching to other internet service providers could be time consuming and costly and could adversely affect our business, results of operations and financial condition.

        In addition, we currently serve the majority of our platform infrastructure from multiple co-located third-party data centers located throughout the United States and in certain international locations. We are in the process of transitioning the hosting of a portion of our platform infrastructure to Amazon Web Services. As a result, our operations depend, in part, on the ability of third parties to protect these facilities and resources against damage or interruption from natural disasters, power or network failures, criminal acts and similar events. In the event that any of our hosting arrangements are terminated, or if there is a lapse of service or damage to a facility or other resource, we could experience interruptions in our platform as well as delays and additional expenses in arranging new facilities and resources. We have experienced and expect that we will in the future experience such interruptions from time to time.

        Any damage to, or failure of, the systems of our third-party providers could result in interruptions to and may cause errors or poor quality communications with our platform. Even with current and planned disaster recovery arrangements, our business could be harmed. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability, damage our reputation and cause customers to become dissatisfied and fail to renew their subscriptions or demand credits, any of which could materially and adversely affect our business.

If we are unable to hire, retain and motivate qualified personnel, our business will suffer.

        Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. From time to time we have experienced difficulty in hiring and retaining employees who have appropriate qualifications, and we are continuing our efforts to meet our hiring goals. We believe that there is, and will continue to be, intense competition for highly skilled executive, technical, marketing and other personnel with experience in the locations where we maintain offices. We must provide competitive compensation packages and a high-quality work environment to hire, retain and motivate employees. If we are unable to retain and motivate our existing employees and attract qualified personnel to fill key positions, we may be unable to manage our business effectively, including the development, marketing and sale of our services, which could adversely affect our business, results of operations and financial condition. To the extent we hire personnel from competitors, we also may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information.

        Volatility in, or lack of performance of, our stock price may also affect our ability to attract and retain key personnel. Many of our key personnel are, or will soon be, vested in a substantial amount of shares of common stock or stock awards. Employees may be more likely to terminate their employment with us if the shares they own or the shares underlying their vested options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or, conversely, if

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the exercise prices of the options that they hold are significantly above the trading price of our common stock. Additionally, if our stock price underperforms or the outlook for our stock is negative, we may not be able to attract qualified personnel to join our business. Candidates making employment decisions, particularly in high-technology industries, often consider the value and growth potential of any equity they may receive in connection with their employment. As a result, any significant decline in the market price of our common stock may adversely affect our ability to attract or retain highly skilled executive, technical, marketing and other personnel. If we are unable to retain and attract highly-skilled employees, our business, results of operations and financial condition could be adversely affected.

We have experienced losses in the past, and we may not achieve or sustain profitability in the future.

        We generated net losses of $13.0 million, $5.9 million and $3.9 million in 2014, 2015 and 2016, respectively, and a net loss of $3.1 million in the six months ended June 30, 2017. As of June 30, 2017, we had an accumulated deficit of $46.7 million. We will need to generate and sustain increased revenue levels in future periods in order to achieve or sustain profitability. We also expect our costs to increase in future periods, which could negatively affect our future operating results if our revenue does not increase commensurately. For example, we intend to continue to expend significant funds to develop and enhance our technical infrastructure, platform and services, expand our research and development efforts and selling and marketing operations, including through increased headcount, meet the increased compliance requirements associated with our transition to and operation as a public company, and expand into new markets. Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to achieve or sustain profitability, our stock price may significantly decrease.

We may require additional financing in the future and may not be able to obtain such financing on favorable terms, if at all, which could slow or stop our ability to grow or otherwise harm our business.

        We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our platform, improve our operating infrastructure or acquire complementary businesses and technologies. To date, we have financed our operations primarily through our operations, private placements of our equity securities and debt financing provided by financial institutions. We may not be able to obtain additional financing on terms favorable to us, if at all. We may need to engage in equity or debt financings to secure additional funds. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the per share value of our common stock could decline. If we engage in debt financing, the holders of debt would have priority over the holders of our common stock, and we may be required to accept terms that restrict our ability to incur additional indebtedness and our ability to operate our business. We may also be required to take other actions that would otherwise be in the interests of the debt holders and force us to maintain specified liquidity or other ratios, any of which could harm our business, financial condition and operating results. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.

Our future quarterly results may fluctuate significantly, and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.

        Our results of operations, including our revenue, operating expenses and cash flows have fluctuated from quarter to quarter in the past and may continue to fluctuate as a result of a variety of factors, many of which are outside of our control, may be difficult to predict and may or may not fully reflect the underlying

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performance of our business. Additionally, we have a limited operating history with the current scale of our business, which makes it difficult to forecast our future results. Some of the factors that may cause our results of operations to fluctuate from quarter to quarter include:

    our ability to attract new customers;

    our ability to retain customers and expand their usage of our services;

    changes in customers' budgets and in the timing of their purchasing decisions, including as a result of any changes in their usage or expected usage of our services;

    potential customers opting for alternative solutions, including internally-developed and maintained solutions, and competitive email or digital communication solutions;

    our ability to control costs, including our operating expenses;

    the timing and success of new products, features and services by us and our competitors;

    changes in the competitive dynamics of our industry, including price competition or consolidation among competitors, customers or strategic partners;

    significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform;

    reputational harm or other liabilities resulting from the use of our platform to transmit spam, phishing scams, website links to harmful applications or other harmful or illegal material;

    the collectability of receivables from customers, which may be hindered or delayed if these customers experience financial distress;

    general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate;

    fluctuations in foreign currency exchange rates which could, for example, cause our subscription agreements denominated in U.S. dollars to be more expensive internationally;

    sales tax and other tax determinations by authorities in the jurisdictions in which we conduct business;

    the impact of new accounting pronouncements; and

    fluctuations in stock-based compensation expense.

        The occurrence of one or more of the foregoing and other factors may cause our results of operations to vary significantly. Accordingly, our results of operations in any one quarter may not be meaningful and should not be relied upon as indicative of future performance. Additionally, if our quarterly results of operations fall below the expectations of investors or securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.

Our revenue is affected by seasonality.

        Our revenue is directly correlated with the number of emails sent by our customers. During the fourth-quarter holiday season, our customers process a relatively higher number of transactions, run a greater number of marketing programs, and therefore send more emails. Partially because of this seasonality, a greater percentage of our annual revenue has come from our fourth quarter than from other quarters. In 2014, 2015 and 2016, 28% to 29% of our annual revenue was in our fourth quarter. While we believe that this seasonality has affected and will continue to affect our quarterly results, our rapid growth has largely masked seasonal trends to date. Seasonality may become more pronounced in the future to the

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extent our revenue mix shifts between our Email API, Marketing Campaigns and other revenue sources over time. As a result, historical patterns in our business may not be a reliable indicator of our future performance.

Our reliance on cloud-based technologies from third parties may adversely affect our business, results of operations and financial condition.

        We rely heavily on hosted cloud-based technologies from third parties in order to operate critical internal functions of our business, including our accounting, billing and office management functions. If these services become unavailable due to extended outages or interruptions, or because they are no longer available on commercially reasonable terms or prices, our expenses could increase. As a result, our ability to manage our operations could be interrupted and our processes for managing our sales process and supporting our customers could be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could adversely affect our business, results of operations and financial condition.

Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, which could harm our business.

        We believe that our culture has been and will continue to be a key contributor to our success. Between December 31, 2011 and June 30, 2017, we have increased the size of our workforce by 326 employees, and we intend to continue to hire aggressively as we expand. If we do not continue to maintain our corporate culture as we grow, we may be unable to foster the innovation, creativity and teamwork we believe we need to support our growth. Moreover, many of our employees may be able to receive significant proceeds from sales of our common stock in the public markets after this offering, which could lead to disparities of wealth among our employees that adversely affects relations among employees and our culture in general. Our substantial anticipated headcount growth and our transition from a private company to a public company may result in a change to our corporate culture, which could harm our business.

Acquisition opportunities could be difficult to identify, and any pursued acquisitions could divert the attention of management, pose integration challenges, disrupt our business, dilute stockholder value and adversely affect our operating results and financial condition.

        We have in the past acquired and may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our platform, enhance our technical capabilities or otherwise offer growth opportunities. For example, in 2017, we acquired JCKM, Inc., or Bizzy, a marketing automation company. We do not know if we will be able to fully realize the anticipated benefits of this or other acquisitions and we may not be successful in integrating acquired technologies and businesses into our company. Acquisitions may disrupt our business, divert our resources and require significant management attention that would otherwise be available for development of our existing business.

        We also may not achieve the anticipated benefits from an acquired business due to a number of factors, including:

    inability to integrate or benefit from acquired technologies or services in a profitable manner;

    unanticipated costs, accounting charges or other liabilities associated with the acquisition;

    incurrence of acquisition-related costs;

    difficulty integrating the accounting systems, operations and personnel of the acquired business, including due to language, geographical or cultural differences;

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    difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;

    difficulty converting the customers of the acquired business onto our platform and contract terms, including disparities in the revenues, licensing, support or professional services model of the acquired company;

    adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;

    the potential loss of key employees;

    retention of employees from the acquired company;

    use of resources that are needed in other parts of our business;

    litigation or other claims arising in connection with the acquired company;

    additional regulatory and compliance requirements; and

    use of substantial portions of our available cash to consummate the acquisition.

        In addition, a significant portion of the purchase price of companies we acquire may be allocated to goodwill and other intangible assets, which must be assessed for impairment at least annually. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.

If the estimates and assumptions we have used to calculate the size of our total addressable target market are inaccurate, our future growth rate may be limited.

        We have estimated the size of our total addressable target market based on data published by third parties and on internally generated data and assumptions. While we believe our market size information is generally reliable, such information is inherently imprecise, and relies on our and third parties' projections, assumptions and estimates within our target market, which are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in this prospectus. If third-party or internally generated data prove to be inaccurate or we make errors in our assumptions based on that data, including how current customer data and trends may apply to potential future customers and the number and type of potential customers, our future growth rate may be lower than what we currently estimate. In addition, these inaccuracies or errors may cause us to misallocate capital and other business resources, which could divert resources from more valuable alternative projects and harm our business.

        Even if our target market meets our size estimates, we may not grow our business. Our growth is subject to many factors, including our success in expanding our international operations, continuing to promote the use of our services by our customers for their marketing needs and otherwise implementing our business strategy, which are subject to many risks and uncertainties. Accordingly, the information regarding the size of our total addressable market included in this prospectus should not be taken as indicative of our future growth.

Our platform or services may infringe the intellectual property rights of third parties and this may create liability for us or otherwise harm our business.

        Third parties may claim that our current or future platform capabilities or services infringe their intellectual property rights, and such claims may result in legal claims against our customers and us. These claims may damage our brand and reputation, harm our customer relationships and create liability for us. We expect the number of such claims will increase as the number of products and services and the level of

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competition in our market grows, the functionality of our platform or services overlap with that of other products and services, and the volume of issued software patents and patent applications continues to increase.

        Companies in the software and technology industries, including some of our current and potential competitors, own large numbers of patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, patent holding companies, non-practicing entities and other adverse patent owners that are not deterred by our existing intellectual property protections may seek to assert patent claims against us. From time to time, third parties have contacted us inviting us to license their patents and may, in the future, assert patent, copyright, trademark or other intellectual property rights against us, our strategic partners or our customers. We have received, and may in the future receive, notices that claim we have misappropriated, misused, or infringed other parties' intellectual property rights, and, to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property infringement claims, which is not uncommon with respect to our market.

        There may be third-party intellectual property rights, including issued or pending patents, that cover significant aspects of our technologies or business methods. In addition, if we acquire or license technologies from third parties, we may be exposed to increased risk of being the subject of intellectual property infringement due to, among other things, our lower level of visibility into the development process with respect to such technology and the care taken to safeguard against infringement risks. Any intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate, and could divert our management's attention and other resources. These claims could also subject us to significant liability for damages, potentially including treble damages if we are found to have willfully infringed patents or copyrights, and may require us to indemnify our customers for liabilities they incur as a result of such claims. These claims could also result in our having to stop using technology found to be in violation of a third party's rights. We might be required to seek a license for the intellectual property, which may not be available on reasonable terms or at all. Even if a license were available, we could be required to pay significant royalties, which would increase our operating expenses. Alternatively, we could be required to develop alternative non-infringing technology, which could require significant time, effort, and expense, and may affect the performance or features of our platform. If we cannot license or develop alternative non-infringing substitutes for any infringing technology used in any aspect of our business, we would be forced to limit or stop sales of our services and may be unable to compete effectively. Any of these results would adversely affect our business, operating results and financial condition.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.

        Our agreements with customers and other third parties typically include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement or other liabilities relating to or arising from our platform or services or other acts or omissions. Large indemnity payments or damage claims from contractual breach could harm our business, results of operations and financial condition. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our platform and adversely affect our business, results of operations and financial condition.

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Our platform contains third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our services.

        Our platform incorporates open source software code. An open source license allows the use, modification and distribution of software in source code form. Certain kinds of open source licenses further require that any person who creates a product or service that contains, links to, or is derived from software that was subject to an open source license must also make their own product or service subject to the same open source license. Using software that is subject to this kind of open source license can lead to a requirement that our services be provided free of charge or be made available or distributed in source code form. Although we do not believe our platform includes any open source software in a manner that would result in the imposition of any such requirement, the interpretation of open source licenses is legally complex and, despite our efforts, it is possible that our platform could be found to contain this type of open source software. Further, few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our platform or services in the future.

        Moreover, we cannot assure you that our processes for controlling our use of open source software in our platform will be effective. If we have not complied with the terms of an applicable open source software license, we could be required to seek licenses from third parties to continue offering our platform on terms that are not economically feasible, to re-engineer our services to remove or replace the open source software, to discontinue the sale of our services if re-engineering could not be accomplished on a timely basis, to pay monetary damages, or to make generally available the source code for our proprietary technology, any of which could adversely affect our business, operating results, and financial condition.

        In addition to risks related to license requirements, use of open source software can involve greater risks than those associated with use of third-party commercial software, as open source licensors generally do not provide warranties or assurance of title, performance, non-infringement, or controls on origin of the software. There is typically no support available for open source software, and we cannot assure you that the authors of such open source software will not abandon further development and maintenance. Many of the risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business. We have established processes to help alleviate these risks, including a review process for screening requests from our development organizations for the use of open source software, but we cannot be sure that all open source software is identified or submitted for approval prior to use in our platform.

        Responding to any infringement claim, regardless of its validity, or discovering open source software code in our platform could harm our business, operating results and financial condition, by, among other things:

    resulting in time-consuming and costly litigation;

    diverting management's time and attention from developing our business;

    requiring us to pay monetary damages or enter into royalty and licensing agreements on terms that may not be favorable to us;

    causing delays in the deployment of our platform;

    requiring us to stop selling some aspects of our platform;

    requiring us to redesign certain components of our platform using alternative non-infringing or non-open source technology or practices, which could require significant effort and expense;

    requiring us to disclose our software source code, the detailed program commands for our software; and

    requiring us to satisfy indemnification obligations to our customers.

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Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.

        Our success and ability to compete depend in part on our ability to protect our proprietary technology and intellectual property. To safeguard these rights, we rely on a combination of patent, trademark, copyright and trade secret laws and contractual protections in the United States and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a competitive advantage.

        In order to protect our unpatented proprietary technologies and processes, we rely on trade secret laws and confidentiality and invention assignment agreements with our employees, consultants, strategic partners, vendors and others. Also, despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, copy, reverse engineer or otherwise obtain and use them. In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights, or develop similar technologies and processes. Further, the contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. Moreover, policing unauthorized use of our technologies, trade secrets and intellectual property is difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. To the extent that we expand our activities outside of the United States, our exposure to unauthorized copying and use of our platform and proprietary information may increase. We may be unable to determine the extent of any unauthorized use or infringement of our platform, technologies or intellectual property rights.

        We cannot assure you that any patents we have obtained or that may issue to us in the future will give us the protection that we seek or that such patents will not be challenged, invalidated or circumvented. As of June 30, 2016, we had one issued patent. Any patents that may issue to us in the future may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers. Obtaining and enforcing software patents in the United States is becoming increasingly challenging. Any patents we have obtained or may obtain in the future may be found to be invalid or unenforceable in light of recent and future changes in the law. Similarly, we cannot assure you that any future trademark registrations will be issued from current or future applications or that any registered trademarks we have obtained or may obtain in the future will be enforceable or provide adequate protection of our proprietary rights. We also license software from third parties for integration into our software, including open source software and other software available on commercially reasonable terms. We cannot assure you that such third parties will maintain such software or continue to make it available.

        There can be no assurance that the steps that we take will be adequate to protect our proprietary technology and intellectual property, that others will not develop or patent similar or superior technologies, products or services, or that our trademark, patent and other intellectual property rights will not be challenged, invalidated or circumvented by others. Furthermore, effective trademark, patent, copyright and trade secret protection may not be available in every country in which our software is available or where we have employees or independent contractors. In addition, the legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights in internet and software-related industries are uncertain and still evolving.

        In order to protect our proprietary technology and intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our proprietary technology and intellectual property rights may be met with defenses,

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counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could materially and adversely affect our business.

We face exposure to foreign currency exchange rate fluctuations, and such fluctuations could adversely affect our business, results of operations and financial condition.

        As our international operations expand beyond our current London location, our exposure to the effects of fluctuations in currency exchange rates grows. While we have primarily transacted with customers and business partners in U.S. dollars, we expect to expand the number of transactions with customers and business partners that are denominated in foreign currencies in the future as we expand our business internationally. We incur expenses for some of our internet service provider costs outside of the United States in local currencies and for employee compensation and other operating expenses at our U.K. location in British pounds. Fluctuations in the exchange rates between the U.S. dollar and other currencies could result in an increase to the U.S. dollar equivalent of such expenses.

        Accordingly, changes in the value of foreign currencies relative to the U.S. dollar may, particularly in the future as we expand our business internationally, affect our results of operations due to transactional and translational remeasurements. As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors and securities analysts who follow our stock, the trading price of our common stock could be adversely affected.

        Our subscription agreements are denominated in U.S. dollars, and therefore our revenue currently is not subject to foreign currency risk. However, a strengthening of the U.S. dollar could increase the real cost of our platform to current and prospective customers outside of the United States, adversely affecting our business, results of operations and financial condition.

        We do not currently maintain a program to hedge transactional exposures in foreign currencies. However, in the future, we may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to structure effective hedges with such instruments.

Taxing authorities may successfully assert that we should have collected or paid, or in the future should collect or pay, sales, use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our financial results.

        We do not collect sales, use, value added and similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable. Sales, use, value added and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect and/or remit such taxes in the future. While we reserve estimated amounts with respect to such taxes on our financial statements, we cannot be certain that we have made sufficient reserves to cover such tax liabilities or such taxes. If our reserve amounts are inadequate, such tax assessments, penalties and interest or future requirements may adversely affect our results of operations and financial condition. Additionally, the application of federal, state, local and international tax laws to cloud services are continuously evolving. Income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted or amended at any time, possibly with retroactive effect, which could increase our taxes and ultimately have a negative impact on our results of operations and cash flows.

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Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

        As of December 31, 2016, we had net operating loss, or NOL, carryforwards for U.S. federal income tax purposes of approximately $33.9 million, which expire in various years beginning in 2029 if not utilized. In general, under Section 382 of the United States Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its pre-ownership change NOLs to offset future taxable income. We are currently in the process of completing a study under Section 382 of the Code to determine the impact that ownership changes during and prior to the year ended December 31, 2016, if any, may have had on our NOLs and expect to complete the analysis within the next twelve months. As a result of this analysis, we may have an adjustment in our available NOLs recorded at December 31, 2016. If our existing NOLs are subject to limitations arising from previous ownership changes, or if we undergo an ownership change in connection with or after this offering, our ability to utilize pre-change NOLs could be further limited by Section 382. Future changes in our stock ownership, some of which are outside of our control, could also result in an ownership change under Section 382 of the Code. We will be unable to use our NOLs if we do not attain profitability sufficient to offset such available NOLs prior to their expiration. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future taxable income. For these reasons, we may not be able to utilize a portion of the NOLs reflected on our balance sheet, even if we attain profitability.

The enactment of legislation implementing changes in U.S. taxation of international business activities or the adoption of other tax reform policies could materially impact our financial condition and results of operations.

        U.S. tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits and the deferral of certain tax deductions until earnings outside of the United States are repatriated to the United States, as well as changes to U.S. tax laws that may be enacted in the future, could impact the tax treatment of our foreign earnings. Due to the anticipated expansion of our international business activities, any changes in the U.S. taxation of such activities may increase our worldwide effective tax rate and adversely affect our financial condition and results of operations.

We could be subject to additional tax liabilities.

        We are subject to federal, state and local taxes in the United States and the United Kingdom. Significant judgment is required in evaluating our tax positions and our worldwide provision for taxes. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain. In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including those relating to income tax nexus, by our earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the valuation of our deferred tax assets and liabilities. We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes against us. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our operating results or cash flows in the period or periods for which a determination is made.

Unfavorable conditions in our industry or the global economy or reductions in marketing information technology spending could limit our ability to grow our business and negatively affect our results of operations.

        Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers. The revenue growth and potential profitability of our business depend on demand for email services and email marketing generally and for our services in particular. Current or

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future economic uncertainties or downturns could adversely affect our business and results of operations. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including spending on information technology, and negatively affect the growth of our business. To the extent our platform or services are perceived by customers and potential customers as discretionary, there may be delays or reductions in spending on our services, we may need to reduce our prices in order to remain competitive and our revenue may decline. In addition, the increased pace of consolidation in certain industries may result in reduced overall spending on our platform and services. We cannot predict the timing, magnitude or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate worsen, our business, results of operations and financial condition could be adversely affected.

        Furthermore, many of our customers are SMBs. These organizations frequently have limited budgets and are often resource- and time-constrained and, as a result, may be significantly more affected by economic downturns than their larger, more established counterparts. As a result, SMBs may choose to spend the limited funds that they have on items other than our services. Moreover, if SMBs experience economic distress, they may be unwilling or unable to expend time and financial resources on email, which could negatively affect the overall demand for our platform, increase customer attrition and cause our revenue growth or operating results to decline.

The success of our business depends on the continued growth and acceptance of email as a communications tool and the related accessibility, expansion and reliability of the Internet infrastructure.

        The future success of our business depends on the continued widespread use of email as a primary means of communication and as the document of record for many digital business transactions. Security problems such as viruses, worms and other malicious programs, reliability issues arising from outages and damage to the Internet infrastructure or an overabundance of spam could create the perception that email is not a safe, reliable or efficient means of communication, which would discourage businesses and consumers from using email. In addition, alternative communications tools such as social media or text messaging have gained significant widespread acceptance and may gain additional acceptance for both email marketing and transactional record purposes. To the extent use of these alternative communications tools continues to grow, these tools could be used by our customers as a substitute for our services, and demand for our services and our revenues could decline.

        Furthermore, federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the Internet as a commercial medium. In addition, government agencies or private organizations have imposed and may impose additional taxes, fees or other charges for accessing the Internet or commerce conducted via the Internet. We provide our platform through the Internet and many of our customers use our services in connection with their own online transactions. Changes in these laws or regulations could require us to modify our platform in order to comply with these changes and could impact our customers' businesses, reducing demand for our services. These laws or charges could limit the growth of Internet-related commerce or the use of Internet communications such as email, or result in reductions in the demand for Internet-based services such as our platform. In addition, the use of the Internet and email as business tools could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands in Internet activity, security, reliability, cost, ease-of-use, accessibility and quality of service. Any decrease in the use of the Internet or email would reduce demand for our platform and harm our business.

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If we experience excessive credit card or other fraudulent activity, we could incur substantial costs.

        Most of our customers authorize us to bill their credit card or other online accounts directly for subscription fees that we charge. If people pay for our services with stolen credit cards or other wrongly obtained online account information, we could incur substantial third-party vendor costs for which we may not be reimbursed. Further, our customers provide us with credit card billing information online, and we do not review the physical credit cards used in these transactions, which increases our risk of exposure to fraudulent activity. We also incur charges, which we refer to as chargebacks, from the credit card and other online payment processing companies from claims that the customer did not authorize the credit card or other online transaction to purchase our subscription. If the number of unauthorized credit card or other online transactions becomes excessive, we could be assessed substantial fines for excess chargebacks and we could lose the right to accept credit cards or other online accounts for payment, which could have a material adverse effect on our business and operating results.

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

        Generally accepted accounting principles in the United States, or GAAP, are subject to interpretation by the Financial Accounting Standards Board, or the FASB, the Securities and Exchange Commission, or the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results for periods prior to and subsequent to such change, and could affect the reporting of transactions completed before the announcement of a change.

        In particular, in May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition . The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services; this new accounting standard also impacts the recognition of sales commissions. As an "emerging growth company" the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act with respect to ASU 2014-09, and as a result ASU 2014-09 will become applicable to us on January 1, 2019.

        ASU 2014-09 permits the use of either a retrospective or cumulative effect transition method. We continue to evaluate the impact of the new standard and available adoption methods on our consolidated financial statements. We are in the process of evaluating arrangements with customers and identifying differences in accounting between new and existing standards. Regardless of the transition method, the application of this new guidance could have an adverse effect on our operating results in one or more periods as compared to what they would have been under current standards.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.

        The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations." The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue

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recognition, valuation of goodwill and intangible assets, and stock-based compensation. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.

The requirements of being a public company may strain our resources, divert management's attention and affect our ability to attract and retain executive management and qualified board members.

        As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the New York Stock Exchange and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources, particularly after we are no longer an "emerging growth company" as defined in the JOBS Act.

        In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, further increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management's time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.

        Moreover, the demands on management in operating a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies, are significant. Our management team may not successfully or efficiently manage us as a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, results of operations and financial condition.

        We also expect that being a public company will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.

If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

        As a public company, we will be required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the year ending December 31, 2018. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial

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reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on our internal control over financial reporting, provided that our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the date we are no longer an "emerging growth company," as defined in the JOBS Act.

        If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We are in the process of designing and implementing the internal controls over financial reporting required to comply with this obligation, which process will be time-consuming, costly and complicated. If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock could be negatively affected. In addition, we could become subject to investigations by the New York Stock Exchange, the SEC or other regulatory authorities, which could require additional financial and management resources and adversely affect our business, financial condition and operating results.

Risks Related to This Offering and Ownership of Our Common Stock

There has been no prior market for our common stock. An active market may not develop or be sustained and investors may not be able to resell their shares at or above the initial public offering price.

        There has been no public market for our common stock prior to this offering. The initial public offering price for our common stock will be determined through negotiations between the underwriters and us and may vary from the market price of our common stock following this offering. If you purchase shares of our common stock in this offering, you may not be able to resell those shares at or above the initial public offering price, if at all.

        We have applied to list our common stock on the New York Stock Exchange under the symbol "SEND." However, there can be no assurance that an active trading market for our common stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. The lack of an active trading market for our common stock could depress the market price of our common stock and could affect your ability to sell your shares, thus causing the value of any investment in our common stock to decline.

Our stock price may be volatile, and the value of any investment in our common stock may decline.

        The trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, many of which are beyond our control. In addition to the factors discussed in this "Risk Factors" section and elsewhere in this prospectus, these factors include:

    our operating performance and the operating performance of similar companies;

    failure to meet revenue, earnings, key metrics or other financial or operational expectations that we establish or are established by securities analysts or investors;

    the overall performance and volatility of the equity markets in general or of our industry in particular;

    actual or anticipated developments in our business, our competitors' businesses or the competitive landscape generally;

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    the number of shares of our common stock publicly owned and available for trading;

    threatened or actual litigation;

    changes in laws or regulations affecting our business;

    changes in our board of directors or management;

    publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts;

    public reaction to our press releases, other public announcements and filings with the SEC, including related to new services or functionalities or announced or completed acquisitions;

    changes in accounting standards, policies, guidelines, interpretations or principles;

    large volumes of sales of shares of our common stock by us or our existing stockholders; and

    general political and economic conditions.

        In addition, the stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our stock regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. Securities class action litigation has often been instituted against companies following periods of volatility in the market price of their securities. This form of litigation, if instituted against us, could result in very substantial costs, divert our management's attention and resources and harm our business, operating results and financial condition.

As a new investor, you will experience immediate and substantial dilution in the book value of the shares that you purchase in this offering.

        The initial public offering price is substantially higher than the pro forma net tangible book value per share of our common stock immediately following this offering based on the total value of our tangible assets less our total liabilities. Therefore, if you purchase shares of our common stock in this offering, at the assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, you will experience immediate dilution of $            per share, the difference between the price per share you pay for our common stock and our pro forma net tangible book value per share as of                        , 2017, after giving effect to the issuance of                    shares of our common stock in this offering. See "Dilution." To the extent outstanding options or warrants to purchase our common stock are exercised, investors purchasing our common stock in this offering will experience further dilution.

Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.

        The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, a large number of shares of our common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares. After this offering, there will be                shares of our common stock outstanding, based on the number of shares outstanding as of June 30, 2017, including the shares to be sold in this offering, which may be resold in the public market immediately. Substantially all of the remaining shares are currently restricted as a result of market stand-off agreements restricting their sale during the period ending 180 days after the date of this prospectus. In addition, substantially all of these shares are also subject to lock-up agreements with the representatives of the underwriters. Morgan Stanley & Co. LLC on behalf of the underwriters may, in its sole discretion, permit our officers, directors,

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employees and current security holders who are subject to lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

        Additionally, 10,669,551 shares of our common stock subject to outstanding options and awards under our equity incentive plans as of June 30, 2017, will become eligible for sale in the public market in the future, subject to applicable vesting requirements, the lock-up agreements and market standoff provisions described above and Rules 144 and 701 under the Securities Act. See "Shares Eligible for Future Sale" for a more detailed description of sales that may occur in the future.

        We also intend to register all                        shares of our common stock that will be initially reserved for issuance under our 2017 Equity Incentive Plan and our 2017 ESPP. Once we register these shares, they can be freely sold in the public market upon issuance and once vested and exercised, as applicable, subject to the lock-up agreements described above.

        As of June 30, 2017, the holders of an aggregate of 24,471,780 shares of our convertible preferred stock, which shares of convertible preferred stock will be converted into 24,471,780 shares of our common stock upon the closing of this offering, have rights, subject to certain conditions, to require us to file registration statements covering their shares and to include their shares in registration statements that we may file for ourselves or other stockholders. The holder of the warrant to purchase 54,269 shares of our convertible preferred stock, which warrant will convert into a warrant to purchase 54,269 shares of our common stock upon the closing of this offering, also has these registration rights. The stockholders with these registration rights have waived such rights with respect to this offering.

        We may issue shares of our common stock or securities convertible into our common stock from time to time in connection with a financing, acquisition, investment or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.

Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

        Our management generally will have broad discretion to use the net proceeds to us from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply the net proceeds from this offering in ways that increase the value of your investment. We intend to use the net proceeds to us from this offering for working capital and other general corporate purposes, including developing and enhancing our technical infrastructure, platform and services, expanding our research and development efforts and selling and marketing operations, meeting the increased compliance requirements associated with our transition to and operation as a public company, and expanding into new markets. We may also use a portion to make acquisitions or investments. However, we do not have any agreements or commitments for any acquisitions or strategic investments at this time. Until we use the net proceeds to us from this offering, we plan to invest them, and these investments may not yield a favorable rate of return. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

Concentration of ownership among our officers, directors, significant stockholders and their affiliates may prevent new investors, including purchasers in this offering, from influencing corporate decisions.

        Our officers, directors and their affiliated funds and each of our stockholders who own greater than 5% of our outstanding common stock and their affiliates, in the aggregate, will beneficially own an aggregate of approximately        % of the outstanding shares of our common stock following this offering, assuming no exercise of the underwriters' option to purchase additional shares. As a result, if some of these persons or entities act together, they will have significant influence over the outcome of matters submitted to our stockholders for approval, including the election of directors and approval of significant

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corporate transactions, such as a merger or other sale of our company or our assets. This concentration of ownership could limit the ability of other stockholders to influence corporate matters and may have the effect of delaying or preventing a change of control of our company. Some of these persons or entities may have interests different from yours. For example, because many of these stockholders purchased their shares at prices substantially below the price at which shares are being sold in this offering and have held their shares for a relatively longer period, they may be more interested in selling the company to an acquirer than other investors.

We do not intend to pay dividends for the foreseeable future.

        We never have declared or paid any cash dividends on our capital stock and do not intend to pay any cash dividends in the foreseeable future. In addition, our credit facility restricts, and any future debt or preferred security arrangements may restrict, our ability to make distributions to our stockholders. We anticipate that we will retain any future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their shares of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

We are an "emerging growth company," and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

        For so long as we remain an "emerging growth company," as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements that are applicable to public companies that are not "emerging growth companies," including not being required to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, we have elected to take advantage of the extended transition period to comply with new or revised accounting standards. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies, which may make comparison of our financials to those of other public companies more difficult. We will remain an "emerging growth company" until the earliest of (i) the last day of the year following the fifth anniversary of the completion of our initial public offering, (ii) the last day of the first year in which our annual gross revenue is $1.07 billion or more, (iii) the date on which we have, during the previous rolling three-year period, issued more than $1.00 billion in non-convertible debt securities or (iv) the date on which we are deemed to be a "large accelerated filer" as defined in the Exchange Act. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

        Provisions in our amended and restated certificate of incorporation and amended and restated bylaws to be effective in connection with the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

    authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;

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    require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

    specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer;

    establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

    establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;

    prohibit cumulative voting in the election of directors;

    provide that our directors may be removed for cause only upon the vote of sixty-six and two-thirds percent (66 2 / 3 %) of our outstanding shares of common stock;

    provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and

    require the approval of our board of directors or the holders of at least sixty-six and two-thirds percent (66 2 / 3 %) of our outstanding shares of common stock to amend our bylaws and certain provisions of our certificate of incorporation.

        These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause the market price of our common stock to decline.

Our amended and restated certificate of incorporation to be effective in connection with the closing of this offering will provide that the Court of Chancery of the State of Delaware or the U.S. federal district courts will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

        Our amended and restated certificate of incorporation to be effective in connection with the closing of this offering provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us arising pursuant to any provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. Our amended and restated certificate of incorporation further provides that the U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. These choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits. If a court were to find either choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our results of operations and financial condition.

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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

        The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If too few securities analysts commence coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus, particularly in the sections titled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future financial condition, results of operations, business strategy and plans and objectives of management for future operations, as well as statements regarding industry trends, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "believe," "will," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," "could," "potentially" or the negative of these terms or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described under the section titled "Risk Factors" and elsewhere in this prospectus, regarding, among other things:

    our ability to effectively sustain and manage our growth and future expenses, and our ability to achieve and maintain future profitability;

    our ability to attract new customers and to maintain and expand our existing customer base;

    our dependence on our self-service model;

    our ability to scale and update our platform to respond to customers' needs and rapid technological change;

    our reliance on third parties, including for strategic relationships to sell our services and for network connectivity, hosting and other services;

    the effects of increased competition on our market and our ability to compete effectively;

    our ability to expand our operations and increase adoption of our platform internationally;

    our ability to maintain, protect and enhance our brand;

    our customers' and other platform users' violation of our policies or misuse of our platform;

    the sufficiency of our cash and cash equivalents to satisfy our liquidity needs;

    our failure or the failure of our platform of services to comply with applicable industry standards, laws and regulations;

    our ability to maintain our corporate culture;

    our ability to hire, retain and motivate qualified personnel;

    our ability to identify targets for, execute on and realize the benefits of potential acquisitions;

    our ability to estimate the size and potential growth of our target market; and

    our ability to maintain proper and effective internal controls.

        These risks are not exhaustive. Other sections of this prospectus may include additional factors that could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

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        You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus.

        You should read this prospectus and the documents that we have filed as exhibits to the registration statement on Form S-1, of which this prospectus is a part, that we have filed with the SEC with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect.

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MARKET AND INDUSTRY DATA

        Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources, including data from the NAICS Association regarding the number of businesses with five or more employees, data from the Small Business Administration, or the SBA, regarding the percentage of businesses with a web presence and our own internal data on our average customer revenue, on assumptions that we have made that are based on that data and other similar sources, including the appropriateness and applicability of that data for our use, and on our knowledge of the markets for our services. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled "Risk Factors" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

        Certain information in the text of this prospectus is contained in independent industry publications. The sources of these independent industry publications are provided below:

    2017 Deliverability Benchmark Report: Analysis of Worldwide Inbox Placement Rates, Return Path, June 2017;

    Email Marketing Benchmarks 2016 Relevancy, Frequency, Deliverability and Mobility, eMarketer, September 2016;

    Email Statistics Report 2017-2021, The Radicati Group, Inc., February 2017;

    National Client Email Report 2015, The Direct Marketing Association (UK) LTD, 2015;

    The Future of Digital Communication: Topline Results, Egg Strategy, August 2017; and

    The Inbox Report 2017: Consumer Perceptions of Email, Fluent, 2017.

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USE OF PROCEEDS

        We estimate that the net proceeds we will receive from this offering will be approximately $             million, assuming an initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions.

        Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of our common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $             million, assuming that the assumed initial public offering price of $            per share remains the same, after deducting the estimated underwriting discounts and commissions.

        The principal purposes of this offering are to increase our capitalization and financial flexibility and create a public market for our common stock. Although we have not yet determined with certainty the manner in which we will allocate the net proceeds of this offering, we intend to use the net proceeds from this offering for working capital and other general corporate purposes, including developing and enhancing our technical infrastructure, platform and services, expanding our research and development efforts and selling and marketing operations, meeting the increased compliance requirements associated with our transition to and operation as a public company, and expanding into new markets.

        We may also use a portion of the net proceeds to make acquisitions of or invest in businesses, products, services or technologies that we believe to be complementary. We do not have any agreements or commitments for any such acquisitions or investments at this time.

        The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, we will have broad discretion in the application of the net proceeds, and investors will be relying on the judgment of our management regarding the application of the net proceeds of this offering. The timing and amount of capital expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business.

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DIVIDEND POLICY

        We have never declared or paid dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business. We do not intend to declare or pay cash dividends on our common stock in the foreseeable future. The terms of our outstanding credit facility also restrict our ability to pay dividends, and we may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our capital stock.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2017, on:

    an actual basis;

    a pro forma basis to give effect to the conversion of all the outstanding shares of our convertible preferred stock into an aggregate of 24,535,227 shares of our common stock and the conversion of an outstanding warrant to purchase shares of our convertible preferred stock into a warrant to purchase 54,269 shares of our common stock, each of which will occur automatically upon the closing of this offering; and              

    a pro forma as adjusted basis to give further effect to the sale of                        shares of our common stock in this offering at an assumed initial public offering price of $      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        The pro forma as adjusted information below is illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other final terms of the offering.

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        You should read this table together with the sections of this prospectus titled "Summary Consolidated Financial Data," "Selected Consolidated Financial Data," "Description of Capital Stock" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes included elsewhere in this prospectus.

 
  As of June 30, 2017  
 
  Actual   Pro
Forma
  Pro Forma
As
Adjusted (1)
 
 
  (unaudited)
 
 
  (in thousands, except share and per
share data)

 

Cash and cash equivalents

  $ 37,625   $ 37,625   $    

Preferred stock warrant liability

  $ 719   $   $    

Convertible preferred stock, par value $0.001 per share;

                   

24,697,410 shares authorized, 24,535,227 issued and outstanding, actual; no shares authorized, issued, or outstanding, pro forma and pro forma as adjusted

    80,688            

Stockholders' equity (deficit):

                   

Preferred stock, par value $0.001 per share; no shares authorized, issued or outstanding, actual; 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

               

Common stock, par value $0.001 per share, 50,000,000 shares authorized, 7,953,628 shares issued and outstanding, actual; 250,000,000 shares authorized, 32,488,855 shares issued and outstanding, pro forma; 250,000,000 shares authorized,                shares issued and outstanding, pro forma as adjusted

    5     30        

Additional paid-in-capital

    7,906     89,288        

Accumulated other comprehensive income (loss)

    (5 )   (5 )      

Accumulated deficit

    (46,738 )   (46,738 )      

Total stockholders' equity (deficit)

    (38,832 )   42,575        

Total capitalization

  $ 42,575   $ 42,575   $    

(1)
Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders' equity (deficit) and total capitalization by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Each increase or decrease of 1,000,000 in the number of shares we are offering would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders' equity (deficit) and total capitalization by approximately $             million, assuming that the assumed initial public offering price stays the same, after deducting the estimated underwriting discounts and commissions.

        The outstanding share information in the table above excludes, as of June 30, 2017, the following shares:

    10,057,096 shares of our common stock issuable upon the exercise of stock options outstanding as of June 30, 2017, with a weighted average exercise price of $2.58 per share;

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    54,269 shares of our common stock issuable upon conversion of shares of our convertible preferred stock that are subject to an outstanding warrant as of June 30, 2017, with an exercise price of $2.764 per share;

    466,571 shares of our common stock reserved for issuance to fund and support the operations of SendGrid.org, of which none were issued and outstanding as of June 30, 2017;

    617,455 shares of our common stock issuable on the vesting and settlement of RSUs outstanding as of June 30, 2017;

                            shares of our common stock to be reserved and available for future issuance under our 2017 Plan, which will become effective immediately prior to the date of the underwriting agreement for this offering (as more fully described in "Executive Compensation—Equity Incentive Plans"), including:

    an aggregate of 1,594,046 shares of our common stock reserved for future grants under our 2012 Plan, which will be added to the shares reserved under our 2017 Plan, plus

    any automatic increases in the number of shares of our common stock reserved for future issuance under our 2017 Plan; and

                        shares of our common stock reserved for issuance under our 2017 ESPP, which will become effective immediately prior to the date of the underwriting agreement for this offering and contains provisions that automatically increase its share reserve each year, as more fully described in the section titled "Executive Compensation—Equity Incentive Plans."

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DILUTION

        If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

        Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of our common stock outstanding. Our historical net tangible book value as of                    , was $         million, or $        per share. Our pro forma net tangible book value as of                        , was $             million, or $            per share, based on the total number of shares of our common stock outstanding as of                        , after giving effect to (i) the automatic conversion of all outstanding shares of our convertible preferred stock as of                        , into an aggregate of                        shares of our common stock, which conversion will occur upon the closing of the offering and (ii) the reclassification of our preferred stock warrant liability to additional paid-in capital upon the closing of this offering.

        After giving effect to the sale of shares of our common stock in this offering at the assumed initial public offering price of $        per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of                        , would have been $         million, or $        per share. This represents an immediate increase in pro forma net tangible book value of $        per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of $      per share to investors purchasing shares of our common stock in this offering at the assumed initial public offering price.

        The following table illustrates this dilution on a per share basis to new investors:

Assumed initial public offering price per share

        $       

Pro forma net tangible book value per share as of                         

  $             

Increase in pro forma net tangible book value per share as of                         

             

Pro forma as adjusted net tangible book value per share immediately after this offering

             

Dilution per share to new investors participating in this offering

        $       

        Each $1.00 increase or decrease in the assumed initial public offering price of $        per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book value per share to new investors by $            , and would increase or decrease, as applicable, dilution per share to new investors in this offering by $        , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions. Each increase or decrease of 1,000,000 shares in the number of shares of our common stock we are offering would increase or decrease the pro forma as adjusted net tangible book value by approximately $        per share and the dilution to new investors by $        per share, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions.

        If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value per share would be $      per share, and the dilution in pro forma net tangible book value per share to new investors in this offering would be $      per share.

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        The following table summarizes, as of                        :

    the total number of shares of our common stock purchased from us by our existing stockholders and by new investors purchasing shares in this offering;

    the total consideration paid to us by our existing stockholders and by new investors purchasing shares in this offering, assuming an initial public offering of $        per share, which is the midpoint of the estimated offering range set forth on the cover page of this prospectus (before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering); and

    the average price per share paid by existing stockholders and by new investors purchasing shares in this offering.
 
  Shares purchased   Total consideration    
 
 
  Average
price per share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

               % $               % $       

New investors

                          $       

Total

          100 % $          100 %      

        Each $1.00 increase or decrease in the assumed initial public offering price of $        per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the total consideration paid by new investors and total consideration paid by all stockholders by approximately $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions.

        In addition, to the extent any outstanding options or the outstanding warrant are exercised, new investors would experience further dilution.

        Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters' over-allotment option. If the underwriters exercise their over-allotment option in full, our existing stockholders would own        % and our new investors would own        % of the total number of shares of our common stock outstanding upon the closing of this offering.

        The number of shares of our common stock that will be outstanding after this offering is based on                        shares outstanding as of                        , and excludes:

                            shares of our common stock issuable upon the exercise of stock options outstanding as of                        , with a weighted average exercise price of $        per share;

                                shares of our common stock issuable upon conversion of shares of our convertible preferred stock that are subject to an outstanding warrant as of                        , with an exercise price of $            per share;

                            shares of our common stock reserved for issuance to fund and support the operations of SendGrid.org, of which                         were issued and outstanding as of                        ;

                            shares of our common stock issuable on the vesting and settlement of RSUs outstanding as of                        ;

                            shares of our common stock to be reserved and available for future issuance under our 2017 Plan, including:

    an aggregate of                        shares of our common stock reserved for future grants under our 2012 Plan, which will be added to the shares reserved under our 2017 Plan, plus

    any automatic increases in the number of shares of our common stock reserved for future issuance under our 2017 Plan; and

                            shares of our common stock reserved for issuance under our 2017 ESPP, which will become effective immediately prior to the date of the underwriting agreement for this offering and contains provisions that automatically increase its share reserve each year, as more fully described in the section titled "Executive Compensation—Equity Incentive Plans."

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following tables summarize our historical consolidated financial data. We have derived the historical consolidated statements of operations data for the years ended December 31, 2014, 2015 and 2016, and the consolidated balance sheet data as of December 31, 2015 and 2016, from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the historical consolidated statements of operations data for the six months ended June 30, 2016 and 2017, and the historical consolidated balance sheet data as of June 30, 2017, from our unaudited interim consolidated financial statements included elsewhere in this prospectus. In management's opinion, we have prepared our unaudited interim consolidated financial statements on the same basis as our audited consolidated financial statements and have included all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial information set forth in those statements. The following summary consolidated financial data should be read in conjunction with the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future and our results for the six months ended June 30, 2017, are not necessarily indicative of the results that may be expected for the full year or any other period.

 
  For the Year Ended
December 31,
  For the Six Months
Ended June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (In thousands, except per share amounts)
 

Consolidated Statements of Operations Data:

                               

Revenue

  $ 42,776   $ 58,476   $ 79,929   $ 36,157   $ 51,843  

Cost of revenue (1)(2)

    15,187     18,961     21,605     10,603     13,745  

Gross profit

    27,589     39,515     58,324     25,554     38,098  

Operating expenses: (1)(2)

                               

Research and development

    15,290     18,959     21,178     10,343     13,663  

Selling and marketing

    15,260     13,737     21,800     9,954     13,458  

General and administrative (3)(4)

    9,550     12,477     18,920     8,499     13,538  

Loss on disposal of assets

    63     1     27     27     2  

Total operating expenses

    40,163     45,174     61,925     28,823     40,661  

Loss from operations

    (12,574 )   (5,659 )   (3,601 )   (3,269 )   (2,563 )

Other income (expense), net (5)

    (386 )   (195 )   (307 )   (212 )   (571 )

Net loss before provision for income taxes

    (12,960 )   (5,854 )   (3,908 )   (3,481 )   (3,134 )

Provision for income taxes

                     

Net loss

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

Weighted average shares used in computing net loss per share, basic and diluted (6)

    5,194     7,091     7,521     7,476     7,896  

Net loss per share, basic and diluted (6)

  $ (2.50 ) $ (0.83 ) $ (0.52 ) $ (0.47 ) $ (0.40 )

Pro forma weighted average shares outstanding (6)

                29,921           32,431  

Pro forma net loss per share (6)

              $ (0.13 )       $ (0.08 )

(1)
Amounts include stock-based compensation expense as follows:
 
  For the Year Ended
December 31,
  For the Six
Months Ended
June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (In thousands)
 

Cost of revenue

  $ 103   $ 97   $ 131   $ 62   $ 151  

Research and development

    157     379     552     257     362  

Selling and marketing

    125     193     402     160     315  

General and administrative

    309     706     814     400     553  

Total stock-based compensation

  $ 694   $ 1,375   $ 1,899   $ 879   $ 1,381  

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(2)
Amounts include merger and acquisition expense as follows:
 
  For the Year Ended
December 31,
  For the Six
Months
Ended
June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (in thousands)
 

Cost of revenue

  $   $   $   $   $ 38  

Research and development

                    195  

Selling and marketing

                    6  

General and administrative

                    232  

Total merger and acquisition expense

                  $ 471  
(3)
Includes third-party consulting services related to preparation to become and operate as a public company of $0, $0, $0.1 million, $0 and $0.3 million for the years ended December 31, 2014, 2015 and 2016, and the six months ended June 30, 2016 and 2017, respectively.

(4)
Includes restructuring expense of $0, $0, $0.4 million, $0.1 million and $1.0 million for the years ended December 31, 2014, 2015 and 2016, and the six months ended June 30, 2016 and 2017, respectively.

(5)
Includes warrant interest expense of $0.1 million, $0, $0.1 million, $0.1 million and $0.5 million for the years ended December 31, 2014, 2015 and 2016, and the six months ended June 30, 2016 and 2017, respectively.

(6)
See Notes 2 and 13 to our consolidated financial statements for an explanation of the method used to calculate basic and diluted and pro forma net loss per common share attributable to common stockholders.
 
  As of Dec. 31,    
 
 
  As of
Jun. 30,
2017
 
 
  2015   2016  
 
  (in thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 9,269   $ 40,400   $ 37,625  

Working capital

    5,665     33,775     29,436  

Property and equipment, net

    10,413     19,190     24,924  

Total assets

    24,676     66,635     73,394  

Total stockholders' deficit

  $ (35,947 ) $ (37,780 ) $ (38,832 )

Non-GAAP Financial Measures

        To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

        We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP financial metrics to assist investors in seeing our financial performance through the eyes of management, and because we believe that these

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measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

 
  For the Year Ended December 31,   For the Six
Months Ended
June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (in thousands)
 

Adjusted net income (loss)

  $ (12,190 ) $ (4,460 ) $ (1,440 ) $ (2,365 ) $ 576  

Free cash flow

    (13,584 )   (3,965 )   (2,462 )   (1,005 )   (889 )

    Adjusted net income (loss)

        We use the non-GAAP financial measure of adjusted net income (loss), which is defined as GAAP net income (loss), excluding stock-based compensation expense, restructuring expense, costs associated with mergers and acquisitions, warrant interest expense and non-capitalizable costs associated with this initial public offering. Due to our significant federal and state net operating loss carryforwards, as well as a full valuation against our net deferred tax assets, there is no income tax effect on adjusted net income (loss) in the presented periods. We believe that adjusted net income (loss) helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in adjusted net income (loss). Additionally our executive compensation structure uses an adjusted net income (loss) target as one of the components when calculating payments that have been earned.

        The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with GAAP, to adjusted net income (loss), for each of the periods presented:

 
  For the Year Ended December 31,   For the Six Months
Ended June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (in thousands)
 

Net loss

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

Stock-based compensation expense

    694     1,375     1,899     879     1,381  

Restructuring expense

            385     135     1,014  

Merger and acquisition expense

                    471  

Adjustment to convertible preferred stock warrant liability

    76     19     86     102     518  

Certain IPO costs

            98         326  

Adjusted net income (loss)

  $ (12,190 ) $ (4,460 ) $ (1,440 ) $ (2,365 ) $ 576  

        There are a number of limitations related to the use of adjusted net income (loss) as compared to net loss, including that adjusted net income (loss) excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy.

    Free cash flow

        We use the non-GAAP financial measure of free cash flow, which is defined as GAAP net cash flows from operating activities, reduced by purchase of property and equipment, and principal payments on capital lease obligations. We believe free cash flow is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses, investment in our business and to make acquisitions. Free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.

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        The following table presents a reconciliation of net cash from operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow for each of the periods presented:

 
  For the Year Ended December 31,   For the Six Months
Ended June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (in thousands)
 

Net cash flows from operating activities

  $ (9,640 ) $ 1,230   $ 9,689   $ 2,404   $ 5,122  

Purchase of property and equipment

   
(2,446

)
 
(1,256

)
 
(7,087

)
 
(1,001

)
 
(3,014

)

Principal payments on capital lease obligations

    (1,498 )   (3,939 )   (5,064 )   (2,408 )   (2,997 )

Free cash flow

  $ (13,584 ) $ (3,965 ) $ (2,462 ) $ (1,005 ) $ (889 )

        There are a number of limitations related to the use of free cash flow as compared to net cash from operating activities, including that free cash flow does not reflect future contractual commitments.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled "Special Note Regarding Forward-Looking Statements" and "Risk Factors" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

        We are a leading digital communication platform, enabling businesses to engage with their customers via email reliably, effectively and at scale. Our cloud-based platform allows for frictionless adoption and immediate value creation for businesses, providing their developers and marketers with the tools to seamlessly and effectively reach their customers using email. Since our inception we have processed more than one trillion emails.

        SendGrid was started by three developers who found themselves spending an increasing amount of time resolving email issues rather than working on the core products of their emerging technology companies. Frustrated with the time and effort required to send email at scale, they started our company with the goal of building an effective and easy to adopt platform for scalable email delivery. Since our founding, we have focused on extending the scale and reliability of our platform while expanding the scope of our offerings. We introduced our Email API service in 2009, which allowed businesses to send both transactional and marketing emails. We continued to add functionality to our platform and in late 2015 introduced our Marketing Campaigns service, which allows marketers to upload and manage customer contact lists, create and test email templates, and then execute and analyze multi-faceted email campaigns that engage customers and drive growth. In 2016, we introduced Expert Services to help businesses further optimize the deliverability of their emails and the effectiveness of their email marketing programs.

        Our services are designed to be easy to adopt and affordable for businesses of all sizes. Our services are easily accessible from our website, with transparent pricing and a monthly contract term. Our customers pay for what they need and can begin using our services in minutes. We generate revenue primarily through sales of subscriptions to our services. We offer our Email API service on a subscription basis, priced based on email volume. Our Email API service pricing plans start at $9.95 per month for up to 40,000 emails. Our Marketing Campaigns service is priced based on the number of email contacts stored on our platform and the number of monthly emails sent to those contacts through our Email API service. Our Marketing Campaigns service is fully integrated, such that businesses using the service to store email contacts on our system must also use our Email API to send email to those contacts. Therefore, revenue from our Marketing Campaigns service includes revenue generated from subscriptions by our Marketing Campaigns customers both to store email contacts on our system and to send emails through our Email API service to those contacts. Expert Services are charged either on a monthly basis or as a one-time consultation fee and to date has accounted for a de minimus percentage of our total revenue.

        We primarily sell to developers and marketers who want easy to use, self-service tools. Businesses learn about us through our marketing efforts or through our user community and sign up through our website. We offer documentation to enable self-service onboarding and 24 x 7 support to answer questions. We also sell our services to and through leading public cloud infrastructure providers and ecommerce platforms, such as Heroku, Amazon Web Services and Microsoft Azure, software vendors that offer complementary products and with which we co-sell our Email API and Marketing Campaigns services, such as Github, New Relic and Twilio, and digital marketing agencies, such as Deloitte Digital, which resell

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our services to their clients. Additionally, we have a limited inside sales team to manage inbound interest from businesses.

        We target any business that needs to deliver transactional or marketing email. As a result, our customers include SMBs and large enterprises across a wide range of industries. As of June 30, 2017, we had more than 55,000 customers globally. We believe a relatively small number of these businesses have more than one unique paying account with us, and we count each of these accounts as a separate customer. No single customer represented more than 2% of annual total revenue in 2014, 2015 or 2016 or for the six months ended June 30, 2017, and our ten largest customers comprised less than 10% of our total revenue in each of 2014, 2015 and 2016 and for the six months ended June 30, 2017.

        We have a history of attracting new customers that increase their spend with us over time. Our customers generally increase spend as their businesses grow, they send more email, or as they expand their use of our services. The chart below illustrates the annual total revenue from each customer cohort over the years presented. Each cohort represents customers that made their initial purchase from us in a given year. For example, the 2012 cohort represents all customers that made their initial purchase from us between January 1, 2012 and December 31, 2012. The 2012 cohort increased their contribution to our annual total revenue from $4.8 million in 2012 to $15.4 million in 2016, growing by 221% over that five-year period.


Annual Revenue by Cohort

GRAPHIC

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        Our historical revenue has generally grown linearly throughout the quarter, as shown by the chart below. Because we utilize a self-service model, customers generally sign up for our services on our website without interacting with anyone at the company, as we do not have a traditional enterprise salesforce.


Percentage of Revenue by Day

GRAPHIC

        We have achieved significant growth in recent periods. For 2014, 2015, 2016 and the six months ended June 30, 2017:

    our total revenue was $42.8 million, $58.5 million, $79.9 million, and $51.8 million, respectively;

    our net loss was $13.0 million, $5.9 million, $3.9 million, and $3.1 million, respectively;

    our adjusted net income (loss) was $(12.2) million, $(4.5) million, $(1.4) million, and $0.6 million, respectively;

    net cash flows from operating activities were $(9.6) million, $1.2 million, $9.7 million, and $5.1 million, respectively; and

    our free cash flow was $(13.6) million, $(4.0) million, $(2.5) million, and $(0.9) million, respectively.

        See "Selected Consolidated Financial Data" for more information on our adjusted net income (loss) and free cash flow and a reconciliation to net income (loss) and net cash flows from operating activities, respectively.

Key Factors Affecting Our Performance

        The following are the key factors affecting our performance:

    Attracting New Customers and Expanding with Existing Customers

        We had over 55,000 customers globally as of June 30, 2017. We believe we are less than 3% penetrated in our potential addressable customer base. Our revenue grows as our customers scale and send more

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email. Our typical adoption pattern begins with a developer who signs up for our Email API service. Once a customer begins using our Email API service, the customer often increases the number of emails sent through our service over time, principally as a result of the customer's organic growth and also through the adoption of additional use cases and services, in each case typically without significant incremental marketing expenditures from us.

        Since launching our Marketing Campaigns service in late 2015, we have seen strong receptivity from marketers, with over 7,400 customers using the service as of June 30, 2017. We intend to grow our Marketing Campaigns business by adding new Marketing Campaigns customers and by cross selling into our existing Email API service customer base. Many of our customers using our Email API service for transactional email do not use a separate, dedicated marketing product, and we believe that our Marketing Campaigns service offers them a highly attractive proposition. The growth of our business is dependent on our ability to attract and retain new customers and to expand services with existing customers.

    Increasing International Revenue

        Customers outside the United States are increasingly using our services. We define U.S. revenue as revenue derived from customers with U.S. billing addresses and international revenue as all other revenue. In each of 2014, 2015 and 2016, more than 36% of our total revenue was from outside the United States, and during that period our international revenue increased by $13.5 million, or approximately 84%. Recently, we opened our first international sales and marketing office, located in London. We plan to grow our international revenue by expanding our sales and marketing efforts in select countries and regions, through increased leverage with international strategic partners, and through localization of our services and support.

        We have relied primarily on our self-service sales model and relationships with strategic partners to attract international customers. We have limited international infrastructure, limited experience operating directly in international markets and no localization of our services or support. To the extent that our self-service sales model or strategic partner relationships do not continue to allow us to attract international customers, our international revenue may not grow or may decline, or we may incur significant additional selling and marketing and other expenses in order to grow our international revenue, including as a result of any expansion of our direct sales force outside the United States. Furthermore, our ability to successfully localize our services and support without making additional material investments in international infrastructure and personnel is uncertain. To the extent that increased costs from our international expansion are not offset by sufficient revenue growth, our profitability will be harmed. See "Risk Factors—Our future success depends in part on our ability to continue to drive adoption of our platform and services by international customers, and our international operations and sales to customers with international operations expose us to risks inherent in international sales" for additional information.

    Increasing Reliance on Strategic Partners

        We have established strategic relationships with a number of other companies and we intend to continue to invest in, and expand, such relationships. Our partner ecosystem includes strategic relationships with leading public cloud infrastructure providers and ecommerce platforms, software vendors that offer complementary products and with which we co-sell our Email API and Marketing Campaigns services, and digital marketing agencies, which resell our services to their clients. Sales to or through these strategic partners accounted for 3%, 4% and 5% of our total revenue in 2015, 2016 and the six months ended June 30, 2017, respectively. Increased sales through our strategic partners will have an impact on our revenue growth and operating margin.

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    Seasonality

        Given our volume pricing model, our revenue is directly correlated with the number of emails sent by our customers. During the fourth-quarter holiday season, our customers process a relatively higher number of transactions, run a greater number of marketing programs, and therefore send more emails. Partially because of this seasonality, a greater percentage of our annual revenue has come from our fourth quarter than from other quarters. In each of 2014, 2015 and 2016, 28% to 29% of our annual revenue was in our fourth quarter. While we believe that this seasonality has affected and will continue to affect our quarterly results, our rapid growth has largely masked seasonal trends to date. Seasonality may become more pronounced in the future to the extent our revenue mix shifts between our Email API, Marketing Campaigns and other revenue sources over time.

Key Business Metrics

        We regularly review the following key metrics to measure performance, identify trends, formulate financial projections and make strategic decisions. We are not aware of any uniform standards for calculating these key metrics. In addition, other companies may not calculate similarly titled metrics in a consistent manner, which may hinder comparability.

    Customers

        We believe that the size of our customer base is an important indicator of the growth of our business, the market acceptance of our platform and future revenue trends. We define a customer as any user account from which we derive revenue during the last month of the period. We believe a relatively small number of businesses have more than one unique paying account with us, and we count each of these accounts as a separate customer. More specifically, for each of the periods presented, we estimate that approximately 4% of our customers may have been part of the same business as one or more of our other customers. Any such affiliations among our customers do not impact how we manage our business or our customer relationships or how our operating results are reported. We view our total number of customers, irrespective of any affiliations among them, as reflective of the number of sources of revenue to us and our growth and potential for future growth because each customer reported is making a separate purchasing decision with respect to our services. Furthermore, in general, we count each of our strategic partners as a single customer regardless of how many end customers the strategic partner may have that are using our services.

    Email volume

        We believe email volume is an important measure of our business because it is a key indicator of volume growth and our ability to generate revenue, since a substantial majority of our revenue is based on the number of emails processed. Email volume consists of the total number of emails we processed in a given period.

        The graphic below on the left shows the growth in our number of customers (in thousands) through June 30, 2017. The graphic below on the right shows the growth in our quarterly email volume (in billions)

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through June 30, 2017 and illustrates seasonal trends in email volume, as discussed in the section titled "—Key Factors Affecting Our Performance—Seasonality."

GRAPHIC   GRAPHIC

    Subscription Net Dollar Retention Rate

        We believe subscription net dollar retention rate is an important measure for evaluating our business because it quantifies the impact on revenue growth of both retention and expansion of our existing customers.

        Our ability to drive growth and generate incremental revenue depends, in part, on our ability to retain our customers and increase their use of our platform. An important way in which we track our performance in this area is by measuring subscription net dollar retention rate.

        Our subscription net dollar retention rate increases when our customers increase their volume usage of our Email API service or extend usage of our platform. Our subscription net dollar retention rate decreases when customers temporarily or permanently cease or reduce volume usage of our Email API service or otherwise cease or reduce usage of our platform. Changes in our pricing may materially impact our subscription net dollar retention rate in the future, but did not have a material impact for any of the periods presented.

        Our subscription net dollar retention rate compares the subscription revenue from a set of customers in a period to the same period in the prior year. To calculate the subscription net dollar retention rate for a period, we first identify the cohort of customers that were customers in the equivalent prior year period. Subscription net dollar retention rate for a period is the quotient obtained by dividing the subscription revenue generated from that cohort in a period, by the subscription revenue generated from that same cohort in the corresponding prior year period.

        Alternatively, our subscription net dollar retention rate can be calculated as the difference between our subscription dollar expansion rate and our subscription gross dollar churn rate. Our subscription dollar expansion rate is indicative of net revenue growth period over period from customers that contribute revenue in both the measured period and the equivalent prior year period. We calculate subscription dollar expansion rate for a period in two steps: first, we take the increase or decrease in the subscription revenue in a period from customers that contributed revenue in both that period and the same period in the prior year and add the total subscription revenue in the prior year period; and second, we divide the result of the first step by the total subscription revenue in the prior year period. Our subscription gross dollar churn rate is indicative of lost revenue from customers that contribute no revenue in the measured period but did contribute revenue in the equivalent prior year period. We also calculate subscription gross dollar churn rate in a period in two steps: first, we measure the amount of subscription revenue in the same period in the prior year from customers that contributed revenue in the prior year period but did not contribute

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revenue in the given period; and second, we divide the result of the first step by the total subscription revenue in the equivalent prior year period.

        For 2014, 2015, 2016 and the six months ended June 30, 2016 and June 30, 2017, our subscription dollar expansion rate was 129%, 124%, 122%, 121% and 127%, respectively, and our subscription gross dollar churn rate was 13%, 12%, 11%, 11% and 10%, respectively. Our subscription net dollar retention rate for those periods is set forth in the table below.

        The following are our key metrics as of and for each of 2014, 2015, 2016 and the six months ended June 30, 2016 and June 30, 2017.

 
  December 31,   June 30,  
 
  2014   2015   2016   2016   2017  

Customers (in thousands) (at period end)

    28.5     33.4     45.9     40.0     55.2  

Email volume (in billions) (for the period ended)

    161     233     338     149     210  

Subscription net dollar retention rate (for the period ended)

    116 %   112 %   111 %   110 %   117 %

Components of Results of Operations

    Revenue

        We generate revenue primarily through the sale of our Email API and Marketing Campaigns services, which we sell on a monthly subscription basis. Sales of our Email API service accounted for 79%, 79%, 79% and 80% of our total revenue in 2014, 2015, 2016 and the six months ended June 30, 2017, respectively. Other sources of revenue for these periods consisted of sales of our email marketing services, including sales of our Marketing Campaigns service and its predecessor, and other sources, including professional services. Revenue attributed to sales of our Email API service does not include the portion of revenue generated by subscriptions by our email marketing services customers to send emails through our Email API to contacts stored on our system for use with our email marketing services.

        Our customers subscribe to our Email API service through a plan that provides for a predetermined allowance of renewable email credits to be used each month. Usage above the plan's credit allowance is billed as an overage charge. All plans include basic customer support.

        Certain customers also subscribe to our Marketing Campaigns service. Our customers store email contacts and segmentation information on our platform in order to customize communications.

        Our revenue is generally recognized ratably over the applicable service period.

    Cost of Revenue

        Cost of revenue consists principally of depreciation and amortization expense related to hosting equipment and outsourced managed hosting costs. Other components include employee related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs, and an allocation of our general overhead. We expect our cost of revenue to continue to increase in absolute dollar amounts as we invest in our business.

    Gross Profit and Gross Margin

        Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. We expect that gross profit and gross margin will continue to be affected by various factors including our pricing, our mix of services sold and our ability to increase total revenue at a sufficient rate to cover fixed costs.

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    Operating Expenses

        Our operating expenses consist of research and development, selling and marketing, and general and administrative expenses.

    Research and Development Expense

        Research and development expense consists primarily of employee related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs, and an allocation of our general overhead. Also included are non-personnel costs, such as subcontracting, consulting and professional fees for third party development resources and depreciation costs. Our research and development efforts focus on maintaining and enhancing functionality of existing services and adding new features and services. We expect research and development expense to increase in absolute dollars as we invest in the enhancement of our services.

    Selling and Marketing Expense

        Selling and marketing expense consists primarily of employee related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs, and an allocation of our general overhead. These expenses also include expenditures related to advertising, marketing, promotional events, and brand awareness activities. We expect selling and marketing expense to continue to increase in absolute dollars as we enhance our services and implement new marketing strategies.

    General and Administrative Expense

        General and administrative expense consists primarily of employee related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs, and an allocation of our general overhead for those employees associated with administrative services such as legal, human resources, information technology, accounting, and finance. These expenses also include certain third-party consulting services, certain facilities costs, credit card processing fees, and any corporate overhead costs not allocated to other expense categories.

        We expect our general and administrative expense to increase in absolute dollars as we continue to grow our business. We also anticipate that we will incur additional costs for employees and third-party consulting services related to preparation to become and operate as a public company.

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Results of Operations

        The following table sets forth our consolidated statements of operations data for the periods indicated:

 
  For the Year Ended
December 31,
  For the Six Months
Ended June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (in thousands)
 

Consolidated Statements of Operations Data:

                               

Revenue

  $ 42,776   $ 58,476   $ 79,929   $ 36,157   $ 51,843  

Cost of revenue (1) (2)

    15,187     18,961     21,605     10,603     13,745  

Gross profit

    27,589     39,515     58,324     25,554     38,098  

Operating Expenses: (1) (2)

                               

Research and development

    15,290     18,959     21,178     10,343     13,663  

Selling and marketing

    15,260     13,737     21,800     9,954     13,458  

General and administrative (3) (4)

    9,550     12,477     18,920     8,499     13,538  

Loss on disposal of assets

    63     1     27     27     2  

Total operating expenses

    40,163     45,174     61,925     28,823     40,661  

Loss from operations

    (12,574 )   (5,659 )   (3,601 )   (3,269 )   (2,563 )

Other income (expense), net (5)

    (386 )   (195 )   (307 )   (212 )   (571 )

Net loss before provision for income taxes

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

Provision for income taxes

                     

Net loss

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

(1)
Includes stock-based compensation expense as follows:
 
  For the Year Ended
December 31,
  For the
Six Months
Ended June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (in thousands)
 

Cost of revenue

  $ 103   $ 97   $ 131   $ 62   $ 151  

Research and development

    157     379     552     257     362  

Selling and marketing

    125     193     402     160     315  

General and administrative

    309     706     814     400     553  

Total

  $ 694   $ 1,375   $ 1,899   $ 879   $ 1,381  
(2)
Includes merger and acquisition expense as follows:
 
  For the
Year Ended
December 31,
  For the
Six Months
Ended June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (in thousands)
 

Cost of revenue

  $   $   $   $   $ 38  

Research and development

                    195  

Selling and marketing

                    6  

General and administrative

                    232  

Total merger and acquisition expense

                  $ 471  

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(3)
Includes third-party consulting services related to preparation to become and operate as a public company of $0, $0, $0.1 million, $0 and $0.3 million for the years ended December 31, 2014, 2015 and 2016 and the six months ended June 30, 2016 and 2017, respectively.

(4)
Includes restructuring expense of $0, $0, $0.4 million, $0.1 million and $1.0 million for the years ended December 31, 2014, 2015 and 2016 and the six months ended June 30, 2016 and 2017, respectively.

(5)
Includes warrant interest expense of $0.1 million, $0, $0.1 million, $0.1 million and $0.5 million for the years ended December 31, 2014, 2015 and 2016 and the six months ended June 30, 2016 and 2017, respectively.

        The following table sets forth our consolidated statements of operations data expressed as a percentage of total revenue:

 
  For the Year Ended
December 31,
  For the Six
Months
Ended
June 30,
 
 
  2014   2015   2016   2016   2017  

Consolidated Statements of Operations Data:

                               

Revenue

    100 %   100 %   100 %   100 %   100 %

Cost of revenue

    36     32     27     29     27  

Gross margin

    64     68     73     71     73  

Operating Expenses:

                               

Research and development

    36     32     26     29     26  

Selling and marketing

    36     23     27     28     26  

General and administrative

    22     21     24     24     26  

Loss on disposal of assets

                     

Total operating expenses

    94     77     77     80     78  

Loss from operations

    (29 )   (10 )   (5 )   (9 )   (5 )

Other income (expense), net

    (1 )           (1 )   (1 )

Net loss before provision for income taxes

    (30 )   (10 )   (5 )   (10 )   (6 )

Provision for income taxes

                     

Net loss

    (30 )%   (10 )%   (5 )%   (10 )%   (6 )%

Six Months Ended June 30, 2016 and 2017

    Revenue

 
  For the Six Months
Ended June 30,
   
   
 
 
  2016   2017   $ Change   % Change  
 
  (in thousands)
 

Revenue

  $ 36,157   $ 51,843   $ 15,686     43 %

        Total revenue increased $15.7 million, or 43%, in the six months ended June 30, 2017, compared to the six months ended June 30, 2016. The increase was attributable to an increase in email volume from, and sales of additional services to, existing customers and sales of our Email API service and other services to new customers. Revenue from existing customers comprised $13.0 million, or 83%, of the $15.7 million increase, with the remaining increase attributed to revenue from new customers. Our overall email volume increased to 210 billion in the first six months of 2017 from 149 billion in the same period in 2016 and our number of customers increased by 38% from June 30, 2016 to June 30, 2017. Revenue from our Email API service increased by $12.8 million, or 45%, in the six months ended June 30, 2017, compared to the six months ended June 30, 2016. Revenue from email marketing services, including our Marketing Campaigns service and its predecessor, increased by $2.1 million, or 31%, in the six months ended June 30, 2017,

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compared to the six months ended June 30, 2016, as a result of a $3.2 million increase in revenue from our Marketing Campaigns service in the six months ended June 30, 2017, offset by a $1.0 million decrease in revenue from our predecessor email marketing service. A portion of the increase in our Marketing Campaigns service revenue is attributable to sales to customers that converted to our Marketing Campaigns service from its predecessor following our announcement that we would phase out our predecessor email marketing service in 2017.

    Cost of Revenue and Gross Margin

 
  For the Six Months
Ended June 30,
   
   
 
 
  2016   2017   $ Change   % Change  
 
  (dollars in thousands)
 

Cost of revenue

  $ 10,603   $ 13,745   $ 3,142     30 %

Gross margin

    71 %   73 %            

        Cost of revenue increased $3.1 million, or 30%, in the six months ended June 30, 2017, compared to the six months ended June 30, 2016. This increase was attributable to a $1.6 million increase in data center and hosting costs due to additional property and equipment used to support growth of the business, as well as a $1.6 million increase in employee related costs due to an increase in headcount related to delivering our services and supporting our customers. There was also an increase of $0.3 million in other expenses, including allocated overhead. These increases were partially offset by a decrease in costs related to third-party consulting services of $0.4 million.

        Gross margin increased to 73% in the six months ended June 30, 2017 compared to 71% in the six months ended June 30, 2016 primarily due to total revenue increasing at a higher rate than the associated costs.

    Operating Expenses

    Research and Development

 
  For the Six Months
Ended June 30,
   
   
 
 
  2016   2017   $ Change   % Change  
 
  (dollars in thousands)
 

Research and development

  $ 10,343   $ 13,663   $ 3,320     32 %

As a percentage of revenue

    29 %   26 %            

        Research and development expense increased $3.3 million, or 32%, in the six months ended June 30, 2017, compared to the six months ended June 30, 2016. This increase was due to a $2.6 million increase in employee related costs due to an increase in headcount to support additional research and development initiatives and a $0.5 million increase in other expenses, including allocated overhead. The remaining increase of $0.2 million was related to merger and acquisition costs.

    Selling and Marketing

 
  For the Six Months
Ended June 30,
   
   
 
 
  2016   2017   $ Change   % Change  
 
  (dollars in thousands)
 

Selling and marketing

  $ 9,954   $ 13,458   $ 3,504     35 %

As a percentage of revenue

    28 %   26 %            

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        Selling and marketing expense increased $3.5 million, or 35%, in the six months ended June 30, 2017, compared to the six months ended June 30, 2016. This increase was due to a $1.9 million increase in advertising and promotion expense, a $1.2 million increase in employee related costs related to increased headcount, and a $0.6 million increase in other expenses, including allocated overhead. These increases were partially offset by a decrease in costs related to third-party consulting services of $0.2 million.

    General and Administrative

 
  For the Six Months
Ended June 30,
   
   
 
 
  2016   2017   $ Change   % Change  
 
  (dollars in thousands)
 

General and administrative

  $ 8,499   $ 13,538   $ 5,039     59 %

As a percentage of revenue

    24 %   26 %            

        General and administrative expense increased $5.0 million, or 59%, in the six months ended June 30, 2017, compared to the six months ended June 30, 2016. This increase was attributable to a $2.5 million increase in employee related costs, largely due to an increase in headcount to support the growth of our business, a $0.9 million increase related to business operations expense, a $0.9 million increase in restructuring expense related to the relocation of our headquarters, $0.4 million increase in office expense, a $0.3 million increase in costs related to our planned initial public offering, and a $0.5 million increase in other expenses, including allocated overhead. These increases were partially offset by a $0.5 million decrease in travel and entertainment expense.

Years Ended December 31, 2014, 2015 and 2016

    Revenue

 
  For the Year Ended
December 31,
  2015 vs. 2014   2016 vs. 2015  
 
  2014   2015   2016   $ Change   % Change   $ Change   % Change  
 
  (in thousands)
 

Revenue

  $ 42,776   $ 58,476   $ 79,929   $ 15,700     37 % $ 21,453     37 %

        Total revenue increased $21.5 million, or 37%, in 2016, compared to 2015. The increase was attributable to an increase in email volume from, and sales of additional services to, existing customers and sales of our Email API service and other services to new customers. Revenue from existing customers comprised $12.3 million, or 57%, of the $21.5 million increase, with the remaining increase attributed to revenue from new customers. Our overall email volume increased to 338 billion in 2016 from 233 billion in 2015 and our number of customers increased by 37% from December 31, 2015 to December 31, 2016. Revenue from our Email API service increased by $17.4 million, or 38%, in 2016, compared to 2015. Revenue from our email marketing services, including our Marketing Campaigns service and its predecessor, increased by $3.0 million, or 26%, in 2016, compared to 2015, as a result of a $6.3 million increase in revenue from our Marketing Campaigns service in 2016, offset by a $3.3 million decrease in revenue from our predecessor email marketing service. The increase in revenue from our Marketing Campaigns service resulted from our offering the service for the full year in 2016 following its introduction in late 2015 and sales to new and existing customers, a portion of which were users of our predecessor email marketing service.

        Total revenue increased $15.7 million, or 37%, in 2015, compared to 2014. The increase was attributable to an increase in email volume from, and sales of additional services to, existing customers and sales of our Email API service and other services to new customers. Revenue from existing customers comprised $10.0 million, or 64%, of the $15.7 million increase, with the remaining increase attributed to revenue from new customers. Our overall email volume increased to 233 billion in 2015 from 161 billion in

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2014 and our number of customers increased by 17% from December 31, 2014 to December 31, 2015. Revenue from our Email API service increased by $12.3 million, or 36%, in 2015, compared to 2014. Revenue from our email marketing services, including our Marketing Campaigns service and its predecessor, increased by $2.9 million, or 33%, in 2015, compared to 2014. We launched our Marketing Campaigns service in 2015 and accordingly had no Marketing Campaigns revenue in 2014.

    Cost of Revenue and Gross Margin

 
  For the Year Ended December 31,   2015 vs. 2014   2016 vs. 2015  
 
  2014   2015   2016   $ Change   % Change   $ Change   % Change  
 
  (dollars in thousands)
 

Cost of revenue

  $ 15,187   $ 18,961   $ 21,605   $ 3,774     25 % $ 2,644     14 %

Gross margin

    64 %   68 %   73 %                        

        Cost of revenue increased $2.6 million, or 14%, in 2016, compared to 2015. The increase was primarily attributable to a $1.4 million increase in data center and hosting costs due to additional property and equipment used to support growth of the business, as well as a $1.2 million increase in employee related costs due to an increase in headcount related to delivering our services and supporting our customers.

        Cost of revenue increased $3.8 million, or 25%, in 2015, compared to 2014. The increase was primarily attributable to a $2.2 million increase in data center and hosting costs due to additional property and equipment used to support growth of the business, as well as a $1.0 million increase in employee related costs, a $0.5 million increase in costs related to third-party consulting services and a $0.1 million increase in other expenses, including allocated overhead.

    Operating Expenses

    Research and Development

 
  For the Year Ended December 31,   2015 vs. 2014   2016 vs. 2015  
 
  2014   2015   2016   $ Change   % Change   $ Change   % Change  
 
  (dollars in thousands)
 

Research and development

  $ 15,290   $ 18,959   $ 21,178   $ 3,669     24 % $ 2,219     12 %

As a percentage of revenue

    36 %   32 %   26 %                        

        Research and development expense increased $2.2 million, or 12%, in 2016 compared to 2015. This increase was primarily a result of a $2.9 million increase in engineering employee related costs related to additional research and development initiatives, partially offset by a $0.4 million decrease in other expenses, including allocated overhead, and a decrease in costs related to third-party consulting services of $0.3 million.

        Research and development expense increased $3.7 million, or 24%, in 2015 compared to 2014. This increase was a result of a $5.4 million increase in engineering employee related costs related to additional research and development initiatives, a $0.3 million increase in office expense, and a $0.3 million increase in business operations expense and software costs. These increases were partially offset by a decrease in costs related to third-party consulting services of $2.3 million.

    Selling and Marketing

 
  For the Year Ended December 31,   2015 vs. 2014   2016 vs. 2015  
 
  2014   2015   2016   $ Change   % Change   $ Change   % Change  
 
  (dollars in thousands)
 

Selling and marketing

  $ 15,260   $ 13,737   $ 21,800   $ (1,523 )   (10 )% $ 8,063     59 %

As a percentage of revenue

    36 %   23 %   27 %                        

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        Selling and marketing expense increased $8.1 million, or 59%, in 2016 compared to 2015. This increase was a result of a $3.9 million increase in employee related costs due to an increase in headcount, a $3.0 million increase in advertising and promotion expense due to implementation of a new advertising strategy, a $0.6 million increase in costs related to third-party consulting services, and a $0.6 million increase in other expenses, including allocated overhead.

        Selling and marketing expense decreased $1.5 million, or 10%, in 2015 compared to 2014. This decrease was a result of a $0.6 million decrease in costs related to third-party consulting services, a $0.5 million decrease in employee related costs and a $0.4 million decrease in travel and entertainment expense.

    General and Administrative

 
  For the Year Ended December 31,   2015 vs. 2014   2016 vs. 2015  
 
  2014   2015   2016   $ Change   % Change   $ Change   % Change  
 
  (dollars in thousands)
 

General and administrative

  $ 9,550   $ 12,477   $ 18,920   $ 2,927     31 % $ 6,443     52 %

As a percentage of revenue

    22 %   21 %   24 %                        

        General and administrative expense increased $6.4 million, or 52%, in 2016 compared to 2015. This increase was a result of a $2.7 million increase in employee related costs, a $0.9 million increase in office expense, a $0.9 million increase in costs related to business operations, a $0.7 million increase in third-party consulting services, a $0.4 million increase in software expense, and a $0.8 million increase in restructuring expense related to the relocation of our headquarters and other expenses, including allocated overhead.

        General and administrative expense increased $2.9 million, or 31%, in 2015 compared to 2014. This increase was a result of a $1.5 million increase in employee related costs to support the increased scale of our business, a $0.3 million increase in travel and entertainment expense and a $1.1 million increase in other expenses, including allocated overhead.

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Quarterly Results of Operations

        The following tables set forth unaudited quarterly statements of operations data for each of the ten quarters in the period ended June 30, 2017. The information for each of these quarters has been prepared on the same basis as the audited annual consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, includes all adjustments, which consist only of normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods. This data should be read in conjunction with our consolidated financial statements, related notes and other financial information included elsewhere in this prospectus. Our quarterly results of operations will vary in the future. These quarterly results are not necessarily indicative of our operating results to be expected for 2017 or any other future period.

 
  For the Three Months Ended  
 
  Mar. 31,
2015
  Jun. 30,
2015
  Sep. 30,
2015
  Dec. 31,
2015
  Mar. 31,
2016
  Jun. 30,
2016
  Sep. 30,
2016
  Dec. 31,
2016
  Mar. 31,
2017
  Jun. 30,
2017
 
 
  (in thousands)
 

Consolidated Statements of Operations Data:

                                                             

Revenue

  $ 12,885   $ 14,146   $ 14,985   $ 16,460   $ 17,125   $ 19,032   $ 20,701   $ 23,071   $ 24,831   $ 27,012  

Cost of revenue

    4,258     4,517     4,891     5,295     5,237     5,366     5,392     5,610     6,471     7,274  

Gross profit

    8,627     9,629     10,094     11,165     11,888     13,666     15,309     17,461     18,360     19,738  

Operating Expenses:

                                                             

Research and development

    4,636     4,529     4,783     5,011     5,238     5,105     5,289     5,546     6,524     7,139  

Selling and marketing

    3,081     3,360     3,403     3,893     4,507     5,447     5,357     6,489     6,588     6,870  

General and administrative

    2,709     3,063     3,087     3,618     3,942     4,557     4,592     5,829     7,044     6,494  

Loss (gain) on disposal of assets

    1         1     (1 )   27                     2  

Total operating expenses

    10,427     10,952     11,274     12,521     13,714     15,109     15,238     17,864     20,156     20,505  

Income (loss) from operations

    (1,800 )   (1,323 )   (1,180 )   (1,356 )   (1,826 )   (1,443 )   71     (403 )   (1,796 )   (767 )

Other income (expense), net

    (40 )   (34 )   (52 )   (69 )   (53 )   (159 )   (73 )   (22 )   (5 )   (566 )

Net loss before provision for income taxes

    (1,840 )   (1,357 )   (1,232 )   (1,425 )   (1,879 )   (1,602 )   (2 )   (425 )   (1,801 )   (1,333 )

Provision for income taxes

                                         

Net loss

                                                             

  $ (1,840 ) $ (1,357 ) $ (1,232 ) $ (1,425 ) $ (1,879 ) $ (1,602 ) $ (2 ) $ (425 ) $ (1,801 ) $ (1,333 )

Other Data:

                                                             

Adjusted net income (loss)

  $ (1,461 ) $ (1,130 ) $ (857 ) $ (1,012 ) $ (1,448 ) $ (916 ) $ 533   $ 390   $ 25   $ 551  

Free cash flow

  $ (1,271 ) $ (784 ) $ (1,214 ) $ (696 ) $ (1,079 ) $ 74   $ (155 ) $ (1,302 ) $ (1,581 ) $ 692  

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  For the Three Months Ended  
 
  Mar. 31,
2015
  Jun. 30,
2015
  Sep. 30,
2015
  Dec. 31,
2015
  Mar. 31,
2016
  Jun. 30,
2016
  Sep. 30,
2016
  Dec. 31,
2016
  Mar. 31,
2017
  Jun. 30,
2017
 
 
  (as a percentage of total revenue)
 

Consolidated Statements of Operation Data

                                                             

Revenue

    100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %

Cost of revenue

    33     32     33     32     31     28     26     24     26     27  

Gross margin

    67     68     67     68     69     72     74     76     74     73  

Operating Expenses:

                                                             

Research and development

    36     32     32     30     31     27     26     24     26     26  

Selling and marketing

    24     24     23     24     26     29     26     28     27     25  

General and administrative

    21     22     21     22     23     24     22     25     28     24  

Loss (gain) on disposal of assets

                                         

Total operating expenses

    81     77     75     76     80     79     74     77     81     76  

Income (loss) from operations

    (14 )   (9 )   (8 )   (8 )   (11 )   (8 )       (2 )   (7 )   (3 )

Other income (expense), net

                        (1 )               (2 )

Net loss before provision for income taxes

    (14 )   (10 )   (8 )   (9 )   (11 )   (8 )       (2 )   (7 )   (5 )

Provision for income taxes

                                         

Net loss

    (14 )%   (10 )%   (8 )%   (9 )%   (11 )%   (8 )%   %   (2 )%   (7 )%   (5 )%

Other Data:

                                                             

Adjusted net income (loss)

    (11 )%   (8 )%   (6 )%   (6 )%   (8 )%   (5 )%   3 %   2 %   0 %   2 %

Free cash flow

    (10 )%   (6 )%   (8 )%   (4 )%   (6 )%   0 %   (1 )%   (6 )%   (6 )%   3 %

        Adjusted net income (loss) is not a measure determined in accordance with GAAP and should not be considered in isolation or as a substitute for operating income (loss), net income (loss), or any other measure determined in accordance with GAAP.

        The following table shows a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to adjusted net income (loss) for the periods indicated:

 
  For the Three Months Ended  
 
  Mar. 31,
2015
  Jun. 30,
2015
  Sep. 30,
2015
  Dec. 31,
2015
  Mar. 31,
2016
  Jun. 30,
2016
  Sep. 30,
2016
  Dec. 31,
2016
  Mar. 31,
2017
  Jun. 30,
2017
 
 
  (in thousands)
 

Net loss

  $ (1,840 ) $ (1,357 ) $ (1,232 ) $ (1,425 ) $ (1,879 ) $ (1,602 ) $ (2 ) $ (425 ) $ (1,801 ) $ (1,333 )

Stock-based compensation expense

    374     236     375     390     431     448     494     526     588     793  

Restructuring expense

                        135     17     233     847     167  

Merger and acquisition expense

                                    257     214  

Adjustment to convertible preferred stock warrant liability

    5     (9 )       23         102     24     (40 )   (26 )   544  

Certain IPO costs

                                98     160     166  

Adjusted net income (loss)

  $ (1,461 ) $ (1,130 ) $ (857 ) $ (1,012 ) $ (1,448 ) $ (917 ) $ 533   $ 392   $ 25   $ 551  

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        Free cash flow is not a measure determined in accordance with GAAP and should not be considered in isolation or as a substitute for cash flows from operations, operating income (loss), net income (loss), or any other measure determined in accordance with GAAP.

        The following table shows a reconciliation of net cash flows from operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow for the periods indicated:

 
  For the Three Months Ended  
 
  Mar. 31,
2015
  Jun. 30,
2015
  Sep. 30,
2015
  Dec. 31,
2015
  Mar. 31,
2016
  Jun. 30,
2016
  Sep. 30,
2016
  Dec. 31,
2016
  Mar. 31,
2017
  Jun. 30,
2017
 
 
  (in thousands)
 

Net cash flows from operating activities

  $ (182 ) $ 652   $ 175   $ 585   $ 217   $ 2,187   $ 4,647   $ 2,638   $ 1,730   $ 3,392  

Purchase of property and equipment

    (236 )   (456 )   (342 )   (222 )   (212 )   (789 )   (3,497 )   (2,589 )   (1,794 )   (1,220 )

Principal payments on capital lease obligations

    (853 )   (980 )   (1,047 )   (1,059 )   (1,084 )   (1,324 )   (1,305 )   (1,351 )   (1,517 )   (1,480 )

Free cash flow

  $ (1,271 ) $ (784 ) $ (1,214 ) $ (696 ) $ (1,079 ) $ 74   $ (155 ) $ (1,302 ) $ (1,581 ) $ 692  

        For more information about adjusted net income (loss) and free cash flow, see "Selected Consolidated Financial Data."

    Quarterly Trends

        Our quarterly total revenue increased sequentially quarter-over-quarter for each period presented above reflecting expansion within our existing customer base and an increase in customers. In future periods, our growth rate may decline, and our Marketing Campaigns service may become a greater component of our total revenue, making seasonality more pronounced in our total revenue. For more information regarding the effect of seasonality on our total revenue, see the section titled "—Key Factors Affecting Our Performance—Seasonality."

        Our quarterly cost of revenue has generally increased sequentially quarter-over-quarter for each period presented above primarily as a result of the increased cost of providing support and delivering our services to our expanding customer base. On a percentage of revenue basis, our quarterly cost of revenue has generally decreased quarter-over-quarter for each period presented above. On a percentage of revenue basis, our cost of revenue for the quarters ended March 31, 2017 and June 30, 2017 increased slightly primarily due to an increase in data center depreciation expense as a result of purchases used to support the growth of the business.

        Our quarterly gross margins have generally improved sequentially quarter-over-quarter for each period presented above due to total revenue increasing at a higher rate than the associated costs.

        Our quarterly operating expenses have increased sequentially quarter-over-quarter for each period presented above primarily as a result of our continued addition of headcount used to support growth and expansion in the business. We have increased headcount in our research and development, selling and marketing and general and administrative functions.

Liquidity and Capital Resources

        As of June 30, 2017, we had $37.6 million of cash and cash equivalents. We believe that existing cash and cash equivalents and positive cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Since inception, we have financed our operations primarily through the sale of equity securities, debt financings and the sale of software subscriptions and support.

        In June 2013, we entered into a loan and security agreement, or LSA, with a bank providing us with a revolving line of credit for up to $8.0 million, which was extended in May 2014 to $12.0 million, in April 2015 to $20.0 million, and in May 2016 to $30.0 million. In May 2017, we amended the LSA to increase the maximum borrowing availability to $40.0 million and extend the maturity date to May 2018.

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        Amounts available to draw under the LSA are calculated from a trailing three-month revenue base, which can differ from the maximum loan amount. Advances are subject to interest at the prime rate then in effect plus 0.50%, with a floor of 4.00% while our cash balance is greater than $8.0 million. While our cash balance is not greater than $8.0 million, advances are subject to interest at the prime rate then in effect plus 1.25%, with a floor of 4.75%. Principal is due at maturity.

        Borrowings are secured by substantially all of our assets. The LSA restricts our ability to pledge our intellectual property. The LSA contains certain affirmative and negative covenants, including, among other things, maintaining certain business performance levels and limitations on disposal of assets, certain fundamental business changes, incurrences of debt, incurrences of liens, payments of dividends, repurchases of stock, and engaging in affiliate transactions, in each case subject to certain exceptions. The LSA also contains certain events of default, including, among other things, that during the existence of an event of default, interest on the obligations could be increased. We had $40.0 million available to draw and were in compliance with all financial covenants under the LSA as of June 30, 2017. No amounts were outstanding on the revolving line of credit as of December 31, 2015 or 2016 or June 30, 2017.

    Historical Cash Flows

        The following table shows a summary of our cash flows for the periods indicated:

 
  Year Ended
December 31,
  Six Months
Ended June 30,
 
 
  2014   2015   2016   2016   2017  
 
  (in thousands)
 

Net cash flows from operating activities

  $ (9,640 ) $ 1,230   $ 9,689   $ 2,404   $ 5,122  

Net cash flows from investing activities

    (2,626 )   (1,032 )   (6,538 )   (893 )   (5,126 )

Net cash flows from financing activities

    19,254     (3,191 )   27,984     (2,386 )   (2,773 )

Effect from foreign currency exchange rates

        (2 )   (4 )   (2 )   2  

Net increase (decrease) in cash

    6,988     (2,995 )   31,131     (877 )   (2,775 )

Cash at beginning of period

    5,276     12,264     9,269     9,269     40,400  

Cash at end of period

  $ 12,264   $ 9,269   $ 40,400   $ 8,392   $ 37,625  

    Operating Activities

        Net cash provided by operating activities was $5.1 million in the six months ended June 30, 2017, primarily due to our net loss of $3.1 million adjusted for non-cash items, including $4.6 million of depreciation and amortization expense primarily as a result of additional acquisitions of computer and data center equipment used to support growth of the business, $1.4 million of stock-based compensation expense driven by an increase in employees to support growth of the business, $0.5 million of warrant expense as a result of an increase in our valuation, $0.4 million in restructuring expense, $0.7 million in tenant improvement reimbursements, and $0.8 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts payable and accrued liabilities increased $2.1 million due to timing of cash payments and growth in the business, partially offset by increases in accounts receivable of $0.8 million and prepaid expenses and other assets of $0.5 million related to timing of cash receipts and growth in the business.

        Net cash provided by operating activities was $2.4 million in the six months ended June 30, 2016, primarily due to our net loss of $3.5 million adjusted for non-cash items, including $3.4 million of depreciation and amortization expense primarily as a result of additional acquisitions of computer and data center equipment used to support growth of the business, $0.9 million of stock-based compensation expense driven by an increase in employees to support growth of the business, and $1.5 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and

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liabilities, accounts payable and accrued liabilities increased $1.6 million and other liabilities increased $0.4 million, and prepaid expenses and other assets decreased $0.2 million due to timing of cash payments and growth in the business, partially offset by increases in accounts receivable of $0.8 million related to timing of cash receipts and growth in the business.

        Net cash provided by operating activities was $9.7 million in 2016, primarily due to our net loss of $3.9 million adjusted for non-cash items, including $6.9 million of depreciation and amortization expense primarily as a result of additional acquisitions of computer and data center equipment used to support growth of the business, $3.6 million of landlord reimbursements for leasehold improvements associated with our new headquarters, $1.9 million of stock-based compensation expense driven by an increase in employees to support growth of the business, $0.9 million of cumulative changes in operating assets and liabilities and $0.2 million in restructuring expense. With respect to changes in operating assets and liabilities, accounts payable and accrued liabilities increased $2.8 million and other liabilities increased $0.2 million due to timing of cash payments and growth in the business partially offset by increases in accounts receivable of $1.3 million and prepaid expenses and other assets of $0.9 million related to timing of cash receipts and growth in the business.

        Net cash provided by operating activities was $1.2 million in 2015, primarily due to our net loss of $5.9 million adjusted for non-cash items, including $5.5 million of depreciation and amortization expenses primarily as a result of additional acquisitions of computer and data center equipment used to support growth of the business, $1.4 million of stock-based compensation expense driven by an increase in employees to support growth of the business, partially offset by $0.2 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts payable and accrued liabilities increased $1.1 million and other liabilities increased $0.2 million due to timing of payments and growth in the business partially offset by increases in accounts receivable of $1.0 million related to timing of cash receipts.

        Net cash used by operating activities was $9.6 million in 2014, primarily due to our net loss of $13.0 million adjusted for non-cash items, including $2.9 million of depreciation and amortization expenses primarily as a result of additional acquisitions of computer and data center equipment used to support growth of the business, $0.7 million of stock-based compensation expense driven by an increase in employees to support growth of the business, partially offset by $0.5 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts payable and accrued liabilities increased $0.5 million and other liabilities increased $0.3 million due to timing of payments and growth in the business offset by increases in accounts receivable of $0.7 million and prepaid expenses and other assets of $0.6 million related to timing of cash receipts and growth in the business.

    Investing Activities

        Net cash used in investing activities was $5.1 million in the six months ended June 30, 2017, primarily due to $3.0 million related to purchases of property and equipment used to support the growth of the business, and $2.2 million related to a business acquisition, partially offset by a $0.1 million decrease in restricted cash due to a lease termination.

        Net cash used in investing activities was $0.9 million in the six months ended June 30, 2016, primarily due to $1.0 million related to purchases of property and equipment used to support the growth of the business partially offset by a $0.1 million decrease in restricted cash due to a lease termination.

        Net cash used in investing activities was $6.5 million in 2016, primarily due to $7.1 million related to purchases of property and equipment used to support the growth of the business partially offset by a $0.3 million decrease in restricted cash related to an office lease and $0.2 million in proceeds from the sale of assets.

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        Net cash used in investing activities was $1.0 million in 2015, primarily due to $1.3 million related to purchases of property and equipment used to support the growth of the business partially offset by a $0.2 million decrease in restricted cash related to an office lease.

        Net cash used in investing activities was $2.6 million in 2014, primarily due to $2.4 million related to purchases of property and equipment used to support the growth of the business and a $0.2 million increase in restricted cash related to our new office lease.

    Financing Activities

        Net cash used in financing activities was $2.8 million in the six months ended June 30, 2017, primarily due to $3.0 million in principal payments on capital lease obligations partially offset by $0.3 million in proceeds from the issuance of common stock.

        Net cash used in financing activities was $2.4 million in the six months ended June 30, 2016, primarily due to $2.4 million in principal payments on capital lease obligations.

        Net cash provided by financing activities was $28.0 million in 2016, primarily due to $32.9 million in proceeds from the issuance of preferred stock partially offset by $5.1 million in principal payments on capital lease obligations.

        Net cash used in financing activities was $3.2 million in 2015, primarily due to $3.9 million in principal payments on capital lease obligations partially offset by $0.8 million in proceeds from the issuance of common stock.

        Net cash provided by financing activities was $19.3 million in 2014, primarily due to $20.7 million in proceeds from the issuance of preferred stock partially offset by $1.5 million in principal payments on capital lease obligations.

Contractual Obligations and Commitments

        The following table summarizes our commitments to settle contractual obligations at December 31, 2016:

 
  Less than
1 year
  1 to 3 years   3 to 5 years   More than
5 years
  Total  
 
  (in thousands)
 

Capital lease obligations

  $ 5,022   $ 5,623   $ 5   $   $ 10,650  

Operating lease obligations

    1,255     7,942     4,967     3,424     17,588  

Purchase obligations

    1,986     1,629             3,615  

Total

  $ 8,263   $ 15,194   $ 4,972   $ 3,424   $ 31,853  

        The following table summarizes our commitments to settle contractual obligations at June 30, 2017:

 
  Less than
1 year
  1 to 3 years   3 to 5 years   More than
5 years
  Total  
 
  (in thousands)
 

Capital lease obligations

  $ 5,670   $ 7,982   $ 1,994   $   $ 15,646  

Operating lease obligations

    3,195     10,271     10,173     18,436     42,075  

Purchase obligations

    3,092     8,099     16,692         27,883  

Total

  $ 11,957   $ 26,352   $ 28,859   $ 18,436   $ 85,604  

        In March 2017, we entered into a lease agreement for a new office in Redwood City, California. The lease expires in 2028, and the total lease commitment is $17.5 million. In May 2017, we entered into a lease agreement for a new office in Irvine, California. The lease expires in 2028, and the total lease commitment

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is $7.4 million. In June 2017, we entered into an agreement with Amazon Web Services for cloud infrastructure services. The agreement expires in 2022, and the total commitment is $24.4 million. The table immediately above includes these amounts.

        The commitment amounts in the tables above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The tables do not include obligations under agreements that we can cancel without a significant penalty.

Backlog

        As substantially all of our revenue is derived from monthly subscription agreements, we do not have material amounts of future revenue contracted in backlog.

Off-Balance Sheet Arrangements

        We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Qualitative and Quantitative Disclosures about Market Risk

        Although we only accept payment for our services in U.S. dollars, a substantial portion of our business is conducted with non-U.S. based customers. We are exposed to market risks in the ordinary course of our business. Our market risk exposure is primarily the result of fluctuations in the U.S. dollar with respect to other currencies.

    Interest Rate Risk

        We had cash and cash equivalents of $40.4 million and $37.6 million at December 31, 2016 and June 30, 2017, respectively. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Because we did not have any cash equivalents or borrowings as of June 30, 2017, a hypothetical 10% change in interest rates would not impact our consolidated financial statements.

    Foreign Currency Exchange Risk

        Based on the size of our foreign operations we do not have material foreign currency exchange risk.

Critical Accounting Policies

        Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

        While our significant accounting policies are more fully described in Note 2 in the notes to our consolidated financial statements included elsewhere in this prospectus, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the accounting policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

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    Revenue Recognition

        We derive revenue primarily from fees charged to customers accessing our Email API and Marketing Campaigns services. Prior to delivering services, we require customers to select a service level package and enter into a monthly service agreement. The arrangement generally includes a fixed subscription fee that covers a predetermined number of email credits for the month. Any usage above the limit is invoiced as overage charges based on a stated price per email. All customers are entitled to unlimited basic support.

        Fixed subscription fees are invoiced at the beginning of each monthly service cycle based on the agreed upon fee. At the end of each monthly service cycle, we invoice customers for usage based on the contracted rate. Revenue from usage incurred that has not been invoiced as of the end of a reporting period are accrued as unbilled accounts receivable. Fees are recognized as revenue in the month services are provided. We provide a service; therefore, service revenue is recognized ratably over the applicable service period, generally one month, when all of the following conditions have been met:

Condition
  Considerations and Evidence

Persuasive evidence of an arrangement exists

  Signed service agreement

The services have been delivered to the customer

 

The customer has access to our platform. Our services are available for use at this point.

The price is fixed or determinable

 

We assess whether the fee is fixed and determinable at the onset of the agreement based on the package selected by the customer and payment terms associated with the transaction. Our fees are typically based on a predetermined volume of emails. Any usage above such predetermined volume is billed as overage charges based on set fees stated in the agreement. We consider the price fixed or determinable when the customer selects a package.

Collection of the fees is reasonably assured

 

We assess collectability based on a number of factors, including collection history and credit worthiness. Our customers generally pay the base fee in advance by credit card.

        We have arrangements with strategic partners that generally act as resellers. In most reseller arrangements, we provision the service, provide technical support, establish pricing and assume credit risk. We consider ourselves the principal in these arrangements and record revenue on a gross basis. On the consolidated statements of operations, expenses directly related to providing the service are recorded as cost of revenue and commissions paid to strategic partners are recorded as selling and marketing expense.

        In other reseller arrangements, the reseller provides support, training, and other services requested or required by end users at the reseller's sole cost and expense. We provide support services only to the reseller and have no obligation to provide technical support or respond to requests directly from end users. In addition, the reseller establishes the price for the service and assumes credit risk. We consider ourselves the agent in these arrangements and record the net amount received from the reseller.

        Our customers generally pay with a credit card. Credit card charges may be subsequently contested by the cardholder. We estimate chargebacks and sales credits using historical experience adjusted to take into account current market conditions. Revenue is recorded net of estimated chargebacks and sales credits.

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    Valuation of Goodwill and Intangible Assets

        When we acquire a business, we allocate the purchase price to the tangible assets and liabilities and identifiable intangible assets acquired. We record any residual purchase price as goodwill. The allocation of the purchase price requires significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates are based on information obtained from management of the acquired companies, market information and historical experience. These estimates can include, but are not limited to:

    the time and expenses that would be necessary to recreate the asset;

    the profit margin a market participant would receive;

    cash flows that an asset is expected to generate in the future; and

    discount rates.

        These estimates are inherently uncertain and unpredictable, and if different estimates were used, the purchase price for the acquisition could be allocated to the acquired assets and liabilities differently from the allocation that we have made. In addition, unanticipated events and circumstances may occur that may affect the accuracy or validity of such estimates, and if such events occur, we may be required to record a charge against the value ascribed to an acquired asset or an increase in the amounts recorded for assumed liabilities.

    Stock-Based Compensation

        We recognize stock-based compensation expense in accordance with the provisions of Accounting Standards Codification 718, Compensation—Stock Compensation , or ASC 718. ASC 718 requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors based on the grant date fair values of the awards. We use the Black-Scholes option-pricing method for valuing stock options. The fair value of an award, net of estimated forfeitures, is recognized as an expense over the requisite service period on a straight-line basis. We include stock-based compensation expense in cost of revenue and operating expenses within our consolidated statements of operations based on the classification of the individual earning the award.

        The determination of the grant date fair value of stock-based awards is affected by the estimated fair value per share of our common stock as well as other highly subjective assumptions, including, but not limited to, the expected term of the stock-based awards, expected stock price volatility, risk-free interest rates, and expected dividend yields, which are estimated as follows:

    Fair Value Per Share of our Common Stock

        As our common stock is not publicly traded, we estimate the fair value of common stock, as discussed in "Valuation of Our Common Stock" below. Our board of directors will determine the fair value of our common stock until such time as our common stock commences trading on an established stock exchange or national market system.

    Expected Term

        We determine the expected term of the awards using the simplified method, which estimates the expected term based on the average of the vesting period and contractual term of the stock award.

    Expected Volatility

        Since a public market for our common stock has not existed and, therefore, we do not have a trading history of our common stock, we estimated the expected volatility based on the volatility of similar publicly

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held entities (referred to as "guideline companies") over a period equivalent to the expected term of the awards. In evaluating the similarity of guideline companies to us, we considered factors such as industry, stage of life cycle, size and financial leverage. We intend to continue to consistently apply this process using the same or similar guideline companies to estimate the expected volatility until sufficient historical information regarding the volatility of the share price of our common stock becomes available.

    Risk-Free Interest Rate

        The risk-free interest rate used to value our stock-based awards is based on the U.S. Treasury yield in effect at the time of grant for a period consistent with the expected term of the award.

    Estimated Dividend Yield

        The expected dividend was assumed to be zero as we have never declared or paid any cash dividends and do not currently intend to declare dividends in the foreseeable future.

        In addition, we are required to estimate at the time of grant the expected forfeiture rate and only recognize expense for those stock-based awards expected to vest. We base our expected forfeiture rate on our estimate of pre-vesting award forfeitures.

        The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change or we use different assumptions, stock-based compensation expense could be materially different in the future.

        The following table presents the weighted-average assumptions used for stock options granted for each of the periods indicated:

 
   
   
   
  For the Six Months Ended June 30,
 
  For the Year Ended December, 31,
 
  2016
(unaudited)
  2017
(unaudited)
 
  2014   2015   2016

Risk-free interest rate

  1.8% - 2.2%   1.5% - 2.0%   1.2% - 1.6%   1.3% - 1.6%   1.8% - 2.1%

Expected life

  6.1 years   6.0 years   6.1 years   6.1 years   6.0 years

Expected dividend yield

         

Expected volatility

  45.0% - 55.7%   44.8% - 48.2%   45.2% - 46.6%   45.2% - 46.4%   50.5% - 54.0%

    Valuation of Our Common Stock

        Prior to this offering, given the absence of an active market for our common stock, our board of directors was required to determine the fair value of our common stock at the time of each stock-based award based upon several factors, including consideration of input from management and contemporaneous third-party valuations.

        The exercise price for all stock options granted was at or above the estimated fair value of the underlying common stock, as estimated on the date of grant by our board of directors in accordance with the guidelines outlined in the practice aid issued by the American Institute of Certified Public Accountants, titled Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Each fair value estimate was based on a variety of factors, which included the following:

    contemporaneous valuations performed by an unrelated third-party valuation firm;

    the prices, rights, preferences, and privileges of our then-outstanding preferred stock relative to our common stock;

    pricing and timing of transactions in our equity;

    the lack of marketability of our common stock;

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    our actual operating and financial performance;

    current business conditions and projections;

    the market performance of comparable publicly-traded companies;

    the likelihood of achieving a liquidity event, such as an initial public offering, merger or acquisition of our business given prevailing market conditions; and

    U.S. and global capital market conditions.

        We determined the fair value of our common stock for financial reporting purposes, taking into account the factors described above, using a combination of valuation methodologies with varying weighting applied to each methodology. One valuation methodology used was the Probability Weighted Expected Return Method under which the value of our common stock was estimated based upon an analysis of values for the company assuming an initial public offering as a possible future event. We applied a discount for lack of marketability to account for a lack of access to an active public market.

        Following this offering, it will not be necessary to determine the fair value of our common stock, as the shares will be traded in the public market.

        Based on the assumed initial public offering price per share of $            , which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, the aggregate intrinsic value of our outstanding stock options as of June 30, 2017 was $             million, with $             million related to vested stock options.

JOBS Act Accounting Election

        In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Therefore, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Recent Accounting Pronouncements

    Recent Adopted Accounting Pronouncements

        In August 2014, the FASB, issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's ability to Continue as a Going Concern , which requires an entity to establish a going concern assessment process. ASU 2014-15 was effective for us on January 1, 2016. The adoption of this standard did not have a significant impact on our consolidated financial statements and related disclosures.

        In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments , which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. ASU 2015-16 became effective for us on January 1, 2017. The adoption of this standard did not have a significant impact on our consolidated financial statements and related disclosures.

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    Recent Accounting Pronouncements Not Yet Adopted

        The adoption dates included in the descriptions below apply to private companies.

        In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718 ): Scope of Modification Accounting , which provides guidance regarding stock-based payment award changes that require modification accounting. ASU 2017-09 is effective for us beginning January 1, 2018. The standard requires prospective application for awards modified on or after the effective date. Early adoption is permitted. We have not yet determined the effect of the standard on our consolidated financial statements and related disclosures.

        In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350 ): Simplifying the Test for Goodwill Impairment . This standard simplifies the accounting for goodwill impairment by removing step two of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will be the amount by which a reporting unit's carrying amount, including goodwill, exceeds its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for us beginning January 1, 2022. The standard requires prospective application. Early adoption is permitted. We will apply this new accounting standard in future periods if we determine that the carrying amount of any reporting units including goodwill exceeds fair value of the reporting unit.

        In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) : Clarifying the Definition of a Business , which clarifies when transactions should be accounted for as acquisitions (or disposals) of assets or business. ASU 2017-01 is effective for us beginning January 1, 2019. Early adoption is permitted for transactions not previously reported in issued financial statements. We have not yet determined the effect of the standard on our consolidated financial statements and related disclosures.

        In November 2016, the FASB issued ASU 2016-18, Statements of Cash Flow (Topic 230): Restricted Cash , which requires that a statement of cash flows explains the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amount shown on the statement of cash flows. ASU 2016-18 is effective for us beginning January 1, 2019. The effect that the ASU will have on our consolidated financial statements will be dependent upon the amount of restricted cash in future periods.

        In August 2016, the FASB issued ASU 2016-15, Statements of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments , which clarifies classification for certain cash receipts and cash payments on the consolidated statement of cash flow. ASU 2016-15 is effective for us beginning January 1, 2019. The standard requires a retrospective transition method for each period presented. We have not yet determined the effect of the standard on our consolidated financial statements and related disclosures.

        In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements for Employee Stock-Based Payment Accounting , which simplifies certain aspects of accounting for share-based payment transactions, including income tax consequences, statutory tax withholdings requirements, forfeitures, and classification in the statement of cash flows. ASU 2016-09 is effective for us beginning January 1, 2018. Early adoption is permitted. The standard requires the guidance related to forfeitures to be applied using a modified retrospective transition method and the guidance related to the accounting for income taxes to be applied prospectively. We are in the process of evaluating our stock award plan and identifying differences in accounting between new and existing standards.

        In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires lessees to recognize the assets and liabilities that arise from all leases on the consolidated balance sheet. ASU 2016-02 is effective for us beginning January 1, 2020. Early adoption is permitted. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of

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the earliest comparative period in the financial statements. We have not yet determined the effect of the standard on our consolidated financial statements and related disclosures.

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This new accounting standard also impacts the recognition of sales commissions. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which defers the effective date of the guidance in ASU 2014-09 by one year. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , which provides clarification on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients , which provides clarification on assessing collectability, presentation of sales taxes, non-cash considerations, and completed contracts and contract modifications at transition. In December 2016, the FASB issued ASU 2016-20, Technical Correction and Improvements to Topic 606, Revenue from Contracts with Customers , which amended several items of 2014-09. ASU 2014-09 is effective for us beginning January 1, 2019. Early adoption is permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We continue to evaluate the impact of the new standard and available adoption methods on our consolidated financial statements. We are in the process of evaluating arrangements with customers and identifying differences in accounting between new and existing standards.

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LETTER FROM OUR CEO

Introduction

        Thank you for spending the time to learn about our special company, SendGrid. You may not have heard of us, but you are likely interacting with us every day when you receive a receipt at the end of a ride share, when you book a reservation online, when you click on the "Forgot Password" button, when brands you love send you their newsletter or offers. We are likely in your email inbox—every single day.

        We have been on an extraordinary journey over the past eight years, since our founders started SendGrid to find a better and simpler way to send email. We are in the early stages of creating a built-to-last company, and hope that you will join us on our journey.

        Before we ask you to make a long-term investment, we feel obliged to share with you some background on Where We Came From, Where We Are Going, and How We Plan to Get There.

Where We Came From

    Genesis Story

        Our Founders—Isaac, Tim, and Jose—are software developers who were serial entrepreneurs. Each time they set out to build a new digital business, they found they had to build a software application or website that needed to communicate with users in an automated fashion. A few examples:

    when users signed up, they needed to respond to a confirmation email in their inbox to confirm their identity;

    when they lost or forgot their credentials, they needed a button to click to retrieve their user ID or password and to receive an email to reset it; and

    when users submitted orders, they needed an online notification that their purchase was received.

        Since the ubiquitous personal digital identifier has long been an email address, our founders realized they needed an email infrastructure that would automatically enable their applications to send these types of emails.

        They spent months learning about email protocols (SMTP, DKIM, DMARC and other alphabet-soup-like email acronyms) and tens of thousands of dollars in servers and networking to set it all up...only to then see just 60% of their automated emails actually arrive in their users' inboxes. Three sharp developers spent a lot of time and money, and still 40% of their email was not delivered successfully. They decided that to effectively use and deliver email, they had to learn more about the policies of the inbox service providers such as Google Gmail and Yahoo! Mail and really understand best practices in email list management.

        Suffice it to say, this is NOT how developers want to spend their time when building a new digital business. No more so than developers want to build and maintain their own physical infrastructure (see Amazon Web Services success), understand global payment processing (see Stripe success), or learn about SMS or voice messaging (see Twilio success). Our founders set out to solve the pain associated with email infrastructure, and expose it as a cloud API service. They believed that others in the universe shared their pain.

        That was 2009.

        Eight years, more than 55,000 customers and one trillion emails later, our founders discovered that many folks did indeed share that same problem. And today, we have a rapidly growing business that touched 3.5 billion unique email addresses during the 12-months ended June 30, 2017.

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Where We Are Going

        It is important to clearly articulate where we are going and the belief set that we will use to inform our strategy and operations. Buying into our stock is tantamount to buying into our long-term journey. We want you to be as excited about our strategic direction and operating principles as we are.

        I hope this letter outlines those beliefs for you.

    Mission

        By focusing on our Mission, to deliver customer communications that drive engagement and growth , we have successfully helped 55,000 customers around the world regularly communicate with their billions of users. We believe in keenly focusing on the business outcomes (engagement and growth) that we deliver for our customers, not simply on the technology we build or the services we offer.

        Email, the primary form of digital communication, is our channel of focus. It often surprises people that delivering email is hard. As consumers, sending person-to-person messages, we do it every day. But for businesses to send email at scale—email that arrives successfully in a consumer's inbox—delivery is quite complex. We believe deeply that email will remain the center of gravity for digital communications for years to come, and that our expertise in helping customers connect through this medium will be an enduring source of strength for our business.

         We believe equally that the proliferation of emerging communications channels—like messaging/chat platforms, in-app messages, online ads, browser and push notifications, and SMS—creates further potential growth opportunities over time for SendGrid to help our customers optimize their communications across those channels.

    Vision

        Our vision is to build the world's most trusted customer communication platform . Each word in that statement was carefully chosen:

    "World," because we believe there is as much opportunity outside the United States as there is within it. In fact, we have already built a significant global footprint, with customers in more than 100 countries around the world.

    "Trusted," because we believe we have an important responsibility to our customers, on behalf of whom we are delivering mission-critical business communications that they expect to happen in a utility-like fashion. When they "plug in" their application to our metaphorical email socket, it has to "just work." We can't fulfill our vision or meet customer expectations without extraordinary uptime performance, which, in 2016, measured better than 99.99%.

    "Customer communication," because we believe that today, while we focus on the email channel, ultimately, we expect to support the many channels of communication that our customers employ to engage with their consumers and users.

    "Platform," because we believe that companies of all shapes and sizes should be able to easily build their applications on top of our services, thereby driving broader usage of our system.

How We Plan to Get There

    Formula for Success

         We believe in a relatively simple formula to drive business success.

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    Happy Customers + Engaged Employees = Financial Strength -> Investments in Innovation

        We refer to each of these formula "variables" as our Enduring Measures of Success. The specific goals and metrics that belie them will change from year-to-year, but the categories themselves never will. We believe that executing and delivering against this formula will allow us to continue to build a durable company.

    Happy Customers

         We believe most great businesses focus intensely on customers, their experiences, and the value they derive. SendGrid obsesses over building products and services that our customers will love and value. We don't allow any "hands on keyboards" (e.g. no coding) until we have done dozens of customer interviews both to validate a perceived problem and to confirm our solution design. We execute quarterly Net Promoter surveys. These surveys include having every company leader reach out personally to a few respondents to hear their qualitative feedback. We want our customers to know we hear them. We invest disproportionately in technical support, customer success and professional services, because we are committed to helping our customers be successful with our services.

    Engaged Employees

         We believe people are our most valuable asset. Highly engaged employees are a competitive advantage for any business, and we believe that SendGrid's success to date has been due in no small part to our "Gridders."

        At SendGrid, we focus maniacally on our 4H culture—Happy, Hungry, Humble and Honest. We believe that those "values create value," that having a deeply shared set of beliefs actually creates economic value. There is no greater compliment I hear from customers than the words, "you're easy to do business with." It's only through the commitment of our 4H employees that we receive the high praise embodied in that compliment. Moreover, in the competitive battle for talent in the software industry, we believe a differentiated and compelling culture is perhaps our greatest weapon. We attract and retain great people because our teammates genuinely enjoy working together.

         We believe also in the concept of "Servant Leadership," in which we flip the organization chart on its head, to visually represent the executive team, leadership and managers all working to serve the individual contributors who do the hard work of our company every day. Our leadership team strives to choose the right markets, direct the right strategy, attract and retain the right people, implement the right processes, and ensure the right capital structure. However, we believe that providing direction is "necessary but not sufficient," so we also push our leadership team to remove obstacles and create an optimal environment for every employee to do their best work.

        Finally, we believe it's critical that we ask all of our employees to act like the owners that they are (we use equity as an incentive lever for nearly every one of our Gridders). We often remind our employees: "You've never seen a rental car at a car wash," because owners care more deeply. They sweat the little details. Ours certainly do.

    Financial Strength

        You will, appropriately, measure our success based on our financial performance.

    Stockholder Value We believe that the goal of business is to create long-term stockholder value. We never lose sight of that truth. By executing well against customer satisfaction and employee engagement, we create that value.

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    Efficient Growth We believe that building a long-term sustainable business, and maximizing long-term stockholder returns, requires us to balance growth and profit aspirations. We are not a team that believes in "growth at all costs."

      We believe that having profitability constraints forces us to make important trade-offs and ensures prioritization of those most critical investments. In the end, resource allocation is among our most important responsibilities, and we believe in doing so with discipline and rigor.

    Business Model We believe that great businesses understand their business models and work hard to keep improving them. Our self-service customer acquisition model facilitates the easy and efficient adoption and integration of our services. Because our customers pull our services from us (rather than a traditional software company push model), we have been able to grow our customer base while avoiding the expensive customer acquisition costs typical of high-touch enterprise sales models.

    Innovation

        While we believe our focus on customers and employees will lead to financial strength, we must continue to innovate if we are to keep growing at high rates. The software industry is dynamic and fast-changing, creating both disruption risk and incredible opportunity.

    We believe in imagining the future, spotting the trends, and building solutions to problems we believe our customers will have. This innovation cycle requires as much discipline—in our analysis and validation of our ideas—as it does courage and conviction.

    We believe that we must not just look around the corner, but invest today to have the inside track and make the turn. We ring-fence a team, called SendGrid Labs, to work exclusively on these innovation projects that we believe will impact the industry and our business multiple years out.

    We believe that innovation can come from anywhere, and we're happy to bring that innovation into SendGrid inorganically. We abhor "not-invented-here," as it runs counter to our Humble H core value. There are many companies in the marketing technology landscape that we believe would make great additions to our platform.

    We believe that fulfilling our long-term vision of building the world's most trusted customer communication platform will require innovation. The solutions our customers will need do not yet exist, and certainly not in a simple, affordable, and easy-to-use solution.

Conclusion

        We want investors who are excited to join us on the long journey ahead. We believe more of you will embark on this journey with us if you appreciate our history, our mission and vision, and our operating philosophies for building and managing our business. I hope this introductory letter gives you insight into those items, and affords you the confidence that we'll continue to build on the foundation that they set.

We believe we will.

Sincerely,

LOGO

Sameer//

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BUSINESS

Overview

        We are a leading digital communication platform, enabling businesses to engage with their customers via email reliably, effectively and at scale. Our cloud-based platform allows for frictionless adoption and immediate value creation for businesses, providing their developers and marketers with the tools to seamlessly and effectively reach their customers using email. Since our inception we have processed more than one trillion emails.

        Increasingly, today's transactions are digital. They happen online and are often automatic and recurring. Consumers want a seamless experience and have come to expect that their online activity will be recorded in their email inbox. Email serves as the system of record for a consumer's digital life, delivering purchase receipts, shipping notifications, account information, social media updates, reservations and website login data. Email is the primary communication channel in the digital world, with 125 billion commercial emails sent every day, according to a 2017 Radicati Group report. Email is also a trusted marketing tool for businesses. Businesses rely on email to send customers notifications, promotions and personalized content because email is effective, searchable and permanent. An email-based promotion can reach the right user at the right time, with a high degree of certainty that the user will see it. According to The Inbox Report 2017, in 2016 nearly 80% of Americans checked their email daily. According to a 2015 Direct Marketing Association report, email demonstrated the highest return on investment among all forms of digital communication, generating $38 in revenue for every $1 invested.

        While email offers a compelling value proposition for businesses, effective email delivery at scale is complex and difficult. Inbox service providers, including Google Gmail, Microsoft Outlook and Yahoo! Mail, evaluate incoming email and block the delivery of harmful or unwanted email. However, these filters can also prevent the delivery of wanted email. According to a 2017 Return Path report, only 80% of wanted email reached its intended recipient. To manage email delivery on their own, businesses must understand the complexities associated with both sending millions or billions of transactional and marketing emails and the unique dynamics of numerous inbox service providers. Dedicated servers and databases, domain expertise, continuous monitoring of email protocols and a team of people are all necessary to maintain a robust internally-developed email communications system. The use of developer resources in this effort can reduce businesses investment in product innovation and other priorities. Without an effective, easy to use system, marketers seeking to reach customers via email can also expend significant time and resources without accomplishing their marketing goals.

        SendGrid was founded in 2009 by developers who were frustrated with their own experiences in managing email delivery. They wanted to build a system "that just worked" for developers and allowed them to focus on strategic business activities. They developed a robust technology platform incorporating their domain expertise and created an API that allowed for easy integration by businesses. We built our business model around serving the developer, including self-service adoption and a frictionless user experience. We have extended this platform over time to serve the similar email delivery needs of marketers.

        We offer our customers three services: our Email API; Marketing Campaigns; and Expert Services. Our Email API service allows developers to use our API in their preferred development framework to leverage our platform to add email functionality to their applications within minutes. This service enables businesses to send thousands or billions of emails, all with the same high level of service and reliability, and incorporates proprietary technology and domain expertise to significantly improve deliverability rates. Our Marketing Campaigns service allows marketers to upload and manage customer contact lists, create and test email templates, and then execute and analyze multi-faceted email campaigns that engage customers and drive growth. Our Expert Services help businesses further optimize their email delivery. With our platform, businesses can achieve industry leading email deliverability that translates into higher brand engagement with their customers.

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        Our category leadership, self-service model and company culture have enabled us to attract and retain customers and employees, and continue to develop innovative solutions for email delivery. Our platform is designed to serve the communication needs of SMBs and large enterprises across industries. Our pricing model and extensive document library makes our platform accessible to developers and marketers alike, irrespective of their expertise or the scale of their needs. We deliver our services through a self-service cloud-based subscription model, where businesses primarily sign up for our services through our website. We offer transparent and affordable pricing, generally on a per month basis by volume of email and typically paid by credit card. In addition, we have robust documentation for onboarding and ongoing usage. We have developed a broad user and partner community available for help and support. This self-service delivery model has enabled us to rapidly attract customers while operating our business efficiently.

        Businesses of all sizes and across industries depend on our digital communication platform. As of June 30, 2017, we had over 55,000 customers globally, an increase of 38% year over year. While we serve large enterprises, we primarily serve SMBs that rely on email to power their businesses and are rapidly adopting cloud services. Our self-service model has allowed us to efficiently acquire SMB customers that historically have not been a focus for companies that depend on large enterprise sales forces. Our robust platform and the increasing breadth of our services allow us to scale with our customers as they grow.

        We have achieved significant growth in recent periods. For 2014, 2015, 2016 and the six months ended June 30, 2017:

    our total revenue was $42.8 million, $58.5 million, $79.9 million, and $51.8 million, respectively;

    our net loss was $13.0 million, $5.9 million, $3.9 million, and $3.1 million, respectively;

    our adjusted net income (loss) was $(12.2) million, $(4.5) million, $(1.4) million, and $0.6 million, respectively;

    our net cash flows from operating activities were $(9.6) million, $1.2 million, $9.7 million, and $5.1 million, respectively; and

    our free cash flow was $(13.6) million, $(4.0) million, $(2.5) million, and $(0.9) million, respectively.

        See "Selected Consolidated Financial Data" for more information on our adjusted net income (loss) and free cash flow and a reconciliation to net income (loss) and net cash flows from operating activities, respectively.

Industry Trends

    Email Is the Primary Commercial Communications Channel in the Digital World

        Businesses increasingly interact with their customers through digital channels. Many emerging businesses are digital first. They primarily engage with customers through online and mobile channels. Customers of these businesses rarely interact with sales people, collect paper receipts, track orders over the phone or mail in their bills. Customers enjoy and increasingly demand one-click purchases, recurring home deliveries and automated online services and depend on email as their system of record for their transactions.

        Businesses send emails to their customers daily because marketers know they can reach a wide audience and personalize interactions, while trusting emails will reach their target recipient. Digital channels allow businesses to engage with their customers in a more personalized way. Consumers leave a digital footprint of their transaction history and preferences, enabling businesses to analyze demographic information and buying behavior in order to deliver highly personalized digital experiences. The emergence of smart phones and other personal devices has enabled convenient online access by consumers, who as a result expect instant access to information and services. These dynamics have created

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the opportunity for frequent customer engagement and targeted marketing. Businesses must be able to react quickly and effectively in order to take advantage of this opportunity.

    Email Is Pervasive and Used for Multiple Business Purposes

        According to a 2017 study that we commissioned from Egg Strategy, Inc., a consumer research and brand strategy consulting firm, 67% of consumers between the ages of 13-50 believe that email is essential to their lives and 74% said email is their preferred communication method with companies or brands. In fact, over the next five years, 83% of Generation Z consumers (ages 13-21) expect to increase or maintain their email usage, the most of all generations studied. Email is the gravitational center of digital communications.

        Businesses send email in three different forms to connect with customers:

    Transactional (Recipient Initiated, One-to-One)

        A transactional email is generated whenever an event occurs, such as a purchase, payment, password reset, account creation, shipping notification, and social media update. Nearly all websites and applications require a unique email address to sign up or login, establishing email as the system of record for the transaction.

    Marketing (One-to-Many)

        One-to-many marketing email is sent as a single message to a large distribution list, and includes promotions, newsletters, buy now, sign up now, and special offers.

    Marketing (Personalized, One-to-One)

        Personalized marketing email is based on unique data about the recipient and is the most difficult type of marketing email to produce, but can be the most valuable to businesses. To generate a personalized marketing email, businesses can apply data analysis techniques to generate an email specific to that user at the right time.

    Email Is Highly Effective at Driving Customer Engagement and Revenue

        Email accounts are widespread and each is personal to its owner and consistent across time, making email a highly effective method of communication between businesses and consumers. A 2017 Radicati Group report estimates that the number of email users worldwide will exceed 3.7 billion in 2017 and that the average number of email accounts per email user was 1.7 accounts. Individuals with email accounts check their email throughout the day, every day. Many individuals change their home address more frequently than their email address. The use of smartphones for always-on access has only increased this effectiveness. According to the Inbox Report 2017, the following statistics demonstrate the continuing reliance on email:

    80% of Americans check email every day.

    67% of Americans check email multiple times a day.

    67% of Americans check email most often from their smartphone.

    80% of Americans expect to use email more, or about the same, in 2021.

    47% of consumers say they have purchased from websites after seeing a marketing email.

        Marketers rely on email because it is effective at driving revenue.

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    The median return on investment for email marketing is nearly five times higher than the median return on investment for social media marketing (source: eMarketer 2016).

    Email generates $38 in revenue for every $1 spent on email marketing (source: Direct Marketing Association 2015).

    Effective Email Delivery Is Difficult

        While email offers a compelling value proposition businesses struggle to achieve effective email delivery due to a number of factors.

    The Email Recipient's Side

        Inbox service providers, including Google Gmail, Microsoft Outlook and Yahoo! Mail, use sophisticated filters to analyze incoming email and prevent the delivery of harmful or unwanted email, often blocking wanted email as well. Recipient systems analyze factors such as sender reputation, email content, past spam or phishing complaints, invalid addresses, blacklists and domain name reputation with the goal of verifying legitimate email. If an email does not pass one of these filters, the system will automatically block the email from the recipient's inbox, with the addressee likely not even knowing it was blocked. The cost of delivery failure includes not only the infrastructure expense associated with processing the email, but more importantly, the lost revenue for a business from a new or existing customer. We estimate businesses lose tens of billions of dollars in revenue every year from failed email delivery.

    The Email Sender's Side

        Maintaining an email delivery system is complex. Domain expertise, dedicated resources and the need to satisfy complex technical requirements are all required to operate an effective email delivery system, particularly at scale.

        To be effective, businesses must understand the complexities of building a sender reputation and how to maintain that reputation across inbox service providers, spam houses, blacklist managers and industry watchdogs. This effectiveness requires strong relationships with postmasters at major inbox service providers to understand their protocols and proprietary methods in order to optimize delivery and resolve sender reputation issues quickly. Businesses must also synthesize a vast array of rapidly changing regulations, including privacy laws, that differ significantly by country.

        Building and managing an email delivery system is resource-intensive and costly. To deliver billions of emails to thousands of recipients, businesses need dedicated infrastructure, including servers and databases, as well as an understanding of protocols to communicate with the recipient servers, including Simple Mail Transfer Protocol, or SMTP, and APIs. Businesses also need to build, maintain and manage distribution lists across various applications and integrate relevant information from disparate databases into the email system.

    Businesses Are Adopting Cloud Services to Reduce Complexity and Focus on Core Functions

        Technological innovation has enabled businesses to improve efficiency, but it has also lowered barriers to entry and raised customer expectations. Businesses of all sizes must adapt quickly to changing market needs in order to grow and compete. As a result, businesses are turning to cloud services to manage complex and costly parts of their IT infrastructure and operations. For example, more than one million companies use Amazon Web Services for computing, network and storage infrastructure, over $20 billion in online payments has been processed by Stripe, over 500,000 businesses are powered by Shopify, and billions of SMS messages have been sent using Twilio. Cloud services can seamlessly provide many of the critical, but non-core, components for a business, allowing it to maximize the value of internal resources by focusing on its core differentiating competencies.

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    Frictionless, Self-Service Models Are Driving High Adoption of Cloud Services

        The ease of cloud service delivery is driving a move from multi-million-dollar capital purchases of on-premises IT infrastructure to recurring lower-cost subscriptions for cloud services. Many cloud services providers are also making it easier for end users to experiment with and adopt their technologies by deploying self-service models. These services enable easy integration with existing IT systems and business workflows. As a result, self-service models enable cloud services providers to broaden their customer reach to include SMBs that have not been well-served by traditional enterprise sales forces. This change has increased the influence of line of business owners, developers and marketers in technology purchasing decisions compared to a traditional CIO-led purchasing process. Developers at businesses of all sizes can now conduct research to find solutions to meet their needs and adopt cloud services on their own, often using credit cards for purchases instead of purchase orders. This enables developers and marketers to sign up for services on the Internet and be up and running in minutes. With cloud services, developers and marketers exert greater control over how they allocate their resources.

    Businesses Need to Effectively and Efficiently Send Wanted Email at Scale

        Email is critical to building and growing customer relationships, but requires significant resources and expertise to manage the complex underlying infrastructure. Businesses are turning to cloud services providers to provide transactional and marketing email services. The developers and marketers who are driving purchasing decisions of cloud services need a transactional and marketing email solution that possesses the following characteristics:

    Reliability: continuous uptime to send secure emails at any time

    Effectiveness: high delivery rates and high consumer engagement

    Scalability: ability to send billions of emails across a range of customer use cases, with the same level of effectiveness

    Ease of Adoption and Integration: self-service onboarding and integration

    Affordability: lower, predictable cost versus an internal system and accessible to businesses of all sizes

    Platform Extensibility: integrated transactional and marketing email capabilities

    Services and Support: expert help to obtain desired outcomes and enhance email marketing capabilities

Our Market Opportunity

        We believe there is a large market opportunity for scalable email delivery as a cloud service. Businesses of all sizes and across industries use email to communicate with customers and can benefit from an easy to use, highly effective email service. While we have customers of various sizes, the majority of our customers today are SMBs that are digital first and rely on cloud services to operate their businesses.

        Our digital communications platform serves both the transactional and marketing email markets through our Email API and Marketing Campaigns services. We estimate our total addressable market for both services was $11 billion in 2016. To calculate our total addressable market, we first derived our total number of potential customers by multiplying the total number of global businesses with five or more employees, based on independent industry data from the NAICS Association, by the percentage of U.S.-based small businesses expected to have an online presence in 2014 according to the SBA. The SBA estimated in 2014 that 53% of small businesses had an online presence, which we used as a proxy for the percentage of global businesses with five or more employees that require email services. We then

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multiplied the total number of these potential customers by our average revenue per customer in 2016 for customers who used both our Email API service and our Marketing Campaigns service.

Understanding the Needs of Users Adopting Our Platform

        We believe an effective way to demonstrate the roles and motivations of developers and marketers, the primary customers of email communication services, is to describe two personas: Dewey the Developer and Olivia the Marketer.

        Dewey is a software engineer at a 100 person startup in San Francisco. Dewey spends his days working through a backlog of feature requests, bugs and configurations. For Dewey, sending email is just another process in his backlog of requests. When email is the problem, it is top of mind. His primary role for email is setting up an API to integrate email lists from his business and send email at appropriate times to recipients. About half of the email that gets sent through the API is promotional in nature and he does not know the context, nor does he want to know it. He just wants successful API calls and a stable service to support the critical mission of his company to communicate via email with its customers. He reports to the Chief Technology Officer, who is responsible for email delivery applications. Dewey uses a home-grown solution for email delivery but is evaluating cloud services that could free up a significant amount of time for him and others on his team. He is measuring these cloud services based on a number of factors, including the quality of their APIs, clear documentation, simple integration, reliability, and an established community for finding answers when he needs them.

        Olivia is a Director of Marketing at the same high growth startup. She has multiple roles: improving search engine optimization, advertising on social media, planning events, managing marketing programs, and establishing partnerships. She is tasked with increasing company revenue that can be directly attributed to her marketing efforts. When it comes to email, Olivia creates the content and layouts for promotional email, manages distribution lists and analyzes user data to create unique personal emails to go out when customers are most likely to buy. She has a lot on her plate and just wants everything to work. She uses an email marketing system that she found online, but she is frustrated with the amount of time that it takes her team to manage the system and the number of emails that get bounced back. She is evaluating cloud services and requires a proven track record, customer testimonials, support and potential to scale with the business as it grows.

        IT purchasing power in businesses is increasingly moving to people like Dewey and Olivia, who want cloud services that are effective and efficient. They care about the reliability of the service, so they can focus on core tasks and be more productive in their jobs. They do not want to deal with sales people, contracts or complicated integrations. They do their own online research and use a credit card to purchase software online. They like the transparency in online pricing, a simple volume-based monthly price for what they need. Once they find a solution that works, they want to be up and running quickly.

Benefits of Our Solution

        Key benefits of our solution include:

    Platform Reliability

        Businesses rely on our platform to power their customer email communications. We utilize a robust global infrastructure that includes multiple co-located data centers and public cloud resources to host our platform. In 2016, our platform was available for our customers to send email 99.995% of the time. We have invested and continue to invest to improve the reliability of our platform.

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    Proprietary Technology and Domain Expertise Enables Effective Email Delivery

        We significantly improve email deliverability through embedded intellectual property in our platform and industry-leading domain expertise. Our platform is designed to operate at scale across multiple inbox service providers. We have over 170 domain experts in email communication supporting our technology. In the first six months of 2017, we estimate that we achieved a delivery rate of 94%, as compared to a general delivery rate for wanted email of 80% for the 12-month period ended June 30, 2017, as reported by Return Path in 2017. Our delivery rates for 2014, 2015 and 2016, were consistent with our delivery rate for the first six months of 2017. We also offer Expert Services to help our customers achieve the best outcomes for their individual needs. We estimate customers who utilize our Expert Services achieve nearly 4% higher deliverability on average, compared to our standard offering.

    Ability to Scale With Customers As They Grow

        Our communication platform provides the same high-quality service to a wide range of businesses, from startups to large enterprises, that send significant email volumes. Our Email API service starts with entry-level pricing of $9.95 that supports up to 40,000 emails per month and scales up from there. Our largest customers send more than one billion emails per month. We recognize that as our customers scale, their needs evolve and we provide services that help them manage the complexities that emerge.

    Frictionless Adoption for Developers and Marketers

        We make it easy for developers and marketers to adopt our platform using a self-service model. We provide a flexible API setup to easily add email functionality to their applications which allows developers to begin sending email through our API in minutes. We have comprehensive documentation to help developers write code in their preferred development framework. We also provide 24 × 7 support to help our customers integrate with our platform. We have a community of over 2.5 million active users that serves as a resource for questions about our platform. Marketers seek the same reliable service for marketing email as developers do for transactional email. Therefore, once a business is using our API for transactional email delivery, it is simple for that business to also use our platform for promotional and personalized email marketing.

    Affordable and Accessible to Businesses of All Sizes

        We offer our Email API service as a monthly subscription, with pricing based on email volume. Our Email API service pricing plans start at $9.95 per month for up to 40,000 emails, providing businesses of all sizes, especially SMBs, with an affordable option for digital customer communication. Businesses can tailor the use of our services for their individual needs, without the need to commit to expensive, multi-year contracts. Our cloud-based services generally provide significant cost savings compared to an internally developed system and free up internal resources for other tasks. Based on our internal estimates and analysis, we believe a typical high-volume customer located in a major metropolitan area could save up to one-third by using our Email API service as compared to the cost of implementing and maintaining an internally-developed email delivery system.

    Extensible Communications Platform

        Our platform incorporates extensible technology that allows our customers to expand their use cases to improve their customer communications. We introduced our Email API service in 2009, which allowed businesses to send both transactional and marketing emails. We continued to add functionality to our platform and in late 2015, we introduced our Marketing Campaigns service. Businesses that use our Marketing Campaigns service gain more insight about how their customers interact with email, which allows the business to improve deliverability and engagement. Our customers benefit from having a single

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platform for transactional and marketing email, enabling them to manage their customer contact data in a single place, leverage universal design templates and testing systems, and ensure high email deliverability.

Competitive Strengths

        Our competitive strengths include:

    Easy to Adopt, Self-Service Model

        Our Email API and Marketing Campaigns services are designed to be accessed from our website and immediately useable. During 2016, approximately 98% of our new customers purchased our platform through our website, without engaging with our sales team. By reducing the friction that typically accompanies the purchase of business software and eliminating the need for complicated and costly implementation and training, we believe we attract more customers to try, buy and derive value from our platform. Customers find us through our marketing efforts and word-of-mouth. This self-service model has allowed us to grow our customer base while avoiding the expensive customer acquisition costs typical of high-touch enterprise sales models. We focus on the quality of our services, frictionless adoption and customer support in lieu of a costly traditional sales infrastructure.

    Market Leadership in Email Service with Strong Brand Association

        We pioneered the market for a cloud-based email API service and continue to invest significant resources to extend our technology leadership and brand awareness in our industry. As a result of these initiatives and our involvement in the early development of commercialized email service, we believe that the SendGrid brand has become synonymous with email delivery and is recognized as the industry standard for scalability, reliability and deliverability. Our brand recognition is central to the efficiency of our self-service sales model.

    Significant Domain Expertise Around Email

        We have processed over one trillion emails since inception, including over 210 billion emails in the first six months of 2017. We sent email to more than 3.5 billion unique email addresses globally during the 12-month period ended June 30, 2017. We believe each of those figures is materially larger than our closest competitor. We have longstanding relationships and integrations with inbox service providers, including Google Gmail, Microsoft Outlook and Yahoo! Mail. These relationships provide us with real-time intelligence and performance feedback that enables us to optimize the deliverability of the emails that we send. Additionally, our personnel hold leadership roles with numerous email industry organizations including the Messaging Malware Mobile Anti-Abuse Working Group, Data & Marketing Association and Email Experience Council.

    Large, Growing and Happy Global Customer Base

        As of June 30, 2017, we had over 55,000 customers globally. Our broad customer base provides us with insight into digital communication trends and activity and results in word-of-mouth recognition that drives traffic to our website. We have minimal customer concentration with no customer accounting for more than 2% of revenue in any of the last three years, and a broad geographic reach with more than 36% of our revenue in the same periods coming from international regions, where we maintain limited infrastructure and no product localization.

    Proven and Well-Regarded Leadership Team

        Our senior leadership team has a strong record of success of starting and scaling technology companies, including publicly-traded software companies. We have received numerous external accolades related to our workplace culture, including a 4.8 / 5.0 rating on Glassdoor as of August 2017.

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The SendGrid Culture Defines Who We Are and How We Engage with Customers

GRAPHIC

        SendGrid's "4H" culture has allowed us to become a dynamic industry creator that attracts great people and consistently ranks as a top place to work. We strive to create an environment where people can have a career-defining experience and do their best work. Our culture is the sum of our values, traditions, beliefs, interactions, behaviors and attitudes, and it is through our culture that we recruit and retain top talent. Our culture is in our "4H's": "Happy," "Hungry," "Humble" and "Honest." Our people are "Hungry" to raise the bar to deliver results, yet are still "Humble" and always learning from each other and their customers. They are "Honest," meaning they value transparency, share feedback freely, and use data to make decisions, and are "Happy" to enjoy both their work and their lives outside of the office. Happiness is not about free food or matching 401Ks. It is about doing meaningful and challenging work, the customers you serve and the people with whom you work.

        The vernacular of our "4H's" can be heard throughout our offices: "Honest H feedback, this wasn't what I had expected" or "We're running a bit behind schedule, we need to add some Hungry H to this initiative." We invest time and resources throughout the year to ensure alignment with our mission, vision and values, and we are maniacally focused on recruiting and developing our talent.

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        Our "4H" culture is not just how we operate day to day, it is what we look for when we hire new employees and is in our DNA. We rely on people who best exemplify our company's culture to interview candidates and be part of the selection process. It is considered a privilege to recruit, with those roles reserved for employees who have demonstrated excellence in their ability to consistently identify great talent and distinctive cultural fit for our company. Each interviewer is responsible for probing on a different "H" and soliciting specific examples from the candidate's experience in which they exhibited those values.

        We invest in our team in multiple ways, including learning and development, performance management and career development. Our employees are our greatest strength and we strive to foster a collaborative, productive and fun work environment. We are proud that we have been recognized with multiple workplace awards, including from Inc. 5000, the Denver Post, Forbes and Fortune.

Our Growth Strategies

        Key components of our growth strategy include:

    Continue to Add Customers to Our Platform

        The market for our platform is large, underpenetrated and growing. We believe we are less than 3% penetrated in our potential addressable customer base and that there is substantial opportunity to add additional customers both in the United States and internationally as the ubiquity of email and the digital transformation of businesses continue to drive market adoption of our services.

    Expand Platform Features and Functionality and Grow Our Marketing Campaigns Service

        Our ability to develop new applications and functionalities has been integral to our success and we intend to continue to invest to extend the functionality and range of our platform. An example of innovation includes our Marketing Campaigns service, which we launched in late 2015. Our Marketing Campaigns service has experienced strong customer receptivity, with more than 7,400 customers as of June 30, 2017. We intend to grow our Marketing Campaigns service by cross selling into our existing Email API service customer base, acquiring new customers and adding new capabilities and features. Many of our Email API service customers do not employ separate, dedicated marketing solutions and we believe that our Marketing Campaigns service offers them a highly attractive proposition. Furthermore, while we do not currently provide services in other emerging communications channels, such as messaging/chat platforms, in-app messages, online ads, browser and push notifications, and SMS, we believe that the proliferation of these channels creates further potential growth opportunities over time for us to help our customers optimize their communications across those channels.

    Expand our Strategic Partner Channel

        We have built and plan to continue investing in channel relationships with our strategic partners in order to broaden the reach of our internal marketing efforts. Our partner ecosystem includes strategic relationships with leading public cloud infrastructure providers and ecommerce platforms, such as Heroku, Amazon Web Services and Microsoft Azure, software vendors that offer complementary products and with which we co-sell our Email API and Marketing Campaigns services, such as Github, New Relic and Twilio, and digital marketing agencies, such as Deloitte Digital, which resell our services to their clients.

    Continue to Grow Internationally

        We generated more than 36% of our revenue in each of the last three years from customers located in international geographies despite having limited international infrastructure and no product localization. We attribute this success to awareness of our services, our frictionless self-service onboarding process and the ease-of-use of our services. Recently, we opened our first international sales and marketing office in

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London. In the future, we intend to add more physical infrastructure as well as localized platform content and currency, checkout, and support that will enhance our attractiveness to international customers.

    Pursue Select Acquisitions to Augment Our Features and Functionality

        We intend to continue pursuing acquisitions that we believe will be complementary. For example, we may pursue acquisitions that we believe will enhance our services, accelerate customer acquisition, introduce different distribution channels, and add talent and expertise to our organization. We have a track record of successfully completing acquisitions. For example, in 2015, we acquired certain assets from Message Bus, a transactional email company, and in 2017, we acquired Bizzy, a marketing automation company.

SendGrid.org

        We believe we can create greater social good through better communications. Through SendGrid.org, which is a part of our company and not a separate legal entity, we donate and discount our services to nonprofits, who use our services to engage their audience, expand their reach and focus on making a meaningful change in the world. To that end, we have reserved 466,571 shares of our common stock to fund and support operations of SendGrid.org, which represented 1% of our outstanding capital stock on the date it was approved by our board of directors.

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Our Platform and Services

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        Our offerings include:

    Email API

        Our Email API service enables businesses to programmatically send email via our API or an SMTP relay. We manage delivery of those emails and report on account statistics and recipient engagement. We take care of the details of making SMTP connections, bulk emailing, connection handling, and click- and open-tracking to help our customers get the right message to the right person at the right time.

    Integrations:   Businesses can integrate our email API with multiple leading development frameworks and client libraries, including Node.js, Ruby, Python, Go, PHP, Java and C#.

    Documentation:   Users can get answers and support from robust documentation, video tutorials and the SendGrid community on our website.

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    IP Management:   Domains and links can be customized, whether sending from shared IP address pools or a dedicated IP address, for improved reputation management and delivery.

    Deliverability:   Our custom Sender Policy Framework and DomainKeys Identified Mail record creation is designed to eliminate domain spoofing and phishing.

    Reporting & Analytics:   Account statistics and engagement data can be accessed in real-time via our Advanced Statistics API and SendGrid Event Webhook.

    Mobile support:   Our deep linking functionality enables email engagement for mobile apps.

    Security:   Our two-factor authentication, API key permissions, and IP Address Access Management enables secure management of our email API by our customers.

    Marketing Campaigns

        Our email marketing service, SendGrid Marketing Campaigns, allows marketers to upload and manage customer contact lists, create and test email templates, and then execute and analyze multi-faceted email campaigns that engage customers and drive growth. Our Marketing Campaigns service includes:

    Segmentation and Contact Management Tools:   Enables users to upload and manage target recipient lists, create segments of recipients, and personalize messages to segments.

    A/B testing:   Campaign optimization tools to test changes to subject lines, images, links, copy and button placement to optimize email campaign performance. Users can run up to six variations simultaneously.

    Email Template Editor:   Enables marketers to design emails, drag and drop email components or existing HTML into the code editors, or write HTML directly, and personalize emails using customer fields to add recipient-specific data.

    Analytics and Reporting:   Our real time analytics provide instant feedback and customizable performance metrics to optimize engagement.

    Expert Services

        Our Expert Services provide customers with a variety of service packages to ensure customers are able to maximize the value of their email programs.

    Expert Managed Services:   Our in-house email experts proactively manage our customers' sender reputations on an ongoing basis by using sophisticated monitoring tools, building custom delivery plans and making recommendations to improve deliverability and email program return on investment.

    One-time Services:   Offerings range from one-time onboarding and email delivery consulting services to custom-designed service packages that include direct access to expert technical support and delivery services team members.

The SendGrid Way

        We create new services and functionality via a process called The SendGrid Way. We engage our customer base to gather extensive feedback on existing services and services in development, as well as to learn about other communications problems our customers need to solve. This iterative process is ideal in providing our development team with listening posts to help guide our development roadmap. Our SendGrid Labs team is focused on future innovation beyond currently offered services.

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Our Technology

        The technology that powers our digital communications platform combines IP and domain knowledge around email delivery, which enables us to deliver email reliably and at scale. Numerous and distinct technologies and processes go into email delivery, and it is our ability to apply these technologies across billions of daily emails and dozens of inbox service providers that truly differentiates our platform. Our technology balances the processes needed to keep bad actors who send harmful or unwanted emails off our platform with enabling reputable senders to deliver wanted mail to recipients. Constantly managing these two objectives, automatically and at scale, ensures a frictionless experience for users.

        We describe our technology differentiation across five areas:

    Ability to Process Email Efficiently

        Using a mechanism in Domain Name Servers, we have designed our mail processors to automatically route mail sent by our customers to our platform to the nearest email processing facility for optimized response times. We lease co-location space from third-party data center providers to maintain email processing facilities in four locations spread across the United States, as well as in Asia, the United Kingdom and Europe.

    Improving Deliverability for Reputable Senders

        Our platform is designed to capture the continuous signal provided by inbox service providers, allowing us to understand their operational responses to our email delivery techniques. Our proprietary technology relies on this continuous feedback mechanism to adjust the timing, speed and volume of email sending to optimize delivery for our customers across inbox service providers. We employ a variety of techniques to preserve the sender reputation of our customers, including warming up new IP addresses, where we systematically increase the volume of email sent from new IP addresses at a measured pace, and exponential-backoff, where we decelerate email sending quickly if the messages being sent are not well received by the target inbox service provider. We also protect our customers from actions that may inadvertently damage their ability to reach their end users. For example, our platform blocks the sending of email to end users who have unsubscribed from an email distribution list. Our Expert Services team also provides customized advice to help businesses improve their sender reputation for better deliverability.

    Keeping Bad Actors Off the System

        We strive to ensure that our platform is used only for sending wanted email. We continuously monitor the behaviors of users to detect unwanted email patterns. Once identified, we can reduce, suspend or eliminate the ability of bad actors to send emails by removing them from our platform. We utilize machine learning to analyze information gathered during the sign-up process and from third parties as well as email content to determine malicious intent. These controls help us to preserve the sender reputations of our customers.

    Market Leading Security Architecture

        We incorporate sophisticated layers of security into our platform. We offer encrypted email to the receiver's inbox through a Transport Layer Security connection. Our services are SOC 2 Type II compliant. Moreover, we have implemented a broad range of advanced security technologies designed to prevent external cyberattacks and keep our internal and customer-facing systems secure.

    Managing Our Services at Scale

        Our technology is designed to capture, process, and react to the unique and continuous signals provided by an array of inbox service providers. We helped create the notion of a transactional email service provider. We built a global, proprietary Message Transfer Agent, which is a set of sophisticated

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software components that manages the distribution and delivery of email to recipients through our co-located email processing facilities. We leverage scalable cloud resources to support continuous sending during high volume periods. We maintain a high level of reliability across our email processing facilities because they operate independently from one another. If we encounter an issue at one email processing facility, we can reroute mail to another to support continuous service for our customers. Our platform also uses fair queuing to optimize the email flow through the system so that an important message such as a password reset email is prioritized over non-critical messages going to millions of recipients.

        We intend to continue to invest in our research and development capabilities. Our research and development expense was $15.3 million, $19.0 million, $21.2 million and $13.7 million for 2014, 2015 and 2016 and for the six months ended June 30, 2017, respectively.

Our Customers

        Our scalable platform helps businesses solve some of their most important digital communications challenges. As of June 30, 2017, we had more than 55,000 customers globally using our services. We believe a relatively small number of businesses have more than one unique paying account with us, and we count each of these accounts as a separate customer. Our customers are comprised of SMBs and large global enterprises. We have a diverse customer base that spans industries. No customer accounted for more than 2% of revenue in any of the last three years.

Customer Case Studies

    DonorsChoose.org

        DonorsChoose.org is an organization realizing efficiencies from replacing an in-house email delivery system with our platform.

         Situation: Founded in April 2000, DonorsChoose.org pioneered crowdfunding to enable teachers to ask for the materials and experiences they need for their students to learn. Email is central to DonorsChoose.org's operations and during the 2016-2017 school year emails sent through our platform helped the online charity raise more than $16 million for classrooms around the country. Beyond revenue, email is key to fostering and nurturing long-term relationships between donors and classrooms. When DonorsChoose.org needed to change datacenters in 2012, the organization also reevaluated its email needs. DonorsChoose.org realized that as the importance of email to its philanthropic mission grew, so did its email sending volume. Further, the technical challenges of managing transactional email in-house had surpassed the expertise of the organization's technical team. To avoid future constraints and a large in-house technical investment, DonorsChoose.org began searching for a platform that was purpose-built to provide email infrastructure and deliverability as a service.

         Solution: After an extensive review of six email service providers, DonorsChoose.org selected us in 2012 as the provider that could easily integrate and scale with the transactional email needs of the organization. DonorsChoose.org has a database of more than 2.1 million opt-in users and sends approximately 2.5 million emails per month (more during the back-to-school and holiday seasons). The organization's promotional transactional email sent through our platform receives high engagement and generated an average monthly open rate above 85% for the six months ended June 30, 2017. The switch to our Email API service not only provided DonorsChoose.org with its desired email delivery capabilities but also freed up valuable time for the organization's engineers and product team who no longer had to maintain a homegrown transactional email delivery solution and troubleshoot issues. They could instead rely on our platform and support team to monitor, diagnose and help fix potential delivery problems.

    Glassdoor

        Glassdoor is a digital-first business that uses our Email API service to effectively reach a broad and diverse set of constituencies.

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         Situation : Founded in 2007 as a ratings and reviews site that focused on giving job seekers insight into what it's like to work at a company, Glassdoor is now known for being the fastest growing and second largest job site in the U.S. and publishing lists such as the Employees' Choice Awards for the Best Places to Work and Highest Rated CEOs. Almost 10 years later, Glassdoor has anonymously gathered approximately 33 million reviews and insights directly from job seekers and employees for more than 700,000 companies around the world. Glassdoor relies on email to engage job seekers and drive job applications, as well as to provide informed candidates to employers on the Glassdoor jobs marketplace. As Glassdoor scaled, it required a flexible and scalable email delivery platform to process rapidly growing email volumes as the company continued to test new ways to engage users and drive business growth.

         Solution : Glassdoor started using our Email API service in 2012 in large part because of its affordable usage-based pricing, responsive customer support and flexible, reliable, and scalable infrastructure. Since implementing our Email API service, Glassdoor has scaled to sending an average of over 260 million emails per month through our platform over the six months ended June 30, 2017. Email is the third largest traffic source to Glassdoor's website, and the company has used our service to manage over 80 different email campaigns targeted at businesses and consumers across 14 countries in four different languages.

    Glö

        Glö is a digital-first SMB that has achieved significant improvement in its business operations as a result of implementation of our platform and use of our Customer Support team.

         Situation : Glö was founded in 2010 to help couples streamline their wedding planning without sacrificing sophistication. Glö provides elegant paperless wedding invitations, save the dates and wedding websites with sophisticated RSVP technology. The success of Glö's business model depends on their paperless invitations reaching the inbox of their users' guests. Glö sends over 18,000 emails each month, but prior to implementing our API service, about 30% of the company's email was routinely being undelivered resulting in numerous customer service calls and complaints from their users. While Glö tried to diagnose and fix the email deliverability issues internally, the company lacked the internal expertise to properly do so. Glö needed a way to ensure that every paperless invite its customers sent to their guest lists got delivered to the inbox, not the spam folder.

         Solution : Glö focused its search for a reliable email delivery service. Glö needed a full-service service that could handle email deployment, manage email deliverability and serve as external experts should delivery failures arise. In 2010, Glö adopted our Email API service and began to utilize our Customer Support team. As a result, from January 1, 2011 through June 30, 2017, Glö's monthly email delivery rate averaged above 97% and customer complaints decreased significantly.

    Gusto

        Gusto is a digital-first, business-to-business company that uses our Email API service for one of its core functions.

         Situation: Founded in 2011, Gusto provides payroll, benefits and HR to small businesses. Gusto has over 40,000 customers and operates in all 50 states. As its business quickly grew, Gusto needed a way to reliably send hundreds of thousands of important emails to its customers' employees being paid through Gusto, such as notifications of pay stub and W-2 availability. As a young startup that had recently graduated from Y Combinator, Gusto planned to launch new HR products in the future, such as worker's comp and health benefits around its flagship payroll product, and was looking for an email partner that could reliably scale as Gusto introduced new products.

         Solution: In 2012, Gusto began using our Email API service to ensure these mission-critical transactional emails were delivered reliably and on time every week. Gusto began by sending fewer than 100,000 emails per month through our platform. As Gusto has continued to grow its customer base, its use

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of our platform has increased significantly, with an average of over 1.0 million emails sent per month through our platform over the six months ended June 30, 2017.

    Spotify

        Spotify is a digital-first business that uses our Email API service to deliver hundreds of millions of emails each month to its users around the world.

         Situation: Spotify is a music, podcast and video streaming service. Spotify provides access to over 30 million songs. As of June 2017, it had over 140 million monthly active users, and as of March 2017, it had over 50 million paying subscribers. Spotify knew their email channel was key to driving revenue and engagement for their application and turned to SendGrid to power a large and fast-growing email program.

         Solution: Spotify became a SendGrid customer in 2011. Spotify uses SendGrid to send transactional emails, such as password resets, along with marketing emails, such as onboarding welcome series and artist promotions. For the six months ended June 30, 2017, Spotify delivered through SendGrid an average of over 300 million emails per month to users in many different countries and languages. The email channel is critical for Spotify, leading to millions of premium subscriptions and free user engagement to the business. Therefore, the high email deliverability Spotify experiences through our platform is a driver of significant revenue for the business.

Marketing and Sales

    Marketing

        We believe the SendGrid name is synonymous with email. We rely on our brand strength and self-service, go-to-market model to acquire customers with little direct sales involvement. Because of our self-service model, we depend on businesses finding us. We invest significantly in our marketing efforts to promote our brand, attract customers and build a community around our platform. We focus our marketing efforts on:

    Self-Service Channel:   We acquire new customers through direct response marketing, such as email marketing, search engine advertising, display advertising, social media advertising and digital sponsorships. These initiatives are designed to attract new customers to our website that will sign up for our service. We run our own demand-side platform, allowing us to directly manage our digital advertising spend and maximize the efficacy of our customer acquisition strategy. We devote significant attention to generating compelling and informative content, including an extensive library of how-to guides, best practices recommendations and comparable benchmarks. Our customer analytics supports all of these efforts, measuring the effectiveness of each component of our self-service strategy.

    Strategic Partner Channel:   We continue to expand our relationships with leading public cloud infrastructure providers, ecommerce platforms, software vendors and digital marketing agencies to acquire new customers.

    Brand Strategy:   Our marketing is focused on both creating awareness of SendGrid across the developer and marketer communities through advertising, content marketing, public relations and events, and driving direct-response conversions via our self-service and partner channels. Our research and insights team continually gathers feedback from our customers to improve our targeting and ultimately the return-on-investment from our marketing activities. We established a customer advisory board to understand the changing needs of customers and to reflect those needs in our development roadmap.

    Community Development:   We attribute much of our early success to our participation in the 2009 Techstars accelerator program. Through our Community Development team, we partner with

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      startup accelerators, such as Techstars, incubators, and others in the startup ecosystem to provide mentorship and other support to emerging digital companies. As of June 30, 2017, more than 550 of our customers have been generated from this effort.

    Sales

        Our inside sales team responds to inbound customer inquiries and pursues targeted outbound prospects. We have a strategic focus on cross-selling our Marketing Campaigns service and Expert Services to our existing customer base. We also have a dedicated customer success team that supports larger-volume accounts and helps them grow and expand.

    Technical Support

        Our platform is designed to be easy to adopt and use with little support. We do provide support for all of our customers through our Customer Support team, which provides 24 × 7 telephonic, email and chat support. Our online support services enable our customers to access documentation and instruction for our services on the Docs section of our website. We offer troubleshooting and how-to tips for all of our services, with links to all our service-specific knowledge bases.

Our Competition

        We provide cloud-based services that enable businesses to reach their customers using email for both transactional and marketing purposes. The market for providing these services is fragmented, with some vendors addressing transactional email services, some vendors addressing email marketing services and other vendors providing a broad array of services that include transactional and marketing services as part of a software suite or broader portfolio of software offerings. Notwithstanding the availability of third-party software services, some businesses rely on internally-developed solutions for their email communications needs. The market for digital communications services is also rapidly evolving, creating opportunity for new competitors to enter the market with point product solutions or addressing specific segments of the market. In addition, in some instances, we have strategic or other commercial relationships with companies with which we also compete, such as Amazon Web Services. Our competitors include:

    Companies that offer transactional email services, including Amazon, Mailgun, Oracle and SparkPost; and

    Companies that offer email marketing services, including Adobe, Campaign Monitor, Endurance, IBM, MailChimp, Oracle, and Salesforce.

        We believe the principal competitive factors include: completeness of offering; credibility with developers and marketers; global reach; ease of adoption; features and functionality; platform scalability, reliability, security and performance; brand awareness and reputation; integration with third-party applications and data sources; customer support; and the total cost of deployment and ownership. We believe that we compete favorably with respect to each of these factors. For additional information, see the section titled "Risk Factors—Risks Related to our Business—The market in which we participate is highly competitive and, if we do not compete effectively, our operating results could be harmed."

Employees

        As of June 30, 2017, we had 384 full-time employees.

Facilities

        Our principal corporate office is in Denver, Colorado, where we occupy approximately 72,000 square feet under a lease that expires in 2024. We also have offices in Redwood City, California, Orange, California, and London, United Kingdom. We also host our platform infrastructure through a combination of leased co-location space at third-party data centers and mail processing facilities in locations spread

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across the United States, as well as in Asia, the United Kingdom and Europe, and public-cloud resources. We believe that our facilities are adequate and suitable for our current needs and that suitable additional space will be available, if needed.

Intellectual Property

        We rely on a combination of intellectual property rights, including patent, trade secret, copyright and trademark protections, as well as customary contractual protections to protect our proprietary technology.

        As of June 30, 2017, in the United States, we had one issued patent, which expires in 2036. We have also registered "SendGrid" as a trademark and our pixel grid design in the United States and various foreign jurisdictions. In addition, we also enter into confidentiality and invention assignment agreements with our employees and contractors and sign confidentiality agreements with third parties. We restrict access to proprietary technology and confidential information through the use of internal controls.

        Despite our efforts to protect our technology and proprietary rights through intellectual property rights and contractual protections, unauthorized parties may still copy or otherwise obtain and use our software and other technology. In addition, we intend to continue to expand our international operations, and effective intellectual property and trade secret protection may not be available or may be limited in foreign countries.

Legal Proceedings

        From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management time and resources and other factors.

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MANAGEMENT

Directors and Executive Officers

        The following table sets forth information concerning our directors and executive officers, including their ages as of October 18, 2017:

Name
  Age   Position(s)

Executive Officers:

         

Sameer Dholakia

    43   President, Chief Executive Officer, Director and Chairman

Yancey Spruill

    50   Chief Financial Officer, Chief Operating Officer and Treasurer

Scott Heimes

    48   Chief Marketing Officer

Pattie Money

    60   Chief People Operations Officer

Stephen Sloan

    44   Chief Product Officer

Leandra Fishman Yanagawa

    45   Senior Vice President of Sales and Customer Success

Craig Kaes

    46   Senior Vice President of Engineering

Michael Tognetti

    44   Senior Vice President, General Counsel and Secretary

Non-Employee Directors:

   
 
 

 

Warren Adelman (1)(3)

    54   Director

Ajay Agarwal (3)

    47   Director

Fred Ball (2)(3) *

    55   Director

Byron B. Deeter (1)(2)

    43   Director

Hilary Schneider (1)(2)

    56   Director

Sri Viswanath (1)(2)

    42   Director

(1)
Member of the compensation committee.

(2)
Member of the nominating and corporate governance committee.

(3)
Member of the audit committee.

*
Lead Independent Director

    Executive Officers

         Sameer Dholakia has served as our Chief Executive Officer and as a member of our board of directors since September 2014. Mr. Dholakia has also served as our Chairman of the Board since September 2017. Prior to joining SendGrid, Mr. Dholakia served at Citrix Systems, Inc., an enterprise software company, as Group Vice President and General Manager of the Cloud Platforms group from 2011 to 2014 and as the Vice President of Marketing from 2010 to 2011. Mr. Dholakia joined Citrix in 2010 following Citrix's acquisition of VMLogix, Inc., a provider of virtualization management software, where he served as Chief Executive Officer from 2007 to 2010. Mr. Dholakia holds a B.A. in Economics and an M.A. in Organizational Studies from Stanford University and an M.B.A. from Harvard Business School. We believe Mr. Dholakia is qualified to serve on our board of directors because of the perspective and experience he brings as our Chief Executive Officer and his extensive experience operating technology companies.

         Yancey Spruill has served as our Chief Financial Officer, Chief Operating Officer and Treasurer since June 2015. Prior to joining SendGrid, Mr. Spruill served as Chief Financial Officer at TwentyEighty, Inc., a provider of training and performance improvement solutions, from 2014 to 2015. From 2004 to 2014, Mr. Spruill served as Executive Vice President and Chief Financial Officer at DigitalGlobe, Inc., a publicly-traded provider of geospatial information products and services. Mr. Spruill also served on the board of directors for Rally Software Development Corp., a formerly publicly-traded provider of agile development software, from 2014 until its acquisition by CA, Inc. in 2015, and has served on the board of directors of

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Allscripts Healthcare Solutions, Inc., a publicly-traded electronic healthcare records technology company, since 2016. Mr. Spruill holds a Bachelor of Electrical Engineering from the Georgia Institute of Technology and an M.B.A. from the Amos Tuck School of Business at Dartmouth College.

         Scott Heimes has served as our Chief Marketing Officer since November 2015. Prior to joining SendGrid, Mr. Heimes served as Chief Marketing Officer at Digital River, Inc., an ecommerce, payments and marketing services provider, from 2012 to 2015. From 2009 to 2012, Mr. Heimes served as Chief Marketing Officer at WebMD Health Corp., a health information provider. Mr. Heimes has also served on the board of directors of Marlin Business Services Corp., a publicly-traded provider of credit products and services to small businesses, since 2015. Mr. Heimes holds a B.A. in English Literature with a minor in French and Business Administration from the University of St. Thomas.

         Pattie Money has served as our Chief People Operations Officer since October 2016. Prior to joining SendGrid, Ms. Money served as Chief People Officer at TubeMogul, Inc., a formerly publicly-traded enterprise advertising software company, from 2015 to 2016. From 2013 to 2015, Ms. Money served as Senior Vice President, Human Resources at Mercury Payment Systems, Inc., an online payment technology company. From 2000 to 2013, Ms. Money was head of Human Resources at Monotype Imaging Incorporated, a provider of type-related products and technologies, including serving as Monotype's Vice President for Human Resources from 2007 to 2013. Ms. Money holds a B.B.A. in Marketing from the University of Memphis and an M.S. in Human Resources Development from Villanova University.

         Stephen Sloan has served as our Chief Product Officer since October 2015. Prior to joining SendGrid, Mr. Sloan served as Senior Vice President, Products and Engineering at Marketo, Inc., a publicly-traded marketing software company, from 2013 to 2015. From 2012 to 2013, Mr. Sloan served as Head of Product, WorkDocs at Amazon Web Services, Inc., a cloud computing company. Mr. Sloan was with Microsoft Corporation from 2005 to 2012, where he served in several product leadership roles, most recently as Director, Product Management for Microsoft Office and Office 365. Mr. Sloan holds a B.A. from the University of California, Berkeley and an M.B.A. from the Kellogg School of Management at Northwestern University.

         Leandra Fishman Yanagawa has served as our Senior Vice President of Sales and Customer Success since August 2016. Prior to joining SendGrid, Ms. Fishman served as an independent executive management consultant for several startup companies from 2011 to 2016. From 2012 to 2014, Ms. Fishman also served as Vice President for Global Corporate Sales at Jive Software, Inc., a formerly publicly-traded provider of communication and collaboration solutions for businesses. From 2010 to 2011, Ms. Fishman served as Vice President for Deal Development and Advisor to Mamapedia, LLC, a social platform for mothers. Ms. Fishman served as Vice President of Sales at VMLogix, Inc., a provider of virtualization management software, from 2008 until its acquisition by Citrix Systems, Inc. in 2010.

         Craig Kaes has served as our Senior Vice President of Engineering since May 2016. From March 2015 to May 2016, Mr. Kaes served as our Vice President of Engineering. Prior to joining SendGrid, Mr. Kaes held several positions with Cisco Systems, Inc., a publicly-traded provider of networking and telephony products and services, including Senior Engineering Director of Mobility from 2013 to 2015, Senior Director of Platform Engineering from 2011 to 2013 and Director of Engineering from 2008 to 2011. From 2000 to 2008, Mr. Kaes held several positions at Jabber, Inc., a presence and messaging software provider, including most recently as Jabber's Vice President of Engineering. Mr. Kaes holds a B.S. in Mathematics and Philosophy from the University of Colorado at Denver, an M.S. in Computer Science from the University of Oregon, and an Executive Certificate in Management and Leadership from the Massachusetts Institute of Technology's Sloan School of Management.

         Michael Tognetti has served as our Senior Vice President and General Counsel since September 2011. Prior to joining SendGrid, Mr. Tognetti served as Senior Vice President and General Counsel at Decisioneering, Inc., a provider of risk analysis and decision-making software, from 2003 to 2007. After Decisioneering was acquired by Hyperion Solutions Corporation, which was subsequently acquired by

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Oracle Corporation, Mr. Tognetti served as a Solution Specialist at Oracle from 2007 to 2011. Mr. Tognetti holds a B.S. in Electrical Engineering from the University of Notre Dame and a J.D. from Harvard Law School.

    Non-Employee Directors

         Warren Adelman has served on our board of directors since April 2014. Mr. Adelman has served as the Managing Director of Nativ Group, a personal investment firm, since 2012. Prior to founding Nativ Group, Mr. Adelman held a variety of positions at GoDaddy Inc., a publicly-traded domain name registrar, from 2003 to 2012, including Vice President for Strategic Development from 2003 to 2004, Chief Operating Officer from 2004 to 2006, President and Chief Operating Officer from 2006 to 2011 and Chief Executive Officer from 2011 to 2012. Mr. Adelman also served as a member of GoDaddy's board of directors from 2006 to 2012. Mr. Adelman holds a B.A. in Political Science and History from the University of Toronto. We believe Mr. Adelman is qualified to serve on our board of directors because of his extensive experience with technology companies as both a director and an executive officer.

         Ajay Agarwal has served on our board of directors since November 2016. Since 2003, Mr. Agarwal has served as a Managing Director at Bain Capital Ventures, a venture capital firm. Prior to joining Bain Capital Ventures, Mr. Agarwal served as head of sales and marketing at Trilogy Inc., an enterprise software company. Mr. Agarwal also serves on the boards of directors of a number of privately-held companies. Mr. Agarwal holds a B.S. in Electrical Engineering from Stanford University and an M.B.A. from Harvard Business School. We believe Mr. Agarwal is qualified to serve on our board of directors because of his extensive experience with technology companies, including as a director and venture capitalist.

         Fred Ball has served on our board of directors since April 2017. Mr. Ball served as Chief Financial Officer, Executive Vice President and Chief Administrative Officer at Marketo, Inc., a formerly publicly-traded marketing software company, from 2011 to 2016. From 2008 to 2011, Mr. Ball served as Chief Financial Officer at Webroot, Inc., a software security solutions provider. From 2004 to 2007, Mr. Ball served as Senior Vice President and Chief Financial Officer at BigBand Networks, Inc., a publicly-traded digital video networking company. Mr. Ball has also served on the board of directors of Advanced Energy Industries Inc., a publicly-traded electronic components manufacturing company, since 2008, and the board of directors of Electro Scientific Industries, Inc., a publicly-traded technology company, since 2003. Mr. Ball also serves on the board of a privately-held company. Mr. Ball holds a B.S. in Accounting from Virginia Polytechnic Institute and State University. We believe Mr. Ball is qualified to serve on our board of directors because of his substantial corporate finance and management experience with technology companies.

         Byron Deeter has served on our board of directors since January 2012. Since 2005, Mr. Deeter has served as a partner of Bessemer Venture Partners, a venture capital firm. From 2004 to 2005, Mr. Deeter served as a business development and marketing development executive at International Business Machines Corporation, a publicly-traded technology and consulting company. From 1999 to 2004, Mr. Deeter served in several roles, including co-founder, President, Chief Executive Officer and Vice President of Business Development, at Trigo Technologies, Inc., a product information management company, which was acquired by IBM in 2004. Since 2010, Mr. Deeter has served on the board of directors of Twilio, Inc., a publicly-traded cloud communications platform company. Mr. Deeter also served on the board of directors of Instructure, Inc., a publicly-traded educational technology company, from 2013 to 2016, the board of directors of Cornerstore OnDemand, Inc., a publicly-traded cloud-based learning and talent management solutions company, from 2007 to 2014, the board of directors of Criteo S.A., a publicly-traded online targeted advertising company, from 2010 to 2014, and the board of directors of Eloqua, Inc., a formerly publicly-traded cloud-based marketing automation company, from 2007 until its acquisition by Oracle in 2013. Mr. Deeter also serves on the boards of directors of a number of privately-held companies. Mr. Deeter holds a B.A. in Political Economy from the University of California,

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Berkeley. We believe Mr. Deeter is qualified to serve on our board of directors because of his extensive experience with technology companies as a director, officer and venture capitalist.

         Hilary Schneider has served on our board of directors since July 2017. Ms. Schneider served as President, Chief Executive Officer and a director of LifeLock, Inc., a formerly publicly-traded provider of identity theft protection, identity risk assessment and fraud protection services, from March 2016 to February 2017. From 2012 to 2016, Ms. Schneider served as the President of LifeLock, Inc. Ms. Schneider served as a director of LogMeIn, Inc., a publicly-traded provider of cloud-based remote connectivity service, from 2011 to 2014. From March 2010 to November 2010, Ms. Schneider served as Executive Vice President at Yahoo! Americas, a global technology company. Ms. Schneider joined Yahoo! in 2006, when she led the company's U.S. region, Global Partner Solutions and Local Markets and Commerce division. Prior to joining Yahoo!, Ms. Schneider held senior leadership roles at Knight Ridder, Inc., a media company, from 2002 to 2005, including serving as Chief Executive Officer of Knight Ridder Digital. From 2000 to 2002, Ms. Schneider served as President and Chief Executive Officer of Red Herring Communications, a media company. Ms. Schneider also serves on the board of directors of several private companies. Ms. Schneider holds a B.A. in Economics from Brown University and an M.B.A. from Harvard Business School. We believe Ms. Schneider is qualified to serve on our board of directors because of her extensive experience with technology companies as both a director and an executive officer.

         Sri Viswanath has served on our board of directors since September 2017. Mr. Viswanath has served as the Chief Technology Officer of Atlassian Corporation PLC, a publicly-traded enterprise software company, since January 2016. From April 2013 to December 2015, Mr. Viswanath served as Chief Technology Officer and Senior Vice President of Product and Engineering at Groupon, Inc., a global local commerce company. From September 2012 to April 2013, Mr. Viswanath was the Vice President of Research and Development for mobile computing at VMware, a provider of cloud and virtualization software and services. From September 2009 to November 2011, Mr. Viswanath served as Senior Vice President of Engineering at Ning, Inc., an online SaaS platform company, which was acquired in November 2011 by Glam Media, a media company, where he was Senior Vice President of Engineering and General Manager of publisher products from November 2011 to August 2012. From 1999 to July 2008, Mr. Viswanath led the development of a number of open-source and business-to-business products at Sun Microsystems. Mr. Viswanath holds an M.S. in computer science from Clemson University and an M.S. in management from Stanford University. We believe Mr. Viswanath is qualified to serve on our board of directors because of his extensive management experience with technology companies.

Classified Board

        Our board of directors will consist of seven members upon completion of this offering. In accordance with our amended and restated certificate of incorporation to be filed in connection with this offering, immediately after this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors will be divided among the three classes as follows:

    The Class I directors will be Fred Ball, Hilary Schneider and Sri Viswanath and their terms will expire at the annual meeting of stockholders to be held in 2018;

    The Class II directors will be Ajay Agarwal and Byron B. Deeter and their terms will expire at the annual meeting of stockholders to be held in 2019; and

    The Class III directors will be Warren Adelman and Sameer Dholakia and their terms will expire at the annual meeting of stockholders to be held in 2020.

        We expect that additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the

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directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Director Independence

        Under the listing requirements and rules of the New York Stock Exchange, independent directors must comprise a majority of our board of directors as a listed company within one year of the closing of this offering.

        Our board of directors has undertaken a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that Mr. Adelman, Mr. Agarwal, Mr. Ball, Mr. Deeter, Ms. Schneider and Mr. Viswanath do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is "independent" as that term is defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the New York Stock Exchange. In making this determination, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Lead Independent Director

        Our corporate governance guidelines and bylaws provide that one of our independent directors shall serve as a lead independent director at any time when an independent director is not serving as the chairman of the board of directors.

Board Committees

        Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

    Audit Committee

        Effective as of the date the registration statement of which this prospectus forms a part is declared effective by the SEC, our audit committee will consist of Mr. Adelman, Mr. Agarwal and Mr. Ball, each of whom our board of directors has determined satisfies the independence requirements under the applicable listing standards and Rule 10A-3(b)(1) of the Securities Exchange Act 1934, as amended, or the Exchange Act. The chair of our audit committee is Mr. Ball, whom our board of directors has determined is an "audit committee financial expert" within the meaning of the SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable listing standards. In arriving at these determinations, the board of directors has examined each audit committee member's scope of experience and the nature of his employment in the corporate finance sector. The functions of this committee include:

    helping our board of directors oversee our corporate accounting and financial reporting processes;

    reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and procedures;

    assisting with design and implementation of our internal audit and risk assessment functions;

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    evaluating the qualifications, performance and independence of our independent registered public accounting firm and deciding whether to retain its services;

    monitoring the rotation of partners of our independent registered public accounting firm on our engagement team as required by law;

    discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end results;

    developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

    reviewing related party transactions;

    obtaining and reviewing a written statement by the independent registered public accounting firm at least annually, that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law;

    approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by an independent registered public accounting firm; and

    reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter.

    Compensation Committee

        Effective as of the date the registration statement of which this prospectus forms a part is declared effective by the SEC, our compensation committee will consist of Mr. Adelman, Mr. Deeter, Ms. Schneider and Mr. Viswanath. Our board of directors has determined that each of Mr. Adelman, Mr. Deeter, Ms. Schneider and Mr. Viswanath is independent under the applicable listing standards, is a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act and is an "outside director" as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, or Section 162(m). Effective as of the date the registration statement of which this prospectus forms a part is declared effective by the SEC, the chair of our compensation committee will be Ms. Schneider. The functions of this committee include:

    reviewing, modifying and overseeing overall compensation strategy and policies;

    reviewing and approving the compensation and other terms of employment of our chief executive officer, other executive officers and senior management, as appropriate;

    reviewing and approving the compensation arrangements with our executive officers and other senior management, as appropriate;

    reviewing and recommending to the full board of directors the compensation of our directors;

    appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and consultants engaged for the purpose of advising the compensation committee;

    adopting and administering equity award plans, compensation plans and similar programs, as well as modification or termination of plans and programs;

    establishing policies with respect to equity compensation arrangements;

    reviewing and evaluating with the chief executive officer the succession plans for our executive officers; and

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    reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its charter.

    Nominating and Corporate Governance Committee

        Effective as of the date the registration statement of which this prospectus forms a part is declared effective by the SEC, our nominating and corporate governance committee consists of Mr. Ball, Mr. Deeter, Ms. Schneider and Mr. Viswanath. Our board of directors has determined that Mr. Ball, Mr. Deeter, Ms. Schneider and Mr. Viswanath are independent under the applicable listing standards. Effective as of the date the registration statement of which this prospectus forms a part is declared effective by the SEC, the chair of our nominating and corporate governance committee will be Mr. Deeter. The functions of this committee include:

    reviewing periodically and evaluating director performance of our board of directors and its applicable committees, and recommending to our board of directors and management areas for improvement;

    identifying, evaluating, nominating and recommending individuals for membership on our board of directors;

    reviewing with our chief executive officer the plans for succession to the offices of our executive officers and make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions;

    reviewing and recommending to our board of directors any amendments to our corporate governance policies; and

    reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee and the adequacy of its charter.

Code of Conduct

        We have adopted a Code of Conduct that applies to all of our employees, officers (including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions), agents and representatives, including directors and consultants. The full text of our Code of Conduct will be posted on our website at http://sendgrid.com. We intend to disclose future amendments to certain provisions of our Code of Conduct, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and our directors, on our website identified above.

Compensation Committee Interlocks and Insider Participation

        During fiscal year 2016, our compensation committee consisted of Messrs. Adelman, Deeter and Ryan McIntyre. Mr. McIntyre resigned from our board of directors in October 2017. None of the members of the compensation committee is currently or has been at any time one of our employees. None of our executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

        In August 2016, we and some of our stockholders, including entities affiliated with Messrs. Deeter and McIntyre, entered into stock transfer agreements. Additionally, in August 2017, we and some of our stockholders, including entities affiliated with Mr. McIntyre, entered into a stock transfer agreement and a securities purchase agreement. Additionally, in November 2016, we sold an aggregate of 2,329,072 shares of our Series D convertible preferred stock at a price per share of $14.14029. Entities affiliated with Messrs. Deeter and McIntyre participated in this equity financing. Concurrently with the November 2016

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financing, we amended and restated certain agreements among us and our stockholders, including such entities affiliated with Messrs. Deeter and McIntyre. See the sections titled "Certain Relationships and Related Party Transactions—Stock Transfers," "Certain Relationships and Related Party Transactions—Equity Financings," "Certain Relationships and Related Party Transactions—Registration Rights Agreement" and "Certain Relationships and Related Party Transactions—Shareholders Agreement" for a description of these transactions.

Non-Employee Director Compensation

    Cash Compensation

        No cash compensation was paid to our non-employee directors in 2016. Although we do not have a written policy, we generally reimburse our directors for their reasonable out-of-pocket expenses incurred in attending board of directors and committee meetings. Mr. Dholakia, our chief executive officer, is also a director but does not receive any additional compensation for his service as a director. Mr. Dholakia's compensation as an executive officer is set forth below under "Executive Compensation—Summary Compensation Table." Mr. Saldana, our co-founder and Senior Software Engineer, was a director during 2016 but did not receive any additional compensation for his service as a director in 2016.

    Equity Incentive Compensation

        Nathaniel Steven Lucas resigned from our board of directors in November 2016. As of December 31, 2016, Mr. Lucas held an option to purchase 63,675 shares of our common stock and Warren Adelman held an option to purchase 101,880 shares of our common stock, each at an exercise price of $1.50 per share. None of our other non-employee directors held any options or other stock awards as of December 31, 2016.

        Fred Ball joined our board of directors in April 2017 and received an option to purchase 30,000 shares of our common stock at an exercise price of $5.48 per share. Hilary Schneider joined our board of directors in July 2017 and received an option to purchase 30,000 shares of our common stock at an exercise price of $12.00 per share. Sri Viswanath joined our board of directors in September 2017 and received an option to purchase 30,000 shares of our common stock at an exercise price of $12.72 per share.

    Future Director Compensation

        After the completion of this offering, we expect to implement a formal policy pursuant to which our non-employee directors will be eligible to receive compensation for service on our board of directors and committees of our board of directors.

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EXECUTIVE COMPENSATION

        Our named executive officers for 2016, which consist of our principal executive officer, our chief financial and operating officer, and our next two most highly compensated executive officers, are:

    Sameer Dholakia, President and Chief Executive Officer;

    Yancey Spruill, Chief Financial Officer, Chief Operating Officer and Treasurer;

    Leandra Fishman Yanagawa, Senior VP of Sales and Customer Success; and

    Pattie Money, Chief People Operations Officer.

2016 Summary Compensation Table

        The following table sets forth all of the compensation awarded to, earned by or paid to our named executive officers during 2016.

Name and Principal Position
  Salary
($)
  Option
Awards
($) (1)
  Non-Equity
Incentive Plan
Compensation
($) (2)
  All Other
Compensation
($) (3)
  Total
($)
 

Sameer Dholakia

    350,024         200,000     15,677     565,701  

President and Chief Executive Officer

                               

Yancey Spruill

   
300,000
   
   
148,500
   
15,920
   
464,420
 

Chief Financial Officer, Chief

                               

Operating Officer and Treasurer

                               

Leandra Fishman Yanagawa

   
85,240
   
595,698
   
37,500
   
81,525
   
807,229
 

Senior VP of Sales and Customer Success

                               

Pattie Money

   
58,750
   
420,005
   
20,000
   
38,403
   
542,530
 

Chief People Operations Officer

                               

(1)
The amounts reflect the full grant date fair value for awards granted during 2016. The grant date fair value was computed in accordance with ASC Topic 718, Compensation—Stock Compensation . Unlike the calculations contained in our financial statements, this calculation does not give effect to any estimate of forfeitures related to service-based vesting, but assumes that the executive will perform the requisite service for the award to vest in full. The assumptions we used in valuing options are described in note 11 to our financial statements included in this prospectus.

(2)
The amounts represent the accumulated discretionary bonus payouts paid for performance during 2016 pursuant to the 2016 VP Bonus Plan, as discussed further below in the section titled "—Bonus Compensation."

(3)
Amounts in this column include payments for annual employee benefits and individual perquisites.

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Outstanding Equity Awards at End of 2016

        The following table provides information about outstanding equity awards held by each of our named executive officers at December 31, 2016.

 
   
  Option Awards   Stock Awards  
 
   
   
   
   
   
   
  Market or
Payout
Value of
Unearned Shares,
Units or
Other Rights
That Have
Not Vested (2)
 
 
   
   
   
   
   
  Number of
Unearned
Shares,
Units or
other Rights
That Have
Not Vested
 
 
   
  Number of Securities
Underlying Unexercised
Options
   
   
 
 
  Grant
Date (1)
  Exercise
Price
  Expiration
Date
 
Name
  Exercisable   Unexercisable  

Sameer Dholakia

    10/20/2014 (3)   781,467     607,808   $ 1.83     10/19/2024              

    10/20/2014 (4)                     10/19/2024     617,455        

Yancey Spruill

    06/26/2015 (5)   216,322     360,539   $ 2.18     06/25/2025              

Leandra Fishman Yanagawa

    08/16/2016 (6)   0     316,847   $ 4.24     08/15/2026              

Pattie Money

    11/01/16 (7)   0     223,380   $ 4.24     10/31/2026              

(1)
All of the outstanding equity awards were granted under our 2012 Plan and are subject to acceleration of vesting as described in "—Employment, Severance, and Change in Control Agreements" below.

(2)
The market price for our common stock is based on the assumed initial public offering price of $            per share, the midpoint of the estimated price range set forth on the cover page of this prospectus.

(3)
1/48th of the shares subject to the option vest monthly measured from September 29, 2014. The unvested shares subject to the option are subject to accelerated vesting as described in the section titled "Employment, Severance and Change in Control Agreements."

(4)
Mr. Dholakia holds RSUs that only vest and settle on the satisfaction of both (i) a time-based condition and (ii) an event-based vesting condition. The event-based condition will be satisfied the earlier of (a) a separation from service (as defined in our 2012 Plan), (b) the closing of a change in control (as defined in our 2012 Plan), and (c) the date six months after the effective date of the registration statement of which this prospectus is a part. Accordingly, it is expected that Mr. Dholakia's RSUs will vest six months after our initial public offering. The time-based condition was satisfied for 437,363 shares of common stock underlying the RSUs on July 31, 2017. The time-based condition for the remaining shares of common stock underlying the RSUs will be satisfied in equal monthly installments ending on August 29, 2018.

(5)
1/4th of the shares subject to the option vested on June 24, 2016. 1/48th of the shares subject to the option vest monthly measured from June 24, 2016. The unvested shares subject to the option are subject to accelerated vesting as described in the section titled "—Employment, Severance and Change in Control Agreements."

(6)
1/4th of the shares subject to the option will vest on August 15, 2017 and 1/48th will vest monthly thereafter. The unvested shares subject to the option are subject to accelerated vesting as described in the section titled "—Employment, Severance and Change in Control Agreements."

(7)
1/4th of the shares subject to the option will vest on October 3, 2017 and 1/48th will vest monthly thereafter. The unvested shares subject to the option are subject to accelerated vesting as described in the section titled "—Employment, Severance and Change in Control Agreements."

Bonus Compensation

        Our executive officers, including our named executive officers, received performance-based bonuses pursuant to SendGrid, Inc. 2016 VP Bonus Plan, or 2016 Bonus Plan, as adopted by the board. Our 2016 Bonus Plan allows the board to provide cash incentive awards to selected employees, including our named executive officers, based upon individual performance goals and corporate performance goals approved by the board.

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        Under our 2016 Bonus Plan, each participant had an opportunity to earn an annual target bonus based on achievement of the individual performance goals and our achievement of the corporate goals. The relative weight between these two goals was 20% for individual performance, although the board had discretion to exceed 20% in the case of exceptional achievement, and 80% for corporate performance. The individual performance achievement was measured by demonstrable activity of competencies and responsibilities with the payout for such individual performance scalable based on achievement. The corporate performance was based on the following metrics: customer satisfaction, employee engagement, innovation, revenue growth and profitability. The minimum level of achievement for each corporate component was 80%, which corresponds to a 80% payout for that component. The payout for the corporate achievement was also scaled. If achievement for a corporate component was 120% or greater, the corresponding payout for that component was capped at 120%.

        In February 2017, our compensation committee adopted our SendGrid, Inc. 2017 Senior Executive Cash Incentive Bonus Plan, or 2017 Bonus Plan. Under our 2017 Bonus Plan, the board of directors determined the individual and corporate performance goals applicable to any award for 2017. Each eligible participant has an opportunity to earn an annual payment based on achievement of these individual and corporate performance goals. For 2017, the performance goals are based on the following metrics: individual performance, customer satisfaction, employee engagement, innovation, and revenue growth and profitability. The minimum level of achievement for each component will be 80%, which corresponds to a 80% payout for that component. The payout is scaled for achievement at or above 80%. If achievement for a component is 100%, then the corresponding payout for that component will be 100%. For any achievement beyond 100%, the corresponding payment is subject to accelerators, provided that the corresponding payout for individual, revenue growth and profitability and innovation are capped at 140%, 140% and 160%, respectively.

Employment, Severance and Change in Control Agreements

    Offer Letters

        We have offer letters with each of our executive officers. The offer letters generally provide for at-will employment and set forth the executive officer's initial base salary, eligibility for employee benefits, and confirmation of the terms of previously issued equity grants, including in some cases severance benefits on a qualifying termination of employment. In addition, each of our executive officers has executed our standard proprietary information and inventions agreement. The key terms of employment with our named executive officers are described below.

    Sameer Dholakia

        We entered into an offer letter with Mr. Dholakia, our President and Chief Executive Officer, on August 28, 2014. Pursuant to the offer letter, Mr. Dholakia's initial base salary was established at $350,000 per year. In addition, Mr. Dholakia was initially eligible to receive an annual cash bonus of up to $150,000 based on achievement of mutually agreed upon objectives. As of July 2017, Mr. Dholakia is eligible to receive an annual cash bonus target equal to 65% of his base salary pursuant to our 2017 Bonus Plan.

        On October 20, 2014, in accordance with the terms of his offer letter, Mr. Dholakia was granted a stock option to purchase 1,389,275 shares of our common stock at an exercise price of $1.83 per share. 1/48th of the shares subject to this option vested or, subject to Mr. Dholakia's continued service, will vest ratably each month on the monthly anniversary measured from September 29, 2014.

        Additionally, on October 20, 2014, in accordance with the terms of his offer letter, Mr. Dholakia was granted 617,455 RSUs. The RSUs only vest and settle on the satisfaction of both (i) a time-based condition and (ii) an event-based vesting condition. The event-based condition will be satisfied the earlier of (a) a separation from service (as defined in our 2012 Plan), (b) the closing of a change in control (as defined in our 2012 Plan), and (c) the date six months after the effective date of the registration statement of which

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this prospectus is a part. Accordingly, it is expected that the event-based condition will be satisfied with respect to Mr. Dholakia's RSUs six months after our initial public offering. The time-based condition for the shares of common stock underlying the RSUs was satisfied or will be satisfied with respect to 1/48th of the shares underlying the RSUs ratably each month on the monthly anniversary measured from September 29, 2014.

        If Mr. Dholakia's employment is terminated without cause (as defined in the offer letter) or he terminates his employment for good reason (as defined in the offer letter), 173,659 shares subject to his option grant and 77,181 shares underlying RSUs (or, if there are fewer than 173,659 shares subject to the option then unvested, all then unvested shares and/or if there are fewer than 77,181 shares underlying RSUs subject to the service-based condition, all remaining shares underlying RSUs still subject to the service-based condition) will vest in full and the service-based condition will be satisfied, respectively, as of his termination date and he will receive six months of his then-current base cash compensation and continued health care benefits.

        Additionally, in the event of a change of control (as defined in the offer letter), 25% of the then unvested shares subject to the option and underlying RSUs will vest and the remaining unvested shares subject to the option and underlying RSUs will vest in an even linear monthly fashion over the subsequent year following the change of control. If Mr. Dholakia is terminated without cause or terminates his employment for good reason in connection with a change of control, then 100% of the unvested shares subject to the option and underlying RSUs will immediately accelerate and vest in full.

        In July 2017, Mr. Dholakia was granted a stock option to purchase 448,144 shares of our common stock at an exercise price of $12.00 per share. 1/40th of the shares subject to the option will vest monthly beginning on October 1, 2018.

        Mr. Dholakia is also a participant in our Executive Severance Benefit Plan, as described further below under "—Executive Severance Benefit Plan."

    Yancey Spruill

        We entered into an offer letter with Mr. Spruill, our Chief Financial Officer, Chief Operating Officer and Treasurer, on April 17, 2015. Pursuant to the offer letter, Mr. Spruill's initial base salary was established at $300,000 per year. As of July 2017, Mr. Spruill's annual base salary was increased to $315,000 and Mr. Spruill is eligible to receive an annual cash bonus of up to 50% of his base salary pursuant to our 2017 Bonus Plan. On June 26, 2015, in accordance with the terms of the offer letter, Mr. Spruill was granted an option to purchase 576,861 shares of our common stock at an exercise price of $2.18 per share. 1/4th of the shares subject to this option vested on June 24, 2016, and 1/48th of the shares subject to the option will vest each monthly anniversary ratably over the following 36-month period thereafter.

        If Mr. Spruill's employment is terminated without cause (as defined in the offer letter) or he terminates his employment for good reason (as defined in the offer letter), 72,107 shares subject to his option grant (or if there are fewer than 72,107 shares subject to the option then unvested, all then unvested shares) will vest in full as of his termination date.

        Additionally, if within 12 months following a change in control (as defined in the offer letter), Mr. Spruill is terminated without cause (as defined in the offer letter) or terminates his employment for good reason (as defined in the offer letter), the vesting and exercisability of any unvested shares subject to the option will be accelerated and vest in full immediately prior to such termination.

        In July 2017, Mr. Spruill was granted a stock option to purchase 125,000 shares of our common stock at an exercise price of $12.00 per share. 1/19th of the shares subject to the option will vest monthly beginning on July 1, 2019.

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        Mr. Spruill is also a participant in our Executive Severance Benefit Plan, as described further below under "—Executive Severance Benefit Plan."

    Leandra Fishman Yanagawa

        We entered into an offer letter with Ms. Fishman, our Senior Vice President of Sales and Customer Success, on July 18, 2016. Pursuant to the offer letter, Ms. Fishman's initial base salary was established at $225,000 per year. In addition, Ms. Fishman is eligible to earn sales commissions based on her and our performance against annual targets with quarterly objectives, with a target annual commission of $135,000. As of July 2017, Ms. Fishman is also eligible to receive an annual cash bonus target equal to 40% of her base salary pursuant to our 2017 Bonus Plan. On August 16, 2016, in accordance with the terms of the offer letter, Ms. Fishman was granted an option to purchase 316,847 shares of our common stock at an exercise price of $4.24 per share. This option vested with respect to 25% of the shares subject to it on August 15, 2017, and 1/48th of the shares subject to the option will vest on each monthly anniversary ratably over the following 36-month period thereafter.

        If within 12 months following a change in control (as defined in the offer letter), Ms. Fishman is terminated without cause (as defined in the offer letter) or terminates her employment for good reason (as defined in the offer letter), the vesting and exercisability of any unvested shares subject to the option will be accelerated and vest in full immediately prior to such termination.

        In July 2017, Ms. Fishman was granted a stock option to purchase 10,000 shares of our common stock at an exercise price of $12.00 per share. 1/5th of the shares subject to the option will vest monthly beginning on September 1, 2020.

        Ms. Fishman is also a participant in our Executive Severance Benefit Plan, as described further below under "—Executive Severance Benefit Plan."

    Pattie Money

        We entered into an offer letter with Ms. Money, our Chief People Officer, on August 28, 2016. Pursuant to the offer letter, Ms. Money's initial base salary was $235,000 per year. On November 1, 2016, in accordance with the terms of the offer letter, Ms. Money was granted an option to purchase 223,380 shares of our common stock at an exercise price of $4.24 per share. This option will vest with respect to 25% of the shares subject to it on October 3, 2017, and 1/48th of the shares subject to the option will vest on each monthly anniversary ratably over the following 36-month period thereafter.

        If within 12 months following a change in control (as defined in the offer letter), Ms. Money is terminated without cause (as defined in the offer letter) or terminates her employment for good reason (as defined in the offer letter), the vesting and exercisability of any unvested shares subject to the option will be accelerated and vest in full immediately prior to such termination.

        In July 2017, Ms. Money was granted a stock option to purchase 10,000 shares of our common stock at an exercise price of $12.00 per share. 1/3rd of the shares subject to the option will vest monthly beginning on November 1, 2020. As of July 2017, Ms. Money is eligible to receive an annual cash bonus target equal to 35% of her base salary pursuant to our 2017 Bonus Plan.

        Ms. Money is also a participant in our Executive Severance Benefit Plan, as described further below under "—Executive Severance Benefit Plan."

Equity Incentive Plans

        The principal features of our equity incentive plans and our 401(k) plan are summarized below. These summaries are qualified in their entirety by reference to the actual text of the plans, which, other than the 401(k) plan, are filed as exhibits to the registration statement of which this prospectus is a part.

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    2017 Equity Incentive Plan

        Our board of directors adopted our 2017 Plan on                        , 2017, and we anticipate that our stockholders will approve our 2017 Plan prior to the completion of this offering. Our 2017 Plan will become effective on the date the registration statement of which this prospectus forms a part is declared effective by the SEC. Our 2017 Plan is the successor to and continuation of our 2012 Equity Incentive Plan, or the 2012 Plan. Once our 2017 Plan becomes effective, no further grants will be made under our 2012 Plan.

        As of                            , 2017, we had reserved                shares of our common stock, or the current share reserve, for issuance under our 2017 Plan.

        Our 2017 Plan provides for the grant of incentive stock options, or ISOs, within the meaning of Section 422 of the Code, to our employees and our parent and subsidiary corporations' employees, and for the grant of nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, and other forms of equity compensation to our employees, directors and consultants. Additionally, our 2017 Plan provides for the grant of performance cash awards to our employees, directors and consultants.

        Authorized Shares.     Upon the date of the underwriting agreement for this offering, the maximum initial number of shares of our common stock that may be issued under our 2017 Plan will not exceed the sum of (i)             shares, (ii) the number of shares reserved for issuance under our 2012 Plan at the time our 2017 Plan becomes effective, (iii) any shares subject to stock options or other stock awards granted under the 2012 Plan that would have otherwise returned to our 2012 Plan (such as upon the expiration or termination of a stock award prior to vesting), and (iv) any shares subject to stock options or other stock awards granted under our 2009 Plan, that would have otherwise returned to our 2012 Plan (such as upon the expiration or termination of a stock award prior to vesting). Additionally, the number of shares of our common stock reserved for issuance under our 2017 Plan will automatically increase on January 1 of each year, beginning on January 1, 2018, and continuing through and including January 1, 2027, by        % of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors. The maximum number of shares that may be issued upon the exercise of ISOs under our 2017 Plan is                .

        Shares issued under our 2017 Plan will be authorized but unissued or reacquired shares of our common stock. Shares subject to stock awards granted under our 2017 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under our 2017 Plan. Additionally, shares issued pursuant to stock awards under our 2017 Plan that we repurchase or that are forfeited, as well as shares used to pay the exercise price of a stock award or to satisfy the tax withholding obligations related to a stock award, will become available for future grant under our 2017 Plan.

        Plan Administration.     Our board of directors, or a duly authorized committee of our board of directors, will administer our 2017 Plan. Our board of directors has delegated concurrent authority to administer our 2017 Plan to our compensation committee under the terms of the compensation committee's charter. Our board of directors may also delegate to one or more of our officers the authority to (i) designate employees (other than officers) to receive specified stock awards, and (ii) determine the number of shares of our common stock to be subject to such stock awards. Subject to the terms of our 2017 Plan, the board of directors has the authority to determine the terms of awards, including recipients, the exercise, purchase or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share of our common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, and the form of consideration, if any, payable upon exercise or settlement of the award and the terms of the award agreements for use under our 2017 Plan.

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        The board of directors has the power to modify outstanding awards under our 2017 Plan. Subject to the terms of our 2017 Plan, the board of directors has the authority, with the consent of any adversely affected participant, to reprice any outstanding option or stock appreciation right, cancel and re-grant any outstanding stock award in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles.

        Section 162(m) Limits.     At such time as necessary for compliance with Section 162(m) of the Code, no participant may be granted stock awards covering more than shares of our common stock under our 2017 Plan during any calendar year pursuant to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise price or strike price of at least 100% of the fair market value of our common stock on the date of grant. Additionally, no participant may be granted in a calendar year a performance stock award covering more than            shares of our common stock or a performance cash award having a maximum value in excess of $10,000,000 under our 2017 Plan. These limitations are designed to allow us to grant compensation that will not be subject to the $1,000,000 annual limitation on the income tax deductibility of compensation paid per covered executive officer imposed by Section 162(m) of the Code.

        Performance Awards.     Our 2017 Plan permits the grant of performance-based stock and cash awards that may qualify as performance-based compensation that is not subject to the $1,000,000 limitation on the income tax deductibility of compensation paid per covered executive officer imposed by Section 162(m) of the Code. Our board of directors can structure such awards so that the stock or cash will be issued or paid pursuant to such award only following the achievement of certain pre-established performance goals during a designated performance period.

        The board of directors and/or our compensation committee may establish performance goals by selecting from one or more of the following performance criteria: (i) earnings (including earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization; (iv) earnings before interest, taxes, depreciation, amortization and legal settlements; (v) earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense); (vi) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense) and stock-based compensation; (vii) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), stock-based compensation and changes in deferred revenue; (viii) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), stock-based compensation, other non-cash expenses and changes in deferred revenue; (ix) total stockholder return; (x) return on equity or average stockholder's equity; (xi) return on assets, investment, or capital employed; (xii) stock price; (xiii) margin (including gross margin); (xiv) income (before or after taxes); (xv) operating income; (xvi) operating income after taxes; (xvii) pre-tax profit; (xviii) operating cash flow; (xix) sales or revenue targets; (xx) increases in revenue or product revenue; (xxi) expenses and cost reduction goals; (xxii) improvement in or attainment of working capital levels; (xxiii) economic value added (or an equivalent metric); (xxiv) market share; (xxv) cash flow; (xxvi) cash flow per share; (xxvii) cash balance; (xxviii) cash burn; (xxix) cash collections; (xxx) share price performance; (xxxi) debt reduction; (xxxii) implementation or completion of projects or processes; (xxxiii) stockholders' equity; (xxxiv) capital expenditures; (xxxv) financings; (xxxvi) operating profit or net operating profit; (xxxvii) workforce diversity; (xxxviii) growth of net income or operating income; (xxxix) employee retention; (xl) initiation of studies by specific dates; (xli) budget management; (xlii) submission to, or approval by, a regulatory body of an applicable filing or a product; (xliii) regulatory milestones; (xliv) progress of internal research or development programs; (xlv) progress of partnered programs; (xlvi) partner satisfaction; (xlvii) milestones related to research development, product development and manufacturing; (xlviii) expansion of sales in additional geographies or markets; (xlix) research progress, including the development of programs; (l) strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property); (li) filing of patent applications and

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granting of patents; and (lii) to the extent that an award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the board of directors.

        Our compensation committee may establish performance goals on a company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise (i) in the award agreement at the time the award is granted or (ii) in such other document setting forth the performance goals at the time the goals are established, our compensation committee will appropriately make adjustments in the method of calculating the attainment of the performance goals as follows: (a) to exclude restructuring and/or other nonrecurring charges; (b) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated Performance Goals; (c) to exclude the effects of changes to generally accepted accounting principles; (d) to exclude the effects of any statutory adjustments to corporate tax rates; and (e) to exclude the effects of any "extraordinary items" as determined under generally accepted accounting principles.

        Corporate Transactions.     Our 2017 Plan provides that in the event of a specified corporate transaction, as defined under our 2017 Plan, each outstanding stock award will be assumed or an equivalent stock award will be substituted by a successor corporation, unless the successor corporation does not agree to assume the stock award or to substitute an equivalent stock award, in which case such stock award will terminate upon the consummation of the transaction.

        Plan Amendment or Termination.     Our board of directors has the authority to amend, suspend or terminate our 2017 Plan, provided that such action does not materially impair the existing rights of any participant without such participant's written consent. No ISOs may be granted after the tenth anniversary of the date our board of directors adopted our 2017 Plan.

    2017 Employee Stock Purchase Plan

        Our board of directors has adopted our 2017 ESPP, on                        , 2017, and we anticipate that our stockholders will approve the 2017 ESPP prior to the completion of this offering. The maximum initial aggregate number of shares of our common stock that may be issued under our 2017 ESPP is            shares. Additionally, the number of shares of our common stock reserved for issuance under our 2017 ESPP will increase automatically each year, beginning on January 1, 2018 and continuing through and including January 1, 2027, by the lesser of (i)         % of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year; (ii)             shares of our common stock; or (iii) such lesser number as determined by our board of directors. Shares subject to purchase rights granted under our 2017 ESPP that terminate without having been exercised in full will not reduce the number of shares available for issuance under our 2017 ESPP.

        Our board of directors, or a duly authorized committee thereof, will administer our 2017 ESPP. Our board of directors has delegated concurrent authority to administer our 2017 ESPP to our compensation committee under the terms of the compensation committee's charter.

        Our employees, including executive officers, or any of our designated affiliates may have to satisfy one or more of the following service requirements before participating in our 2017 ESPP, as determined by the administrator: (i) customary employment with us or one of our affiliates for more than 20 hours per week and more than five months per calendar year, or (ii) continuous employment with us or one of our affiliates for a minimum period of time, not to exceed two years, prior to the first date of an offering. An employee may not be granted rights to purchase stock under our 2017 ESPP if such employee (x) immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of our common stock, or (y) holds rights to purchase stock under our 2017 ESPP that would accrue at a rate that exceeds $25,000 worth of our stock for each calendar year that the rights remain outstanding.

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        Our 2017 ESPP includes both a component that is intended to qualify as an employee stock purchase plan under Section 423 of the Code and a component that is not intended to so qualify. The purposes of the non-423 component of our ESPP is to authorize the grant of purchase rights that do not meet the requirements of an employee stock purchase plan because of deviations necessary or desirable to permit participation in our 2017 ESPP by employees who are foreign nationals or employed outside of the United States, while complying with applicable foreign laws.

        Each offering will have one or more purchase dates on which shares of our common stock will be purchased for the employees who are participating in the offering. The administrator, in its discretion, will determine the terms of offerings under our 2017 ESPP including determining which of our designated affiliates will be eligible to participate in the 423 component of our 2017 ESPP and which of our designated affiliates will be eligible to participate in the non-423 component of our 2017 ESPP.

        Our 2017 ESPP permits participants to purchase shares of our common stock through payroll deductions or other methods, if required by law, with up to 15% of their earnings. The purchase price of the shares will be not less than 85% of the lower of the fair market value of our common stock on the first day of an offering or on the date of purchase.

        A participant may not transfer purchase rights under our 2017 ESPP other than by will, the laws of descent and distribution or as otherwise provided under our 2017 ESPP.

        In the event of a specified corporate transaction, such as our merger or change in control, a successor corporation may assume, continue or substitute each outstanding purchase right. If the successor corporation does not assume, continue or substitute for the outstanding purchase rights, the offering in progress will be shortened and a new exercise date will be set. The participants' purchase rights will be exercised on the new exercised date and such purchase rights will terminate immediately thereafter.

        Our 2017 ESPP will remain in effect until terminated by the administrator in accordance with the terms of the 2017 ESPP. Our board of directors has the authority to amend, suspend or terminate our 2017 ESPP, at any time and for any reason.

    2012 Equity Incentive Plan

        Our board of directors adopted our 2012 Plan in March 2012, and our stockholders approved the 2012 Plan in November 2012. As of June 30, 2017, we had reserved 15,593,718 shares of our common stock for issuance under our 2012 Plan. On July 26, 2017, we increased the number of shares of our common stock reserved for issuance under our 2012 Plan to 16,943,718 shares. As of June 30, 2017, options or rights to purchase 971,219 of these shares had been exercised, options or rights to purchase 10,057,096 of these shares remained outstanding and 1,594,046 of these shares remained available for future grant. The options outstanding as of June 30, 2017, had a weighted-average exercise price of $2.58 per share. Our 2012 Plan allows for the grant of ISOs to our employees, and for the grant of NSOs and stock purchase rights to our employees and consultants. The 2012 Plan will be terminated following the date our 2017 Plan becomes effective. However, any outstanding stock awards under our 2012 Plan will continue to be governed by their existing terms.

        Our board of directors, or a committee thereof appointed by our board of directors, administers our 2012 Plan and the stock awards granted under it. The administrator has the authority to modify outstanding stock awards under our 2012 Plan.

        Our 2012 Plan provides that in the event of certain specified significant corporate transactions, generally including: (1) a sale of all or substantially all of our assets, (2) the sale or disposition of at least 90% of our outstanding securities, (3) the consummation of a merger or consolidation where we do not survive the transaction, and (4) the consummation of a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding before such transaction are converted or exchanged into other property by virtue of the transaction, unless otherwise provided in an award

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agreement or other written agreement between us and the award holder, the administrator may take one or more of the following actions with respect to such stock awards: (1) arrange for the assumption, continuation, or substitution of a stock award by a successor corporation, (2) arrange for the assignment of any reacquisition or repurchase rights held by us to a successor corporation, (3) accelerate the vesting, in whole or in part, of the stock award and provide for its termination before the transaction, (4) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by us, (5) cancel or arrange for the cancellation of the stock award before the transaction in exchange for a cash payment, if any, determined by the board of directors, or (6) make a payment, in the form determined by the board of directors, equal to the excess, if any, of the value of the property the participant would have received on exercise of the stock award before the transaction over any exercise price payable by the participant in connection with the exercise. The plan administrator is not obligated to treat all stock awards, even those that are of the same type, or all participants, in the same manner.

    2009 Equity Incentive Plan

        Our board of directors adopted and our stockholders approved our 2009 Plan in November 2009. The 2009 Plan was terminated upon the effectiveness of the 2012 Plan. However, any outstanding stock awards under our 2009 Plan will continue to be governed by their existing terms. As of June 30, 2017, no shares of our common stock were reserved for issuance under our 2012 Plan. As of June 30, 2017, options or rights to purchase 416,142 shares remained outstanding. The options outstanding as of June 30, 2017, had a weighted-average exercise price of $0.20 per share.

        Our board of directors, or a committee thereof appointed by our board of directors, administers our 2009 Plan and the stock awards granted under it. The administrator has the authority to modify outstanding stock awards under our 2009 Plan.

401(k) Plan

        We maintain a tax-qualified retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees are able to defer eligible compensation subject to applicable annual Code limits. Historically, we have matched a portion of employee contributions and during the years ended December 31, 2015, and 2016, we incurred $1.0 million and $1.3 million, respectively, in expense associated with matching contributions. Employees' pre-tax contributions are allocated to each participant's individual account and are then invested in selected investment alternatives according to the participants' directions. Employees are immediately and fully vested in their contributions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan's related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, pre-tax contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan.

Executive Severance Benefit Plan

        In October 2017, our board of directors adopted an Executive Severance Benefit Plan that provides severance benefits to eligible executive employees selected by our board of directors, including our named executive officers. Following a termination by the company without cause and other than as a result of death or disability, or a termination by the eligible employee for good reason, participants are eligible to receive (1) six months (or in the case of our chief executive officer, twelve months) of base salary continuation or (2) if such qualifying termination occurs within the twelve-month period following a change in control of the beneficial ownership of the Company, twelve months (or in the case of our chief executive officer, eighteen months) of base salary continuation and accelerated vesting of any time based equity awards and the lapse of any equity award reacquisition or repurchase rights. Participants are further eligible to receive a pro-rated portion of their target annual bonus for the calendar year in which the termination occurs and continued health benefits during the applicable severance period. Severance

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benefits under the plan are paid only upon execution of a release of claims following an involuntary termination of employment without cause (other than on account of death or disability) or a resignation by the executive for good reason.

        In addition, any time-based vesting conditions will accelerate and any reacquisition or repurchase rights will lapse if a participant's equity awards are not assumed or continued and would otherwise terminate in connection with a change in control.

Limitations on Liability and Indemnification Matters

        Upon the completion of this offering, our amended and restated certificate of incorporation will contain provisions that allow us to limit the liability of our current and former directors for monetary damages to the fullest extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, except liability for:

    any breach of the director's duty of loyalty to the corporation or its stockholders;

    any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

    unlawful payments of dividends or unlawful stock repurchases or redemptions; or

    any transaction from which the director derived an improper personal benefit.

        Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

        Our amended and restated certificate of incorporation will provide us with the authority to, and our amended and restated bylaws will provide that we are required to, indemnify our directors and executive officers to the fullest extent permitted by Delaware law. Our amended and restated bylaws will also provide that, upon satisfaction of certain conditions, we shall advance expenses incurred by a director or executive officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. Our amended and restated certificate of incorporation and amended and restated bylaws will also provide our board of directors with discretion to indemnify our other officers and employees when determined appropriate by our board of directors. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by the board of directors. With certain exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys' fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors' and officers' liability insurance.

Rule 10b5-1 Sales Plans

        Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them. The director or executive officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with the terms of our insider trading policy. Prior to 180 days after the date of this offering (subject to potential early termination), the

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sale of any shares under such plan would be subject to the lock-up agreement that the director or executive officer has entered into with Morgan Stanley & Co. LLC on behalf of the underwriters.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

        The following is a summary of transactions since January 1, 2014, to which we have been a participant in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than five percent of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements which are described in the section titled "Management—Executive Compensation" and "Management—Non-Employee Director Compensation."

Stock Transfers

    2017 Stock Transfers

        In August 2017, we and some of our holders of our capital stock entered into a stock transfer agreement and a securities purchase agreement pursuant to which the sellers agreed to sell, and the purchasers agreed to purchase, an aggregate of 538,000 shares of our common stock at a purchase price of $12.72 per share. The following table summarizes the purchases of shares of our capital stock by our executive officers, directors and holders of more than 5% of our capital stock:

Stockholder
  Common
(shares)
  Total
Purchase
Price
 

Foundry Group Select Fund, L.P. (1)

    179,333   $ 2,281,116  

Entities affiliated with Bain Capital Ventures (2)

    179,333   $ 2,281,116  

(1)
Foundry Group Select Fund, L.P. is a holder of more than 5% of our capital stock. Ryan McIntyre and Brad Feld, former members of our board of directors, are affiliated with Foundry Group Select Fund, L.P.

(2)
Entities affiliated with Bain Capital Ventures are holders of more than 5% of our capital stock. Ajay Agarwal, a member of our board of directors, is affiliated with Bain Capital Ventures.

    2015 Stock Transfers

        In June 2015, we and some of the holders of our capital stock entered into a stock transfer agreement pursuant to which the sellers agreed to sell, and the purchasers agreed to purchase, an aggregate of 381,831 shares of our common stock and 17,755 shares of our Series A convertible preferred stock at a purchase price of $5.60 per share. The following table summarizes the purchases of shares of our capital stock by our executive officers, directors and holders of more than 5% of our capital stock:

Stockholder
  Common
(shares)
  Series A
(shares)
  Total
Purchase
Price
 

Foundry Group Select Fund, L.P. (1)

    127,277     5,918   $ 745,892  

Entities affiliated with Bessemer Venture Partners (2)

    127,277     5,918   $ 745,892  

(1)
Foundry Group Select Fund, L.P. is a holder of more than 5% of our capital stock. Ryan McIntyre and Brad Feld, former members of our board of directors, are affiliated with Foundry Group Select Fund, L.P.

(2)
Entities affiliated with Bessemer Venture Partners are holders of more than 5% of our capital stock. Byron B. Deeter, a member of our board of directors, is affiliated with Bessemer Venture Partners.

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        In October 2015, we and some of our holders of our capital stock entered into a stock transfer agreement pursuant to which the sellers agreed to sell, and the purchasers agreed to purchase, an aggregate of 49,000 shares of our Series A-1 convertible preferred stock at a purchase price of $4.25 per share. The following table summarizes the purchases of shares of our capital stock by our executive officers, directors and holders of more than 5% of our capital stock:

Stockholder
  Series A-1
(shares)
  Total
Purchase
Price
 

Foundry Group Select Fund, L.P. (1)

    16,333   $ 69,415.25  

Entities affiliated with Bessemer Venture Partners (2)

    16,333   $ 69,415.25  

(1)
Foundry Group Select Fund, L.P. is a holder of more than 5% of our capital stock. Ryan McIntyre and Brad Feld, former members of our board of directors, are affiliated with Foundry Group Select Fund, L.P.

(2)
Entities affiliated with Bessemer Venture Partners are holders of more than 5% of our capital stock. Byron B. Deeter, a member of our board of directors, is affiliated with Bessemer Venture Partners.

Equity Financings

    Sales of Series D Convertible Preferred Stock

        In November 2016, we sold an aggregate of 2,329,072 shares of our Series D convertible preferred stock at a purchase price of $14.14029 per share for an aggregate purchase price of approximately $33.0 million. The following table summarizes purchases of shares of our Series D convertible preferred stock by our executive officers, directors and holders of more than 5% of our capital stock:

Stockholder
  Series D
(shares)
  Total
Purchase
Price
 

Entities affiliated with Bain Capital Ventures (1)

    1,414,398   $ 19,999,998  

Foundry Group Select Fund, L.P. (2)

    490,503   $ 6,935,855  

Entities affiliated with Bessemer Venture Partners (3)

    372,427   $ 5,266,226  

(1)
Entities associated with Bain Capital Ventures hold more than 5% of our capital stock. Ajay Agarwal, a member of our board of directors, is affiliated with Bain Capital Ventures.

(2)
Foundry Group Select Fund, L.P. is a holder of more than 5% of our capital stock. Ryan McIntyre and Brad Feld, former members of our board of directors, are affiliated with Foundry Group Select Fund, L.P.

(3)
Entities associated with Bessemer Venture Partners are holders of more than 5% of our capital stock. Byron B. Deeter, a member of our board of directors, is affiliated with Bessemer Venture Partners.

    Sales of Series C Convertible Preferred Stock

        In November 2014, we sold an aggregate of 3,610,273 shares of our Series C convertible preferred stock at a purchase price of $5.74 per share for an aggregate purchase price of approximately $20.7 million.

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The following table summarizes purchases of shares of our Series C convertible preferred stock by our executive officers, directors and holders of more than 5% of our capital stock:

Stockholder
  Series C
(shares)
  Total
Purchase
Price
 

Foundry Group Select Fund, LP (1)

    1,306,620   $ 7,499,999  

Entities affiliated with Bain Capital Ventures (2)

    871,080   $ 4,999,999  

Entities affiliated with Bessemer Venture Partners (3)

    1,306,620   $ 7,499,999  

(1)
Foundry Group Select Fund, L.P. is a holder of more than 5% of our capital stock. Ryan McIntyre and Brad Feld, former members of our board of directors, are affiliated with Foundry Group Select Fund, L.P.

(2)
Entities associated with Bain Capital Ventures hold more than 5% of our capital stock. Ajay Agarwal, a member of our board of directors, is affiliated with Bain Capital Ventures.

(3)
Entities associated with Bessemer Venture Partners are holders of more than 5% of our capital stock. Byron B. Deeter, a member of our board of directors, is affiliated with Bessemer Venture Partners.

Registration Rights Agreement

        We have entered into an amended and restated registration rights agreement, or the RRA, with certain holders of our convertible preferred stock. The RRA, among other things, grants these stockholders specified registration rights with respect to shares of our common stock, including shares of our common stock issued or issuable upon conversion of the shares of our convertible preferred stock held by them. For more information regarding the registration rights provided in this agreement, please refer to the section titled "Description of Capital Stock—Registration Rights."

Shareholders Agreement

        We have entered into an amended and restated shareholders agreement, or the shareholders agreement, with certain holders of our common stock and convertible preferred stock. The shareholders agreement provides for, among other things, the voting of shares with respect to the constituency of our board of directors and the voting of shares in favor of specified transactions approved by our board of directors and the requisite supermajority of the shares of our voting capital stock held by investors party thereto. The shareholders agreement will terminate upon the completion of this offering and none of our stockholders will have any special rights regarding the election or designation of members of our board of directors.

Indemnification Agreements

        We have entered into an indemnification agreement with each of our directors and executive officers. For more information regarding these agreements, see the section titled "Executive Compensation—Limitations on Liability and Indemnification Matters."

Policy on Future Related Person Transactions

        All future transactions between us and our officers, directors, and their affiliates will be subject to the approval of the board of directors or the audit committee, according to the terms of our Code of Conduct.

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PRINCIPAL STOCKHOLDERS

        The following table sets forth certain information with respect to the beneficial ownership of our common stock as of June 30, 2017, and as adjusted to reflect the sale of our common stock offered in this offering assuming no exercise of the underwriters' over-allotment option, for:

    each of our named executive officers;

    each of our directors;

    all of our directors and executive officers as a group; and

    each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock.

        We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission, or SEC, and therefore it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of June 30, 2017, to be outstanding and to be beneficially owned by the person holding the option for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person.

        We have based percentage ownership of our common stock before this offering on 32,488,855 shares of our common stock outstanding as of June 30, 2017, which includes 24,535,227 shares of our common stock resulting from the automatic conversion of all outstanding shares of our convertible preferred stock immediately prior to closing of this offering, as if this conversion had occurred as of June 30, 2017. Percentage ownership of our common stock after this offering assumes sale of                  shares of our common stock in this offering and no exercise of the underwriters' over-allotment option.

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        Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o SendGrid, Inc., 1801 California Street, Suite 500, Denver, CO 80202.

 
  Shares Beneficially
Owned Prior
to the Offering
  Shares Beneficially
Owned After
the Offering
 
 
  Number   Percentage   Number   Percentage  

Named Executive Officers and Directors:

                         

Sameer Dholakia (1)

    1,013,013     3.12 %                         %

Yancey Spruill (2)

    312,466     *                            

Leandra Fishman Yanagawa (3)

    79,211     *                            

Pattie Money (4)

                     

Byron B. Deeter (6)

    7,311,635     22.51              

Ajay Agarwal (7)

    2,285,478     7.03              

Warren Adelman (9)

    82,777     *              

Fred Ball (10)

        *              

Hilary Schneider (11)

        *              

Sri Viswanath (12)

        *              

All current directors and executive officers as a group (13) (14 persons)

    12,015,713     36.98 %            

5% Stockholders

   
 
   
 
   
 
   
 
 

Entities affiliated with Bain Capital Ventures (7)

    2,285,478     7.03              

Entities affiliated with Bessemer Venture Partners (6)

    7,311,635     22.51              

Entities affiliated with Foundry Group Funds (5)

    9,629,727     29.64              

Entities affiliated with Highway 12 Ventures (8)

    4,515,144     13.90              

Isaac Saldana (14)

    2,235,707     6.88              

*
Represents beneficial ownership of less than 1%.

(1)
Consists of 1,013,013 shares of our common stock issuable upon exercise of outstanding stock options exercisable within 60 days of June 30, 2017.

(2)
Consists of 312,466 shares of our common stock issuable upon exercise of outstanding stock options exercisable within 60 days of June 30, 2017.

(3)
Consists of 79,211 shares of common stock issuable upon exercise of outstanding stock options exercisable within 60 days of June 30, 2017.

(4)
No shares subject to Ms. Money's option will be exercisable within 60 days of June 30, 2017.

(5)
Consists of 6,980,709 shares of our common stock held by Foundry Venture Capital 2007, L.P. ("Foundry 2007") and 2,649,018 shares of our common stock held by Foundry Group Select Fund, L.P. ("Foundry Group Select" and together with Foundry 2007, the "Foundry Group Funds"). Foundry Venture 2007, LLC is the general partner of Foundry 2007 and Foundry Select Fund GP, LLC is the general partner of Foundry Group Select Fund, LP. Seth Levine, Ryan McIntyre, a former member of our board of directors, Jason Mendelson and Brad Feld, a former member of our board of directors, are the managing members of Foundry Group, an affiliate of the Foundry Group Funds and, therefore, may be deemed to share voting and dispositive power over the shares held by the Foundry Group Funds. The address for the Foundry Group Funds is 1050 Walnut Street, Suite 210, Boulder, Colorado 80302. Mr. McIntyre resigned from our board of directors in October 2017.

(6)
Consists of 3,992,151 shares of our common stock held by Bessemer Venture Partners VIII Institutional L.P. ("Bessemer Institutional") and 3,319,484 shares of our common stock held by Bessemer Venture Partners VIII L.P. ("Bessemer VIII" and together with Bessemer Institutional, the

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    "Bessemer Entities"). Deer VIII & Co. L.P. is the general partner of each of the Bessemer Entities, and Deer VIII & Co. Ltd. is the general partner of Deer VIII & Co. L.P. Each of Deer VIII & Co. L.P. and Deer VIII & Co. Ltd. may be deemed to have voting and dispositive power over the shares held by the Bessemer Entities. Robert M. Stavis, J. Edmund Colloton, David J. Cowan, Byron B. Deeter, a member of our board of directors, Robert P. Goodman and Jeremy S. Levine are the directors of Deer VIII & Co. Ltd. Investment and voting decisions with respect to shares held by the Bessemer Entities are made by the directors of Deer VIII & Co. Ltd. acting as an investment committee. The address for the Bessemer Entities is c/o Bessemer Venture Partners, 1865 Palmer Avenue, Suite 104, Larchmont, NY 10538.

(7)
Consists of 2,061,203 shares of our common stock held by Bain Capital Venture Fund 2014, L.P. ("Fund 2014"), 212,774 shares of our common stock held by BCIP Venture Associates ("BCIP"), and 11,501 shares of our common stock held by BCIP Venture Associates-B ("BCIP-B" and together with BCIP and Fund 2014, the "Bain Entities"). Bain Capital Venture Investors, LLC ("BCVI") is the general partner of Bain Capital Venture Partners 2014, L.P. ("BCVP 2014"), which is the general partner of Fund 2014. Boylston Coinvestors, LLC ("Boylston") is the managing partner of BCIP and BCIP-B. The governance, investment strategy and decision-making process with respect to the investments held by the Bain Entities is directed by the Executive Committee of BCVI. The Executive Committee of BCVI consists of Michael A. Krupka and Ajay Agarwal. As a result, BCVI and Messrs. Krupka and Agarwal may be deemed to share voting and dispositive power with respect to the securities held by the Bain Entities. Each of BCVI and Messrs. Krupka and Agarwal disclaim beneficial ownership of such securities except to the extent of its or his pecuniary interest therein. The address for each of BCVI, BCVP 2014, Boylston and the Bain Entities is 200 Clarendon Street, Boston, Massachusetts 02116.

(8)
Consists of 2,401,970 shares of our common stock held by Highway 12 Venture Fund II, L.P. ("Fund II") and 2,113,174 shares of our common stock held by Highway 12 Venture Fund II-B, L.P. ("Fund II-B" and together with Fund II, "Highway 12 Ventures"). Highway 12 Capital Partners II, LLC is the general partner of Fund II and Fund II-B and Highway 12 Ventures II, Inc., is the manager of Highway 12 Capital Partners II, LLC. Mark Solon, a former member of our board of directors, is the managing partner of Highway 12 Ventures II, Inc. and a managing partner of Techstars Ventures. The address for Highway 12 Ventures II, Inc. is Hoff Building, 802 West Bannock, 7th Floor, Boise, ID 83702.

(9)
Consists of 82,777 shares of our common stock issuable upon exercise of outstanding stock options exercisable within 60 days of June 30, 2017.

(10)
No shares subject to Mr. Ball's option will be exercisable within 60 days of June 30, 2017.

(11)
Ms. Schneider was appointed to our board of directors in July 2017. No shares subject to Ms. Schneider's option will be exercisable within 60 days of June 30, 2017.

(12)
Mr. Viswanath was appointed to our board of directors in September 2017.

(13)
Consists of 9,597,113 shares of our common stock and 2,418,600 shares of our common stock issuable upon exercise of outstanding stock options exercisable within 60 days of June 30, 2017.

(14)
Consists of 2,187,500 shares of our common stock held by Mr. Saldana and 48,207 shares of our common stock issuable upon exercise of outstanding stock options exercisable within 60 days of June 30, 2017. Mr. Saldana, our co-founder and Senior Software Engineer, is a former member of our board of directors.

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DESCRIPTION OF CAPITAL STOCK

         The description below of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated bylaws are summaries and are qualified by reference to the amended and restated certificate of incorporation and the amended and restated bylaws to be in effect upon completion of this offering, which are filed as exhibits to the registration statement of which this prospectus is part, and by the applicable provisions of Delaware law.

General

Common Stock

        Upon completion of this offering, our amended and restated certificate of incorporation will authorize us to issue up to 250 million shares of our common stock, $0.001 par value per share, and 10 million shares of preferred stock, $0.001 par value per share.

        As of June 30, 2017, there were 7,953,628 shares of our common stock issued and outstanding, held by 105 stockholders.

        As of June 30, 2017, after giving effect to the conversion of all outstanding shares of our convertible preferred stock into 24,535,227 shares of our common stock, there would have been 32,488,855 shares of our common stock issued and outstanding, held by 123 stockholders.

    Voting Rights

        Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Under our amended and restated certificate of incorporation and amended and restated bylaws, our stockholders will not have cumulative voting rights. Because of this, the holders of a majority of the shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election.

    Dividends

        Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of our common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.

    Liquidation

        In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of our preferred stock.

    Rights and Preferences

        Holders of our common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.

Preferred Stock

        Upon the completion of this offering, our board of directors may, without further action by our stockholders, fix the rights, preferences, privileges and restrictions of up to an aggregate of 10 million shares of preferred stock in one or more series and authorize their issuance. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation

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preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of our common stock. The issuance of our preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deterring or preventing a change of control or other corporate action. Upon the completion of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

Warrants

        As of June 30, 2017, a warrant to purchase 54,269 shares of our Series B convertible preferred stock was outstanding. Upon the completion of this offering, this warrant will become exercisable for 54,269 shares of our common stock at an exercise price of $2.764 per share.

        The warrant has a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of the underlying shares at the time of exercise of the warrant after deduction of a number of shares equal in value to the aggregate exercise price. The warrant contains provisions for the adjustment of the exercise price and the number of shares issuable upon the exercise of the warrant in the event of certain stock dividends, stock splits, reorganizations, reclassifications and consolidations. The holder of the shares issuable upon exercise of the warrant is entitled to piggy-back registration rights with respect to such shares as described in greater detail below in the section titled "—Registration Rights."

Options and Restricted Stock Units

        As of June 30, 2017, under our 2009 Plan, options to purchase an aggregate of 416,142 shares of our common stock were outstanding and no additional shares of our common stock were available for future grant. As of June 30, 2017, under our 2012 Plan, options to purchase an aggregate of 9,635,954 shares of our common stock and RSUs for 617,455 shares of our common stock were outstanding and 1,594,046 additional shares of our common stock were available for future grant. In addition, there was an outstanding non-plan option grant to purchase 5,000 shares of common stock as of June 30, 2017. For additional information regarding the terms of these plans, see the section titled "Management—Employee Benefit Plans."

Registration Rights

        Certain holders of shares of our common stock, including those shares of our common stock that were issued upon conversion of our convertible preferred stock, and the holder of the warrant will be entitled to certain rights with respect to registration of their shares of common stock under the Securities Act. These shares are referred to as registrable securities. The holders of these registrable securities possess registration rights pursuant to the terms of the RRA and the warrant and are described in additional detail below. We, along with entities affiliated with Bain Capital Ventures, Bessemer Venture Partners, Foundry Group Funds and Highway 12 Ventures, as well as other stockholders, are parties to the RRA. We entered into the RRA in connection with the issuance of our Series D convertible preferred stock in November 2016. The following summary discusses certain material provisions of the RRA and is qualified by the full text of the agreement, which is filed as an exhibit to the registration statement of which this prospectus is a part.

        Certain stockholders who are party to the RRA have waived their registration rights and the registration rights of the other stockholders who are party to the RRA, in each case, with respect to this offering.

        The registration of shares of our common stock pursuant to the exercise of registration rights described below would enable the holders to trade these shares without restriction under the Securities Act when the applicable registration statement is declared effective. We will pay the registration expenses

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(other than underwriting discounts, selling commissions and stock transfer taxes) of the shares registered pursuant to the demand, piggyback and Form S-3 registrations described below.

        Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares the holders may include. The demand, piggyback and Form S-3 registration rights described below will expire seven years after the effective date of the registration statement of which this prospectus forms a part.

    Demand Registration Rights

        At any time beginning 180 days following the effective date of the registration statement of which this prospectus is a part, upon the written request of the holders of more than 50% of our registrable securities then outstanding that we file a registration statement under the Securities Act covering at least 60% of the registrable securities then outstanding, or lesser percent if the anticipated aggregate offering price, net of selling expenses, would exceed $10.0 million, we are obligated to register the sale of all registrable securities that the holders may request in writing to be registered. We are required to effect no more than two registration statements that are declared or ordered effective. We may postpone the filing of a registration statement for up to 90 days once in a 12-month period if in the good faith judgment of our board of directors such registration would be materially detrimental to us. An aggregate of 24,471,780 shares of our common stock and 54,269 shares of our common stock issuable upon exercise of the warrant will be entitled to these demand registration rights.

    Piggyback Registration Rights

        If we register any of our securities for public sale, either for our own account or for the account of other security holders, we will also have to register all registrable securities that the holders of such securities request in writing be registered. This piggyback registration right does not apply to a registration relating to any of our stock plans, stock purchase or similar plan or a transaction under Rule 145 of the Securities Act. The managing underwriter of any underwritten offering will have the right to limit the number of shares registered by these holders if the underwriters determine that including all registrable securities will jeopardize the success of the offering. An aggregate of 24,471,780 shares of our common stock and 54,269 shares of our common stock issuable upon the exercise of the warrant will be entitled to these piggyback registration rights.

    Form S-3 Registration Rights

        The holders of our registrable securities can also request that we register all or a portion of their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and the aggregate price to the public of the shares offered is in excess of $1.0 million (net of underwriting discounts and commissions, if any). We are required to effect no more than two Form S-3 registration statements that are declared or ordered effective in any 12-month period. We may postpone the filing of a registration statement for up to 90 days once in a 12-month period if in the good faith judgment of our board of directors such registration would be materially detrimental to us. An aggregate of 24,471,780 shares of our common stock and 54,269 shares of our common stock issuable upon the exercise of the warrant will be entitled to these Form S-3 registration rights.

Anti-Takeover Provisions

    Section 203 of the Delaware General Corporation Law

        We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of

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three years after the date that such stockholder became an interested stockholder, with the following exceptions:

    before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

    upon completion 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 began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

    on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2 / 3 % of the outstanding voting stock that is not owned by the interested stockholder.

        In general, Section 203 defines a "business combination" to include the following:

    any merger or consolidation involving the corporation and the interested stockholder;

    any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;

    subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

    any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or

    the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the corporation.

        In general, Section 203 defines an "interested stockholder" as an entity or person who, together with the person's affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.

        A Delaware corporation may "opt out" of these provisions with an express provision in its original certificate of incorporation or an express provision in its amended and restated certificate of incorporation or amended and restated bylaws resulting from a stockholders' amendment approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of us may be discouraged or prevented.

    Certificate of Incorporation and Bylaws to be in Effect Upon the Completion of this Offering

        Our amended and restated certificate of incorporation to be in effect upon the completion of this offering, or our restated certificate, will provide for our board of directors to be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, stockholders holding a majority of the shares of our common stock outstanding will be able to elect all of our directors. Our restated certificate and our amended and restated bylaws to be effective upon the completion of this offering, or our restated bylaws, will also provide that directors may be removed by the stockholders only for cause upon the vote of 66 2 / 3 % of our outstanding common stock. Furthermore, the authorized number of directors may be

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changed only by resolution of the board of directors, and vacancies and newly created directorships on the board of directors may, except as otherwise required by law or determined by the board, only be filled by a majority vote of the directors then serving on the board, even though less than a quorum.

        Our restated certificate and restated bylaws will also provide that all stockholder actions must be effected at a duly called meeting of stockholders and will eliminate the right of stockholders to act by written consent without a meeting. Our restated bylaws will also provide that only our chairman of the board, chief executive officer or the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors may call a special meeting of stockholders.

        Our restated bylaws will also provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide timely advance notice in writing, and will specify requirements as to the form and content of a stockholder's notice.

        Our restated certificate and restated bylaws will provide that the stockholders cannot amend many of the provisions described above except by a vote of 66 2 / 3 % or more of our outstanding common stock.

        The combination of these provisions will make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could delay or impede the success of any attempt to change our control.

        These provisions are intended to facilitate our continued innovation and the risk-taking that it requires, permit us to continue to prioritize our long-term goals rather than short-term results, enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage certain types of transactions that may involve an acquisition of us. These provisions are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of deterring hostile takeovers or delaying changes in our control or management. As a consequence, these provisions may also inhibit increases in the market price of our stock that could result from actual or rumored takeover attempts.

Choice of Forum

        Our restated certificate will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a breach of fiduciary duty owed by any director, officer or other employee to us or our stockholders; (iii) any action asserting a claim against us or any director or officer or other employee arising pursuant to the Delaware General Corporation Law, our restated certificate or restated bylaws; or (iv) any action asserting a claim against us or any director or officer or other employee that is governed by the internal affairs doctrine. Our restated certificate further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

Listing

        We have applied to list our common stock on the New York Stock Exchange under the trading symbol "SEND."

Transfer Agent and Registrar

        The transfer agent and registrar for our common stock will be Broadridge Corporate Issuer Solutions, Inc. The transfer agent's address is 1717 Arch St., Suite 1300, Philadelphia, Pennsylvania 19103.

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, no public market existed for our common stock. Future sales of shares of our common stock in the public market after this offering, and the availability of shares for future sale, could adversely affect the market price of our common stock prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nonetheless, sales of substantial amounts of our common stock, or the perception that these sales could occur, could adversely affect prevailing market prices for our common stock and could impair our future ability to raise equity capital.

        Based on the number of shares outstanding on June 30, 2017, upon completion of this offering,            shares of common stock will be outstanding, assuming no exercise of the underwriters' over-allotment option, and no exercise of outstanding options or the outstanding warrant. All of the shares of common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act, except for any shares sold to our "affiliates," as that term is defined under Rule 144 under the Securities Act.

        The remaining shares of common stock and common stock underlying outstanding RSUs or subject to stock options will be on issuance "restricted securities," as that term is defined in Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if registered under the Securities Act or if they qualify for exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below. Restricted securities may also be sold outside of the United States to non-U.S. persons in accordance with Rule 904 of Regulation S.

Rule 144

        In general, persons who have beneficially owned restricted shares of our common stock for at least six months, and any affiliate of the company who owns either restricted or unrestricted shares of our common stock, are entitled to sell their securities without registration with the SEC under an exemption from registration provided by Rule 144 under the Securities Act.

        In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned restricted shares of our common stock for at least six months, but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

    1% of the number of shares of our common stock then outstanding, which will equal approximately            shares immediately after the completion of this offering based on the number of shares of common stock outstanding as of June 30, 2017; or

    the average weekly trading volume of our common stock on during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;

provided, in each case that we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

        Substantially all of the restricted shares are subject to lock-up agreements as described below and in the section titled "Underwriters."

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Rule 701

        Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and in the section titled "Underwriters" and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.

Form S-8 Registration Statements

        As soon as practicable after the completion of this offering, we intend to file with the SEC one or more registration statements on Form S-8 under the Securities Act to register the shares of our common stock that are issuable pursuant to our 2009 Plan, 2012 Plan, 2017 Plan and 2017 ESPP. These registration statements will become effective immediately upon filing. Shares covered by these registration statements will then be eligible for sale in the public markets, subject to vesting restrictions, the applicable lock-up agreements described below and Rule 144 limitations applicable to affiliates.

Lock-Up Agreements

        We and all of our directors and officers, as well as the other holders of substantially all of our common stock and securities convertible into or exercisable or exchangeable for our common stock outstanding immediately prior to the completion of this offering, have agreed with Morgan Stanley & Co. LLC on behalf of the underwriters that, for a period of 180 days following the date of this prospectus, subject to certain exceptions, we and they will not, directly or indirectly, dispose of any of our common stock or securities convertible into or exercisable or exchangeable for our common stock, except with the prior written consent of Morgan Stanley & Co. LLC, in its sole discretion, on behalf of the underwriters. See the section titled "Underwriters" for a more complete description of the lock-up agreements with the underwriters.

        In addition to the restrictions contained in the lock-up agreements described above, we have entered into agreements with certain security holders, including our RRA and our standard form of stock purchase agreement under our 2009 Plan and notice of exercise under our 2012 Plan, that contain market stand-off provisions imposing restrictions on the ability of such security holders to offer, sell or transfer our equity securities for a period of 180 days following the date of this prospectus.

Registration Rights

        Upon the completion of this offering, the holders of 24,471,780 shares of our common stock, or their transferees, and the holder of the warrant will be entitled to certain rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. See the section titled "Description of Capital Stock—Registration Rights" for additional information.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR CERTAIN NON-U.S. HOLDERS

        The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the acquisition, ownership and disposition of our common stock issued pursuant to this offering. This discussion is not a complete analysis of all potential U.S. federal income tax consequences relating thereto, does not address the potential application of the Medicare contribution tax on net investment income, and does not address any estate or gift tax consequences or any tax consequences arising under any state, local or foreign tax laws, or any other U.S. federal tax laws. This discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, and applicable Treasury Regulations promulgated thereunder, judicial decisions and published rulings and administrative pronouncements of the Internal Revenue Service, or IRS, all as in effect as of the date hereof. These authorities are subject to differing interpretations and may change, possibly retroactively, resulting in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the IRS with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.

        This discussion is limited to non-U.S. holders who purchase our common stock pursuant to this offering and who hold our common stock as a "capital asset" within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all of the U.S. federal income tax consequences that may be relevant to a particular holder in light of such holder's particular circumstances. This discussion also does not consider any specific facts or circumstances that may be relevant to holders subject to special rules under the U.S. federal income tax laws, including:

    certain former citizens or long-term residents of the United States;

    partnerships or other pass-through entities (and investors therein);

    "controlled foreign corporations";

    "passive foreign investment companies";

    corporations that accumulate earnings to avoid U.S. federal income tax;

    banks, financial institutions, investment funds, insurance companies, brokers, dealers or traders in securities;

    tax-exempt organizations and governmental organizations;

    tax-qualified retirement plans;

    persons subject to the alternative minimum tax;

    persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;

    persons that own, or have owned, actually or constructively, more than 5% of our common stock;

    persons who have elected to mark securities to market; and

    persons holding our common stock as part of a hedging or conversion transaction or straddle, or a constructive sale, or other risk reduction strategy or integrated investment.

        If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships holding our common stock and the partners in such partnerships are urged to consult their tax advisors about the particular U.S. federal income tax consequences to them of holding and disposing of our common stock.

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         THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS AND ANY OTHER U.S. FEDERAL TAX LAWS.

Definition of Non-U.S. Holder

        For purposes of this discussion, a non-U.S. holder is any beneficial owner of our common stock that is not a "U.S. person" or a partnership (including any entity or arrangement treated as a partnership) for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:

    an individual who is a citizen or resident of the United States;

    a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized 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 tax regardless of its source; or

    a trust (1) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (2) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

Distributions on Our Common Stock

        As described under the section titled "Dividend Policy," we have not paid and do not anticipate paying dividends. However, if we make cash or other property distributions on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and will first be applied against and reduce a holder's tax basis in our common stock, but not below zero. Any excess will be treated as gain realized on the sale or other disposition of our common stock and will be treated as described under the section titled "—Gain On Disposition of our Common Stock" below.

        Subject to the discussions below regarding effectively connected income, backup withholding and FATCA, dividends paid to a non-U.S. holder of our common stock generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends or such lower rate specified by an applicable income tax treaty. To receive the benefit of a reduced treaty rate, a non-U.S. holder must furnish us or our paying agent with a valid IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form) including a U.S. taxpayer identification number and certifying such holder's qualification for the reduced rate. This certification must be provided to us or our paying agent before the payment of dividends and must be updated periodically. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the non-U.S. holder's behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to us or our paying agent, either directly or through other intermediaries.

        Non-U.S. holders that do not provide the required certification on a timely basis, but that qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

        If a non-U.S. holder holds our common stock in connection with the conduct of a trade or business in the United States, and dividends paid on our common stock are effectively connected with such holder's U.S. trade or business (and are attributable to such holder's permanent establishment in the United States

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if required by an applicable tax treaty), the non-U.S. holder will be exempt from U.S. federal withholding tax. To claim the exemption, the non-U.S. holder must generally furnish a valid IRS Form W-8ECI (or applicable successor form) to the applicable withholding agent.

        However, any such effectively connected dividends paid on our common stock generally will be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates in the same manner as if such holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

Gain on Disposition of Our Common Stock

        Subject to the discussions below regarding backup withholding and FATCA, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized on the sale or other disposition of our common stock, unless:

    the gain is effectively connected with the non-U.S. holder's conduct of a trade or business in the United States, and if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States;

    the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition, and certain other requirements are met; or

    our common stock constitutes a "United States real property interest" by reason of our status as a United States real property holding corporation, or USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder's holding period for our common stock, and our common stock is not regularly traded on an established securities market during the calendar year in which the sale or other disposition occurs.

        Determining whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our other trade or business assets and our foreign real property interests. We believe that we are not currently and do not anticipate becoming a USRPHC for U.S. federal income tax purposes, although there can be no assurance we will not in the future become a USRPHC.

        Gain described in the first bullet point above generally will be subject to United States federal income tax on a net income basis at the regular graduated U.S. federal income tax rates in the same manner as if such holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Gain described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate (or such lower rate specified by an applicable income tax treaty), but may be offset by certain U.S.-source capital losses (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

        Annual reports are required to be filed with the IRS and provided to each non-U.S. holder indicating the amount of dividends on our common stock paid to such holder and the amount of any tax withheld with respect to those dividends. These information reporting requirements apply even if no withholding was required because the dividends were effectively connected with the holder's conduct of a U.S. trade or business, or withholding was reduced or eliminated by an applicable income tax treaty. This information

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also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established. Backup withholding, currently at a 28% rate, generally will not apply to payments to a non-U.S. holder of dividends on or the gross proceeds of a disposition of our common stock provided the non-U.S. holder furnishes the required certification for its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, or certain other requirements are met. Backup withholding may apply if the payor has actual knowledge, or reason to know, that the holder is a U.S. person who is not an exempt recipient.

        Backup withholding is not an additional tax. If any amount is withheld under the backup withholding rules, the non-U.S. holder should consult with a U.S. tax advisor regarding the possibility of and procedure for obtaining a refund or a credit against the non-U.S. holder's U.S. federal income tax liability, if any.

Withholding on Foreign Entities

        Sections 1471 through 1474 of the Code (commonly referred to as FATCA) impose a U.S. federal withholding tax of 30% on certain payments made to a "foreign financial institution" (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally will impose a U.S. federal withholding tax of 30% on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. FATCA currently applies to dividends paid on our common stock. FATCA will also apply to gross proceeds from sales or other dispositions of our common stock after December 31, 2018.

        Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in our common stock.

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UNDERWRITERS

        Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares of common stock indicated below:

Name
  Number of
Shares
 

Morgan Stanley & Co. LLC

                  

J.P. Morgan Securities LLC

                  

William Blair & Company, L.L.C. 

                  

KeyBanc Capital Markets Inc. 

                  

Piper Jaffray & Co. 

                  

Stifel, Nicolaus & Company, Incorporated

                  

Total:

                  

        The underwriters and the representatives are collectively referred to as the "underwriters" and the "representatives," respectively. The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters' over-allotment option described below.

        The underwriters initially propose to offer part of the shares of common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $            a share under the public offering price. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives. Sales of common stock made outside of the United States may be made by affiliates of the underwriters.

        We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to                    additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter's name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table.

        The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us. These amounts are shown assuming both no exercise

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and full exercise of the underwriters' option to purchase up to an additional                    shares of common stock.

 
   
  Total  
 
  Per
Share
  No
Exercise
  Full
Exercise
 

Public offering price

  $            $            $           

Underwriting discounts and commissions to be paid by us

  $            $            $           

Proceeds, before expenses, to us

  $            $            $           

        The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $            . We have agreed to reimburse the underwriters for their expenses of up to $40,000 related to the clearance of this offering with the Financial Industry Regulatory Authority, Inc. and compliance with state securities or "blue sky" laws.

        The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of common stock offered by them.

        We have applied to apply to list our common stock on the New York Stock Exchange under the trading symbol "SEND."

        We and all directors and officers and the holders of all of our outstanding stock and stock options have agreed that, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus (the "restricted period"):

    offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock;

    file any registration statement with the Securities and Exchange Commission relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or

    enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock.

whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. In addition, we and each such person agrees that, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock.

        The restrictions in the immediately preceding paragraph do not apply to our directors, officers or holders of our outstanding common stock or other securities in certain circumstances, including the (i) sale of our common stock acquired in this offering; (ii) transfers of our common stock as bona fide gifts, by will, to an immediate family member or to certain trusts; (iii) distributions of our common stock to the stockholders, partners or members of such holders; (iv) transfers of our common stock to us for the net exercise of options granted pursuant to our equity incentive plans or to cover tax withholding for grants pursuant to our equity incentive plans; (v) the establishment by such holders of trading plans under Rule 10b5-1 under the Exchange Act; (vi) transfers of our common stock pursuant to a domestic order, divorce settlement or other court order; (vii) transfers of our common stock to us pursuant to any right to repurchase or any right of first refusal we may have over such shares; (viii) conversion of our outstanding convertible preferred stock into common stock in connection with the closing of this offering; (ix) sale of

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our common stock to the underwriters pursuant to the underwriting agreement; and (x) transfers of our common stock pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by our board of directors. The restrictions also do not apply to us in certain circumstances, including in connection with our issuance of up to 10% of our outstanding shares of common stock immediately following the closing of this offering in acquisitions or other similar strategic transactions. Certain of these exceptions are subject to a requirement that the transferee enter into a lock-up agreement with the underwriters containing similar restrictions.

        Morgan Stanley & Co. LLC, in its sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time.

        In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, shares of common stock in the open market to stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.

        We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

        A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.

Other Relationships

        The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

        In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations

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or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.

Pricing of the Offering

        Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives. Among the factors to be considered in determining the initial public offering price will be our future prospects and those of our industry in general, our results of operations and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.

Selling Restrictions

    European Economic Area

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), an offer to the public of any shares of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

    (i)
    to any legal entity which is a qualified investor as defined in the Prospectus Directive;

    (ii)
    to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

    (iii)
    in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares of our common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

        For the purposes of this provision, the expression an "offer to the public" in relation to any shares of our common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our common stock to be offered so as to enable an investor to decide to purchase any shares of our common stock. As the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

    United Kingdom

        Each underwriter has represented and agreed that:

    (a)
    it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or FSMA) received by it in connection with the issue or sale of the shares of our common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and

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    (b)
    it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our common stock in, from or otherwise involving the United Kingdom.

    Hong Kong

        The shares of our common stock have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares of our common stock has been or may be issued or has been or may be in the possession of any person for the purposes of issuance, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of our common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

    Singapore

        This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares of our common stock may not be circulated or distributed, nor may the shares of our common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

        Where the shares of our common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

    (a)
    a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

    (b)
    a trust (where the trustee is not an accredited investor) the sole purpose of which is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares of our common stock pursuant to an offer made under Section 275 of the SFA except:

    (a)
    to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

    (b)
    where no consideration is or will be given for the transfer;

    (c)
    where the transfer is by operation of law;

    (d)
    as specified in Section 276(7) of the SFA; or

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    (e)
    as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

    Japan

        No registration pursuant to Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended), or the FIEL, has been made or will be made with respect to the solicitation of the application for the acquisition of the shares of our common stock.

        Accordingly, the shares of our common stock have not been, directly or indirectly, offered or sold and will not be, directly or indirectly, offered or sold in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale,directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements, and otherwise in compliance with, the FIEL and the other applicable laws and regulations of Japan.

    For Qualified Institutional Investors, or QII

        Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the shares of our common stock constitutes either a "QII only private placement" or a "QII only secondary distribution" (each as described in Paragraph 1, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the shares of our common stock. The shares of our common stock may only be transferred to QIIs.

    For Non-QII Investors

        Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the shares of our common stock constitutes either a "small number private placement" or a "small number private secondary distribution" (each as is described in Paragraph 4, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the shares of our common stock. The shares of our common stock may only be transferred en bloc without subdivision to a single investor.

    Australia

        No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or ASIC, in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

        Any offer in Australia of the shares may only be made to persons, or the Exempt Investors, who are "sophisticated investors" (within the meaning of section 708(8) of the Corporations Act), "professional investors" (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.

        The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an

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exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.

        This prospectus contains general information only and does not take into account the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate for their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

    Dubai International Financial Centre

        This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

    Switzerland

        The shares of our common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland. Neither this document nor any other offering or marketing material relating to the offering, us or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

    Canada

        The shares of our common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations . Any resale of the shares of our common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

        Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The

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purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.

        Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts ( NI 33-105 ), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

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LEGAL MATTERS

        The validity of the shares of common stock offered hereby will be passed upon for us by Cooley LLP, Broomfield, Colorado. As of the date of this prospectus, GC&H Investments, LLC, an entity that is comprised of partners and associates of Cooley LLP, beneficially owns 8,710 shares of our convertible preferred stock, which shares of preferred stock will be converted into 8,710 shares of common stock upon the closing of this offering. Davis Polk & Wardwell LLP, Menlo Park, California, is representing the underwriters.


EXPERTS

        The consolidated financial statements of SendGrid, Inc. as of December 31, 2015 and 2016, and for each of the years in the three-year period ended December 31, 2016, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.


WHERE YOU CAN FIND ADDITIONAL INFORMATION

        We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information in the registration statement and its exhibits. For further information with respect to our company and the common stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

        You can read our SEC filings, including the registration statement, over the internet at the SEC's website at http://www.sec.gov . You may also read and copy any document we file with the SEC at its public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

        Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act, and we will file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above. We also maintain a website at http://sendgrid.com , at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of, and is not incorporated into, this prospectus.

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INDEX TO FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
SendGrid, Inc.:

        We have audited the accompanying consolidated balance sheets of SendGrid, Inc. and subsidiaries (the company) as of December 31, 2015 and 2016, and the related consolidated statements of operations, comprehensive loss, cash flows, and stockholders' equity (deficit) for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SendGrid, Inc. and subsidiaries as of December 31, 2015 and 2016, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Denver, Colorado

August 18, 2017

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SENDGRID, INC.

Consolidated Statements of Operations

(In thousands, except per share amounts)

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended December 31,  
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  

Revenue

  $ 42,776   $ 58,476   $ 79,929   $ 36,157   $ 51,843  

Cost of revenue

    15,187     18,961     21,605     10,603     13,745  

Gross profit

    27,589     39,515     58,324     25,554     38,098  

Operating expenses:

                               

Research and development

    15,290     18,959     21,178     10,343     13,663  

Selling and marketing

    15,260     13,737     21,800     9,954     13,458  

General and administrative

    9,550     12,477     18,920     8,499     13,538  

Loss on disposal of assets

    63     1     27     27     2  

Total operating expenses

    40,163     45,174     61,925     28,823     40,661  

Loss from operations

    (12,574 )   (5,659 )   (3,601 )   (3,269 )   (2,563 )

Other income (expense):

                               

Interest expense

    (305 )   (165 )   (195 )   (92 )   (69 )

Adjustment to redeemable preferred stock warrant liability

    (76 )   (19 )   (86 )   (102 )   (518 )

Other

    (5 )   (11 )   (26 )   (18 )   16  

Other income (expense)

    (386 )   (195 )   (307 )   (212 )   (571 )

Net loss before provision for income taxes

    (12,960 )   (5,854 )   (3,908 )   (3,481 )   (3,134 )

Provision for income taxes

                     

Net loss

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

Weighted average shares used in computing net loss per share attributable to common stockholders

    5,194     7,091     7,521     7,476     7,896  

Net loss per share attributable to common stockholders

  $ (2.50 ) $ (0.83 ) $ (0.52 ) $ (0.47 ) $ (0.40 )

Pro forma weighted average shares outstanding (unaudited)

                29,921           32,431  

Pro forma net loss per share (unaudited)

              $ (0.13 )       $ (0.08 )

   

The accompanying notes are an integral part of these consolidated financial statements

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SENDGRID, INC.

Consolidated Statements of Comprehensive Loss

(In thousands)

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended
December 31,
 
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  

Net loss

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

Other comprehensive Income (loss), net of tax:

                               

Foreign currency translation adjustments

        (2 )   (4 )       1  

Comprehensive loss

  $ (12,960 ) $ (5,856 ) $ (3,912 ) $ (3,481 ) $ (3,133 )

   

The accompanying notes are an integral part of these consolidated financial statements

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SENDGRID, INC.

Consolidated Balance Sheets

(In thousands, except share amounts)

 
  As of
December 31,
   
  Pro Forma
June 30,
2017
(unaudited)
Note 2
 
 
  As of
June 30,
2017
(unaudited)
 
 
  2015   2016  

Assets

                         

Current assets:

                         

Cash

  $ 9,269   $ 40,400   $ 37,625   $ 37,625  

Restricted cash equivalents

    411     78          

Accounts receivable, net of allowance of $15, $34, and $30, respectively

    2,629     4,119     4,684     4,684  

Prepaid expenses and other current assets

    1,653     2,603     3,044     3,044  

Total current assets

    13,962     47,200     45,353     45,353  

Property and equipment, net

    10,413     19,190     24,924     24,924  

Intangible assets, net

    28     11     1,135     1,135  

Other assets

    273     234     336     336  

Goodwill

            1,646     1,646  

Total assets

  $ 24,676   $ 66,635   $ 73,394   $ 73,394  

Liabilities, Redeemable Convertible Preferred Stock, and Stockholders' Equity

                         

Current liabilities:

                         

Accounts payable and accrued liabilities

    3,583     7,771     9,028     9,028  

Current portion of capital lease obligations

    4,177     5,022     5,666     5,666  

Current portion of deferred rent

    250     153     549     549  

Other current liabilities

    287     479     674     674  

Total current liabilities

    8,297     13,425     15,917     15,917  

Capital lease obligations, net of current portion

    3,165     5,628     9,980     9,980  

Deferred rent, net of current portion

    593     3,983     4,410     4,410  

Other long-term liabilities

    594     490     512     512  

Redeemable preferred stock warrant liability

    115     201     719      

Total liabilities

    12,764     23,727     31,538     30,819  

Commitment and contingencies (notes 8 - 17)

                         

Redeemable Convertible Preferred Stock

                         

Series A redeemable convertible preferred stock, $0.001 par value, 3,227,265 shares authorized, issued, and outstanding as of Dec. 31, 2015 and 2016 and Jun. 30, 2017* (Aggregate liquidation value as of Dec. 31, 2016 and Jun. 30, 2017*: $710)

    677     677     677      

Series A-1 redeemable convertible preferred stock, $0.001 par value, 7,530,555 shares authorized, issued, and outstanding as of Dec. 31, 2015 and 2016 and Jun. 30, 2017* (Aggregate liquidation value as of Dec. 31, 2016 and Jun. 30, 2017*: $5,025)

    4,979     4,979     4,979      

Series B redeemable convertible preferred stock, $0.001 par value, 7,903,185 shares authorized, 7,838,062 issued and outstanding as of Dec. 31, 2015 and 2016 and Jun. 30, 2017* (Aggregate liquidation value as of Dec. 31, 2016 and Jun. 30, 2017*: $21,664)

    21,583     21,583     21,583      

Series C redeemable convertible preferred stock, $0.001 par value, 3,710,273 shares authorized as of Dec. 31, 2015 3,636,405 shares authorized as of Dec. 31, 2016 and Jun. 30, 2017* 3,610,273 shares issued and outstanding as of Dec. 31, 2016 and 2015 and Jun. 30, 2017* (Aggregate liquidation value as of Dec. 31, 2016 and Jun. 30, 2017*: $20,723)

    20,620     20,620     20,620      

Series D redeemable convertible preferred stock, $0.001 par value, 2,400,000 shares authorized, 2,329,072 shares issued and outstanding as of Dec. 31, 2016 and Jun. 30, 2017* (Aggregate liquidation value as of Dec. 31, 2016 and Jun. 30, 2017*: $32,934)

        32,829     32,829      

Total redeemable convertible preferred stock

    47,859     80,688     80,688      

Stockholders' equity (deficit):

                         

Common stock, $0.001 par value, 39,714,328 shares authorized as of Dec. 31, 2015, 50,000,000 shares authorized as of Dec. 31, 2016 and Jun. 30, 2017*, 7,454,693, 7,611,930 and 7,953,628 shares issued and outstanding as of Dec. 31, 2015, Dec. 31, 2016, and Jun. 30, 2017*, respectively

    4     5     5     30  

Additional paid-in capital

    3,747     5,825     7,906     89,288  

Accumulated deficit

    (39,696 )   (43,604 )   (46,738 )   (46,738 )

Accumulated other comprehensive loss

    (2 )   (6 )   (5 )   (5 )

Total stockholders' equity (deficit)

    (35,947 )   (37,780 )   (38,832 )   42,575  

Total liabilities, redeemable convertible preferred stock, and stockholders' equity

  $ 24,676   $ 66,635   $ 73,394   $ 73,394  

*
June 30, 2017 information is unaudited

   

The accompanying notes are an integral part of these consolidated financial statements

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SENDGRID, INC.

Consolidated Statements of Cash Flows

(In thousands)

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended
December 31,
 
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  

Cash flows from operating activities:

                               

Net loss

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

Adjustments to reconcile net loss to net cash used in operating activities:

                               

Depreciation and amortization

    2,893     5,521     6,913     3,363     4,562  

Stock-based compensation

    694     1,375     1,899     879     1,381  

Adjustment to redeemable preferred stock warrant liability

    76     19     86     102     518  

Non-cash interest expense and other

    39     (7 )   14     9     10  

Loss on extinguishment of debt           

    21                  

Restructuring and loss on disposal of assets

    63     1     248     27     352  

Reimbursement of tenant improvements

            3,578         654  

Changes in operating assets and liabilities:

                               

Accounts receivable

    (664 )   (963 )   (1,252 )   (796 )   (803 )

Prepaid expenses and other assets           

    (587 )   (88 )   (925 )   226     (494 )

Accounts payable and accrued liabilities

    523     1,063     2,795     1,634     2,050  

Other liabilities

    262     163     241     441     26  

Net cash flows from operating activities

    (9,640 )   1,230     9,689     2,404     5,122  

Cash flows from investing activities:

                               

Purchase of property and equipment

    (2,446 )   (1,256 )   (7,087 )   (1,001 )   (3,014 )

Cash paid for business combination           

                    (2,726 )

Cash acquired in business combination

                    527  

Proceeds from sale of assets

    31     7     216         9  

Decrease (increase) in restricted cash

    (211 )   217     333     108     78  

Net cash flows from investing activities

    (2,626 )   (1,032 )   (6,538 )   (893 )   (5,126 )

Cash flows from financing activities:

                               

Deferred financing costs

                    (40 )

Proceeds from issuance of common stock

    95     784     180     22     264  

Proceeds from issuance of preferred stock

    20,723         32,934          

Payments for preferred stock issuance costs

    (66 )   (36 )   (66 )        

Proceeds from line of credit

    10,000                  

Repayment of line of credit

    (10,000 )                

Principal payments on capital lease obligations

    (1,498 )   (3,939 )   (5,064 )   (2,408 )   (2,997 )

Net cash flows from financing activities

    19,254     (3,191 )   27,984     (2,386 )   (2,773 )

Effect of foreign currency exchange rates on cash

        (2 )   (4 )   (2 )   2  

Net increase (decrease) in cash and cash equivalents                

    6,988     (2,995 )   31,131     (877 )   (2,775 )

Cash and cash equivalents, beginning of year

    5,276     12,264     9,269     9,269     40,400  

Cash and cash equivalents, end of year

  $ 12,264   $ 9,269   $ 40,400   $ 8,392   $ 37,625  

Supplemental disclosure of cash flow information:

                               

Assets acquired under capitalized leases

  $ 8,621   $ 3,094   $ 8,527   $ 3,832   $ 8,352  

Property and equipment included in accounts payable

  $ 26   $ 73   $ 832   $ 311   $ 41  

Issuance of common stock for business combination

  $   $   $   $   $ 436  

Cash paid for interest

  $ 492   $ 172   $ 182   $ 194   $ 69  

   

The accompanying notes are an integral part of these consolidated financial statements

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SENDGRID, INC.

Consolidated Statements of Stockholders' Equity (Deficit)

(In thousands)

 
  Common Stock    
   
  Accumulated
Other
Comprehensive
Income (Loss)
   
 
 
  Additional
paid-in
capital
  Accumulated
deficit
  Total
stockholders'
equity
 
 
  Shares   Amount  

Balance at January 1, 2014

    5,079,221   $ 2   $ 801   $ (20,882 ) $   $ (20,079 )

Exercise of common stock options

    213,873         95             95  

Stock-based compensation

            694             694  

Net loss

                (12,960 )       (12,960 )

Balance at December 31, 2014

    5,293,094     2     1,590     (33,842 )       (32,250 )

Exercise of common stock options

    2,161,599     2     782             784  

Stock-based compensation

            1,375             1,375  

Net loss

                (5,854 )       (5,854 )

Foreign currency translation adjustment

                    (2 )   (2 )

Balance at December 31, 2015

    7,454,693     4     3,747     (39,696 )   (2 )   (35,947 )

Exercise of common stock options

    157,237     1     179             180  

Stock-based compensation

            1,899             1,899  

Net loss

                (3,908 )       (3,908 )

Foreign currency translation adjustment

                    (4 )   (4 )

Balance at December 31, 2016

    7,611,930     5     5,825     (43,604 )   (6 )   (37,780 )

Exercise of common stock options (unaudited)

    262,151         264             264  

Issuance of common stock for business combination (unaudited)

    79,547         436             436  

Stock-based compensation (unaudited)

            1,381             1,381  

Net loss (unaudited)

                (3,134 )       (3,134 )

Foreign currency translation adjustment (unaudited)

                    1     1  

Balance at June 30, 2017 (unaudited)

    7,953,628   $ 5   $ 7,906   $ (46,738 ) $ (5 ) $ (38,832 )

   

The accompanying notes are an integral part of these consolidated financial statements

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SENDGRID, INC.

Notes to Consolidated Financial Statements

(1) Organization and Description of Business

        SendGrid, Inc. and our wholly owned subsidiaries, SendGrid UK Limited and JCKM, Inc. (or "Bizzy") (collectively, "we," "SendGrid," or "the Company"), operate a leading digital communication platform, enabling businesses to engage with their customers via email reliably, effectively and at scale. SendGrid's cloud-based platform allows for frictionless adoption and immediate value creation for businesses, providing their developers and marketers with the tools to seamlessly and effectively reach their customers using email. We maintain business operations in the United States and United Kingdom, with sales to customers in the United States and internationally.

(2) Summary of Significant Accounting Policies

(a)   Basis of Presentation and Consolidation

        The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Consolidated financial statements include the accounts of the Company and its subsidiaries. Bizzy became a wholly owned subsidiary effective March 3, 2017. All intercompany transactions and accounts balances have been eliminated in consolidation.

(b)   Unaudited Interim Consolidated Financial Information Estimates

        The accompanying consolidated balance sheet as of June 30, 2017, the consolidated statements of operations, comprehensive loss, and statements of cash flows for the six months ended June 30, 2016 and 2017, the consolidated statement of stockholders' equity (deficit) for the six months ended June 30, 2017 and the related footnote disclosures are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in our opinion, reflect all adjustments necessary to present fairly our consolidated financial position as of June 30, 2017 and results of operations, comprehensive loss, and cash flows for the six months ended June 30, 2016 and 2017. The results for the six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or for any other periods.

(c)   Unaudited Pro Forma Information

        Upon the consummation of an initial public offering, all outstanding shares of the redeemable convertible preferred stock will automatically convert and be reclassified into shares of common stock. As a result, the December 31, 2016 and June 30, 2017 unaudited consolidated pro forma net loss per share applicable to common stockholders, pro forma weighted average shares outstanding, and pro forma stockholders' deficit have been prepared assuming the conversion and reclassification of the outstanding shares of convertible preferred stock into shares of common stock.

(d)   Use of Estimates

        The preparation of consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, the reported amounts of revenue and expenses during the reporting period, and certain information disclosed in the notes to the consolidated financial statements. Actual results could differ from these estimates. Significant estimates and assumptions that affect our consolidated financial condition and results of operations include revenue recognition, allowance for doubtful accounts and sales returns, determination

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

of the fair value of assets acquired and liabilities assumed in business combinations, income tax uncertainties, valuation of deferred income tax assets, stock-based compensation, and other contingencies.

(e)   Foreign Currency Translation

        Our reporting currency is the U.S. dollar. We operate a subsidiary in the United Kingdom and use the British pound as its functional currency. All of the subsidiary's assets and liabilities denominated in a foreign currency are translated into U.S. dollars based on the exchange rate on the balance sheet date. Revenue, expenses, and cash flows are translated at the average exchange rates during the period. The effects of foreign exchange gains and losses arising from translation are included as a component of other comprehensive income (loss).

(f)    Liquidity

        We are subject to various risks and uncertainties frequently encountered by companies in the early stages of development, particularly companies in the evolving market for software and services. Such risks and uncertainties include, but are not limited to, operating losses, the ability to raise capital, significant competition, changing marketplace demands, the ability to retain and attract personnel, and management of growth. To address these risks, we must, among other things, further develop our customer base, implement and successfully execute our business and marketing strategy, continue to develop and upgrade our platform, provide excellent customer service, provide for sufficient funding to support our operations and anticipated growth, and attract, retain, and motivate qualified personnel. There can be no guarantee that we will be successful in addressing these or other such risks.

        We have historically funded our operations through a combination of equity and debt financings, and cash flows from operations. We generated a net loss and negative cash flow from operations in 2014. We generated a net loss but positive net cash flows from operations during the years ended December 31, 2015, and 2016 and the six months ended June 30, 2016 and 2017 (unaudited). We believe that the cash on hand, cash available to draw on our line of credit, cash expected to be generated from customers, and managing operating costs at a level commensurate with cash generated from customers will provide sufficient cash flow to fund operations and provide our working capital needs through at least the next 12 months.

        The continued execution of our long-term business plan may require us to raise additional capital through the issuance of equity or debt instruments. While we have historically been successful in obtaining equity financing, there can be no assurance that such additional financing, if necessary, will be available or, if available, that such financings can be obtained on satisfactory terms.

(g)   Cash and Restricted Cash Equivalents

        Cash consists of checking and other demand deposit accounts. We consider all liquid investments purchased with a remaining maturity of 90 days or less at the date of acquisition to be cash equivalents. Our restricted cash consists of cash equivalents (money market funds) and represents funds restricted for use or withdrawal related to contractual agreements for facility leases.

        We maintained balances in various operating accounts in excess of federally insured limits.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(h)   Trade Accounts Receivable

        Accounts receivable are recorded at the invoiced amount and do not bear interest. Customer usage charges in excess of package limits are billed in arrears. Charges incurred but not yet billed at the end of the reporting period are recorded as unbilled accounts receivable until they are billed in the following month.

        Accounts receivable on the consolidated balance sheets is reflected net of the allowance for doubtful accounts. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. In establishing the required allowance amount, we consider historical losses adjusted to take into account current market conditions, customer payment patterns, and the current receivables aging. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We record bad debt expense in general and administrative expense on the consolidated statements of operations.

(i)    Property and Equipment

        Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets from the date placed in service. We periodically evaluate the estimates of the useful lives by reviewing historical usage and consider technological changes, trends in the industry, and other economic factors that could impact utilization.

        We record equipment acquired under capital leases at the lower of the fair value of the asset or the net present value of the minimum lease payments at the inception of the lease. Depreciation of equipment held under capital leases is included in depreciation expense and calculated on a straight-line basis over the estimated useful lives of the assets, or the related lease term, whichever is shorter.

        Upon retirement or disposition of assets, the cost and related accumulated depreciation are removed from the accounts, and the related gains or losses are recognized in our results of operations. Maintenance and repair costs are expensed as incurred.

(j)    Intangible Assets and Goodwill

        Identified intangible assets arising from business combinations are initially recorded at fair value. We amortize our intangible assets using the straight-line method, as this method approximates the timing in which we expect to receive the associated benefit.

        Goodwill represents the excess of the purchase price over the estimated acquisition date fair value assigned to the identifiable assets acquired and liabilities assumed. We do not amortize goodwill, but evaluate for impairment annually each October 1st, or more frequently if a triggering event occurs between testing dates, using a fair value approach.

        Our impairment assessment begins with a qualitative assessment to determine if it is more likely than not that a reporting unit's fair value is less than the carrying amount. The initial qualitative assessment includes comparing the overall financial performance of the reporting unit against the planned results as well as other factors which might indicate that the reporting unit's value has declined since the last assessment date.

        If it is determined in the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then we perform the standard two-step quantitative

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

impairment test. The first step of the quantitative impairment test consists of comparing the estimated fair value of each reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, then it is not considered impaired and no further analysis is required. If the first step of the quantitative impairment test indicates that the estimated fair value of a reporting unit is less than its carrying value, then impairment potentially exists and we perform the second step of the quantitative impairment test to measure the amount of goodwill impairment. Goodwill impairment exists when the estimated implied fair value of a reporting unit's goodwill is less than its carrying value.

        Our goodwill as of June 30, 2017 (unaudited) is associated with our acquisition of Bizzy.

(k)   Long-Lived Assets

        We review long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. If circumstances require a long-lived asset to be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by an asset group to the carrying value of the asset group.

        If the carrying value of the long-lived asset group is not recoverable on an undiscounted basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. No impairment losses were recognized for the years ended December 31, 2014, 2015, and 2016. In addition, no impairment losses were recognized during the six months ended June 30, 2016 or 2017 (unaudited).

(l)    Redeemable Preferred Stock Warrant Liability

        Freestanding warrants related to shares that are redeemable or contingently redeemable are classified as a liability on our consolidated balance sheets. The warrants to purchase the Company's convertible redeemable preferred stock are subject to re-measurement at each balance sheet date, and any change in the fair value is recognized as a component of other expense. We will continue to adjust the liability for changes in fair value until the earlier of: (1) the exercise or expiration of the warrant or (2) the completion of a liquidation event, including completion of an initial public offering, at which time the warrant to purchase preferred stock will be converted into common stock or a warrant to purchase common stock, and the liability will be reclassified to additional paid-in capital. The warrants are recorded at fair value, estimated using the Black-Scholes option-pricing method and revalued at each balance sheet date.

(m)  Fair Value Measurements

        Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. Fair value guidance establishes a framework for measuring fair value and expands disclosures about fair value measurements.

        GAAP establishes a three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on the inputs used in valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally derived (unobservable). The three levels are defined as follows.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

    Level 1—inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

    Level 2—inputs to the valuation methodology based on quoted prices for similar assets and liabilities in active markets for substantially the full term of the financial instrument; quoted prices for identical or similar instruments in markets that are not active for substantially the full term of the financial instrument; and model-derived valuations whose inputs or significant value drivers are observable.

    Level 3—inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.

        A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

        As of all periods presented, the carrying amount for cash, restricted cash, accounts receivable (net of allowance for doubtful accounts), and current liabilities (excluding the current portion of capital lease obligations) is equal to or approximates fair value due to their short-term nature and proximity to current market rates.

        We view our capital lease obligations as Level 2 measurements. The fair value of our capital lease obligations approximates their carrying amounts based on the proximity of their interest rates to current market rates.

        Level 3 assumptions are used in valuing our redeemable preferred stock warrant liability. Our redeemable preferred stock warrant liability is the only asset or liability on our consolidated balance sheets subject to fair value measurement on a recurring basis.

        Our accounting policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. For all periods presented, there have been no significant transfers into or out of Level 1, Level 2, or Level 3.

(n)   Revenue Recognition

        We derive revenue primarily from fees charged to customers accessing our Email application program interface and Marketing Campaigns services. Prior to delivering services, we require customers to select a service level package and enter into a monthly service agreement. The arrangement generally includes a fixed subscription fee that covers a predetermined number of email credits for the month. Any usage above the limit is invoiced as overage charges based on a stated price per email. All customers are entitled to unlimited basic support.

        Fixed subscription fees are invoiced at the beginning of each monthly service cycle based on the agreed upon fee. At the end of each monthly service cycle, we invoice customers for usage based on the contracted rate. Revenue from usage incurred that has not been invoiced as of the end of a reporting period are accrued as unbilled accounts receivable. Fees are recognized as revenue in the month services

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

are provided. We provide a service; therefore, service revenue is recognized ratably over the applicable service period, generally one month, when all of the following conditions have been met:

Condition
  Considerations and Evidence

Persuasive evidence of an arrangement exists

  A signed service agreement

The services have been delivered to the customer

 

The customer has access to our platform. Our services are available for use at this point.

The price is fixed or determinable

 

We assess whether the fee is fixed and determinable at the onset of the agreement based on the package selected by the customer and payment terms associated with the transaction. Our fees are typically based on a predetermined volume of emails. Any usage above such predetermined volume is billed as overage charges based on set fees stated in the agreement. We consider the price fixed or determinable when the customer selects a package.

Collection of the fees is reasonably assured

 

We assess collectability based on a number of factors, including collection history and credit worthiness. Our customers generally pay the base fee in advance by credit card.

        We have arrangements with partners who generally act as resellers. In most reseller arrangements, we provision the service, provide technical support, establish pricing, and assume credit risk. We consider ourselves the principal in these arrangements and record revenue on a gross basis. On the consolidated statements of operations, expenses directly related to providing the service are recorded as cost of revenue and commissions paid to partners are recorded as selling and marketing expense.

        In other reseller arrangements, the reseller provides support, training, and other services requested or required by end users at the reseller's sole cost and expense. We provide support services only to the reseller and have no obligation to provide technical support or respond to requests directly from end users. In addition, the reseller establishes the price for the service and assumes credit risk. We consider ourselves the agent in these arrangements and record the net amount received from the reseller.

        As discussed above, our customers generally pay with a credit card. Credit card charges may be subsequently contested by the cardholder, and we occasionally receive chargebacks.

        We estimate chargebacks and sales credits using historical experience adjusted to take into account current market conditions. Revenue is recorded net of estimated chargebacks and sales credits of $0.2 million, $0.4 million, and $0.3 million, respectively, for the years ended December 31, 2014, 2015 and 2016 and $0.1 million and $0.5 million, respectively, for the six months ended June 30, 2016 and 2017 (unaudited).

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(o)   Cost of Revenue

        Cost of revenue consists principally of depreciation and amortization expense related to hosting equipment and outsourced managed hosting costs. Other components include employee related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs, and an allocation of our general overhead.

(p)   Research and Development

        Research and development expense consists primarily of employee related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs, and an allocation of our general overhead. Also included are non-personnel costs, such as subcontracting, consulting and professional fees for third party development resources, and depreciation costs. Our research and development efforts focus on maintaining and enhancing functionality of existing services and adding new features and services.

        To date, expenditures incurred between when the application has reached the development stage and when it is substantially complete and ready for its intended use have been inconsequential and, as a result, we have not capitalized any qualifying software development costs in the accompanying consolidated financial statements.

(q)   Income Taxes

        We account for income taxes using the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases that will result in taxable or deductible amounts in the future. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is recorded to the extent it is more likely than not that a deferred tax asset will not be realized.

        In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

        We recognize the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest related to unrecognized tax benefits in interest expense and penalties in general, and administrative expenses. As of December 31, 2016 and June 30, 2017 (unaudited), the earliest year we were subject to examination for federal and state tax returns was 2009.

        Our net deferred tax asset has been completely reduced by a valuation allowance because we cannot conclude that realization of the deferred tax assets is assured, on a more likely than not basis, due primarily to our history of operating losses.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(r)   Stock-Based Compensation

        We account for employee stock-based compensation based on the fair value of the award at the grant date. Expense is recognized, net of estimated forfeitures, on a straight-line basis over the period during which the holder is required to provide services, which is usually the vesting period. We determine the fair value of all stock options at time of grant using the Black-Scholes option pricing model.

        We record excess tax benefits and deficiencies in the period they arise in the provision for income taxes. To date, there has been no impact on the provision for income taxes due to the full valuation allowance.

(s)   Advertising Costs

        Advertising costs are expensed as incurred and were $2.3 million, $1.8 million, and $4.5 million, respectively, for the years ended December 31, 2014, 2015, and 2016 and $1.8 million and $3.5 million, respectively, for the six months ended June 30, 2016 and 2017 (unaudited). Advertising costs are included in selling and marketing expenses on our consolidated statements of operations.

(t)    Net Income or Loss Per Share Attributable to Common Stockholders

        We calculate our basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method, which is required for companies with participating securities. We have excluded all potentially dilutive securities, which include the following which are considered "common stock equivalents":

    Redeemable convertible preferred stock

    Options to purchase common stock

    Restricted stock units

    Redeemable convertible preferred stock warrants

Our shares of redeemable convertible preferred stock are participating securities and are excluded from the earnings per share calculation.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

        The two-class method requires the following:

Periods when we have net loss   We calculate both basic and diluted net loss per common share by dividing net loss by the weighted average number of common shares outstanding during the period.

 

 

Common stock equivalents are not considered because their effect is antidilutive.

Periods when we have net income

 

Basic net income per share
    We calculate basic net income per share by dividing the net income attributable to the common stockholder by the weighted average number of common shares outstanding during the period.

 

 

Diluted net income per share
    We calculate diluted net income per share by dividing net income attributable to the common stockholder by the weighted average number of common shares and common stock equivalents outstanding during the period. The potential dilution from stock awards is accounted for using the treasury stock method.

(u)   Concentration of Credit Risk and Significant Customers

        Concentrations of credit risk consist primarily of cash and accounts receivable. All cash is deposited into demand deposit accounts at financial institutions we believe to be creditworthy. We perform ongoing evaluations of our customers' financial condition and do not require any collateral to support receivables.

(v)   Recently Adopted Accounting Standards

        In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's ability to Continue as a Going Concern , which requires an entity to establish a going concern assessment process. ASU 2014-15 was effective for us on January 1, 2016. The adoption of this standard did not have a significant impact on our consolidated financial statements and related disclosures.

        In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. ASU 2015-16 became effective for us on January 1, 2017. The adoption of this standard did not have a significant impact on our consolidated financial statements and related disclosures.

(w)  New Accounting Pronouncements Not Yet Adopted

        We are an emerging growth company ("EGC") as defined by the Jumpstart Our Business Startups Act ("JOBS Act"). The JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

accounting standards until those standards would otherwise apply to private companies. We elected to take advantage of the extended transition period. However, this election will not apply should we cease to be classified as an EGC.

        In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting , which provides guidance regarding stock-based payment award changes that require modification accounting. ASU 2017-09 is effective for us beginning January 1, 2018. The standard requires prospective application for awards modified on or after the effective date. Early adoption is permitted. We have not yet determined the effect of the standard on our consolidated financial statements and related disclosures.

        In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This standard simplifies the accounting for goodwill impairment by removing step two of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will be the amount by which a reporting unit's carrying amount, including goodwill, exceeds its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for us beginning January 1, 2022 (or January 1, 2020 should we cease to be classified as an EGC). The standard requires prospective application. Early adoption is permitted. We will apply this new accounting standard in future periods if we determine that the carrying amount of any reporting units including goodwill exceeds fair value of the reporting unit.

        In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , which clarifies when transactions should be accounted for as acquisitions (or disposals) of assets or business. ASU 2017-01 is effective for us beginning January 1, 2019. Early adoption is permitted for transactions not previously reported in issued financial statements. We have not yet determined the effect of the standard on our consolidated financial statements and related disclosures.

        In November 2016, the FASB issued ASU 2016-18, Statements of Cash Flow (Topic 230): Restricted Cash , which requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amount shown on the statement of cash flows. ASU 2016-18 is effective for us beginning January 1, 2019. The effect that the ASU will have on our consolidated financial statements will be dependent upon the amount of restricted cash in future periods.

        In August 2016, the FASB issued ASU 2016-15, Statements of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments , which clarifies classification for certain cash receipts and cash payments on the consolidated statement of cash flow. ASU 2016-15 is effective for us beginning January 1, 2019. The standard requires a retrospective transition method for each period presented. We have not yet determined the effect of the standard on our consolidated financial statements and related disclosures.

        In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements for Employee Share-Based Payment Accounting , which simplifies certain aspects of accounting for share-based payment transactions, including income tax consequences, statutory tax withholdings requirements, forfeitures, and classification in the statement of cash flows. ASU 2016-09 is effective for us beginning January 1, 2018. Early adoption is permitted. The standard requires the guidance related to forfeitures to be applied using a modified retrospective transition method and the guidance related to the

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

accounting for income taxes to be applied prospectively. We are in the process of evaluating our stock award plan and identifying differences in accounting between new and existing standards.

        In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires lessees to recognize the assets and liabilities that arise from all leases on the consolidated balance sheet. ASU 2016-02 is effective for us beginning January 1, 2020 (or January 1, 2019 should we cease to be classified as an EGC). Early adoption is permitted. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. We have not yet determined the effect of the standard on our consolidated financial statements and related disclosures.

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This new accounting standard also impacts the recognition of sales commissions. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) : Deferral of the Effective Date , which defers the effective date of the guidance in ASU 2014-09 by one year. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing , which provides clarification on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients , which provides clarification on assessing collectability, presentation of sales taxes, noncash considerations, and completed contracts and contract modifications at transition. In December 2016, the FASB issued ASU 2016-20, Technical Correction and Improvements to Topic 606, Revenue from Contracts with Customers , which amended several items of 2014-09. ASU 2014-09 is effective for us beginning January 1, 2019. Early adoption is permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We continue to evaluate the impact of the new standard and available adoption methods on our consolidated financial statements. We are in the process of evaluating arrangements with customers and identifying differences in accounting between new and existing standards.

(3) Accounts Receivable

        Accounts receivable on the consolidated balance sheets is reflected net of the allowance for doubtful accounts. The following table summarizes the activity in the allowance for doubtful accounts:

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended
December 31,
 
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  
 
  (in thousands)
 

Balance, beginning of period

  $ 29   $ 23   $ 15   $ 15   $ 34  

Additions

    91     105     313     71     122  

Write-offs

    (97 )   (113 )   (294 )   (66 )   (126 )

Balance, end of period

  $ 23   $ 15   $ 34   $ 20   $ 30  

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(4) Prepaid Expenses and Other Assets

        Prepaid expenses and other assets consist of the following:

 
  As of
December 31,
   
 
 
  As of
June 30,
2017
(unaudited)
 
 
  2015   2016  
 
  (In thousands)
 

Prepaid marketing expenses

  $ 151   $ 235   $ 415  

Prepaid subscription expenses

    611     939     1,084  

Prepaid technology

    65     250      

Deferred financing costs

            655  

Security deposits

    273     321     345  

Other prepaid expenses

    826     1,092     881  

    1,926     2,837     3,380  

Less long-term

    (273 )   (234 )   (336 )

Prepaid expenses and other current assets

  $ 1,653   $ 2,603   $ 3,044  

        Deferred financing costs represent direct, incremental costs associated with an anticipated initial public offering of our common stock. These costs are primarily professional fees including legal and accounting. Upon completion of an initial public offering, these amounts will be offset against the proceeds of the offering. If the offering is terminated, the deferred offering costs will be expensed. Security deposits consist of cash held as security deposits for facility leases which are long-term in nature. Prepaid technology consists of the use of internet protocol addresses.

(5) Property and Equipment

        Property and equipment consist of the following:

 
   
  As of December 31,    
 
 
  Estimated Useful
Life (in months)
  As of June 30,
2017
(unaudited)
 
 
  2015   2016  
 
   
  (In thousands)
 

Data center equipment

  36 - 48   $ 16,515   $ 22,307   $ 31,125  

Computer equipment and peripherals

  36         2,595     3,023  

Office furniture and equipment

  36 - 60     1,723     2,780     3,159  

Leasehold improvements

  *     1,599     6,056     6,092  

        19,837     33,738     43,399  

Less accumulated depreciation

        (9,424 )   (14,548 )   (18,475 )

Property and equipment, net

      $ 10,413   $ 19,190   $ 24,924  

*
We depreciate leasehold improvements over the shorter of the asset's useful life or the life of the lease.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(5) Property and Equipment (Continued)

        Certain equipment was held under capital lease arrangements in the gross amount of $13.2 million, $22.0 million, and $29.3 million, respectively, as of December 31, 2015 and 2016 and June 30, 2017 (unaudited). This equipment is classified as data center and office equipment and depreciated using the straight-line method over the shorter of the useful life or the term of the lease agreement. The related accumulated depreciation for these assets was $5.7 million, $11.3 million, and $13.7 million, respectively, as of December 31, 2015 and 2016 and June 30, 2017 (unaudited).

        Depreciation expense, including depreciation of assets held under capital leases, was $2.9 million, $5.5 million, and $6.9 million, respectively, for the years ended December 31, 2014, 2015, and 2016 and $3.4 million and $4.5 million, respectively, for the six months ended June 30, 2016 and 2017 (unaudited).

(6) Business Combination

        On March 3, 2017, we acquired 100% of the outstanding common stock of JCKM, Inc. (or "Bizzy"). Bizzy is based in San Francisco, California and operates a subscription based email automation tool that focuses on customer segmentation and customization, which enhances our Marketing Campaigns Service.

        We allocated the purchase price to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess purchase price allocated to goodwill. We retained a third-party valuation specialist to assist with estimating these values. The valuation of the identifiable assets acquired was based upon our estimates and assumptions. The preliminary estimated fair value of the assets acquired is subject to adjustment based on our final assessment of the fair values of the intangible assets, which is the most likely source for the change in the fair value assessment of the acquired assets upon finalization of the valuation process.

        The following tables summarize the consideration paid at the acquisition date and the purchase price allocation:

 
  Consideration
Paid
 
 
  (in millions)
 

Cash

  $ 2.7  

79,547 shares of SendGrid common stock

    0.4  

  $ 3.1  

 

 
  Purchase
Price
Allocation
  Estimated
Useful Life
(in months)
 
 
  (in millions)
   
 

Cash

  $ 0.5     NA  

Core technology

    0.8     84  

Customer relationships, non compete agreements, and other intangible assets

    0.2     36 - 60  

Goodwill

    1.6     NA  

  $ 3.1        

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(6) Business Combination (Continued)

        We allocated the excess of purchase price over the fair value of the underlying assets acquired and liabilities assumed to goodwill. The goodwill principally represents the acquired assembled workforce and the value of synergies expected to be realized between SendGrid and Bizzy, neither of which qualify as a separate amortizable intangible asset. Goodwill is not amortized. The goodwill is not deductible for tax purposes.

        We entered into employment agreements with certain former Bizzy stockholders whereby additional aggregate consideration of $1.2 million in cash will be paid at various dates through March 2019 should the employees remain continuously employed. The fair value will be recorded as post-acquisition compensation expense in research and development expense ratably over the 24-month period beginning March 2017.

        During the six months ended June 30, 2017 (unaudited), we incurred outside legal fees of $0.2 million related to the Bizzy acquisition. These costs are included in general and administrative expense on the consolidated statements of operations. Bizzy's results of operations have been included in our financial statements for the period subsequent to the completion of the acquisition on March 3, 2017.

(7) Intangible Assets and Goodwill

        Substantially all of our intangible assets relate to the acquisition of Bizzy and consist of the following:

 
   
  As of
December 31, 2015
  As of
December 31, 2016
  As of
June 30, 2017 (unaudited)
 
 
  Estimated
Useful Life
(in months)
  Cost   Accumulated
Amortization
  Net Book
Value
  Cost   Accumulated
Amortization
  Net Book
Value
  Cost   Accumulated
Amortization
  Net Book
Value
 
 
   
  (In thousands)
 

Core technology

  84   $   $   $   $   $   $   $ 800   $ (37 ) $ 763  

Customer relationships, non-compete agreements, and other

  36 - 60                             170     (13 )   157  

Software

  36     99     (71 )   28     99     (88 )   11     297     (82 )   215  

      $ 99   $ (71 ) $ 28   $ 99   $ (88 ) $ 11   $ 1,267   $ (132 ) $ 1,135  

        As of June 30, 2017 (unaudited), the weighted average remaining amortization period on our intangible assets was 70 months. The following table summarizes future amortization expense as of June 30, 2017 (unaudited):

 
  2017
(remaining
6 months)
  2018   2019   2020   2021   Thereafter   Total  
 
  (in thousands)
 

Amortization expense

  $ 120   $ 235   $ 230   $ 167   $ 131   $ 252   $ 1,135  

        We had no goodwill on our consolidated balance sheets as of December 31, 2015 or 2016. Our goodwill as of June 30, 2017 (unaudited) is associated with our acquisition of Bizzy.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(8) Accounts Payable and Accrued Liabilities

        Accounts payable and accrued liabilities consists of the following:

 
  As of
December 31,
   
 
 
  As of June 30,
2017
(unaudited)
 
 
  2015   2016  
 
  (In thousands)
 

Accounts payable

  $ 1,033   $ 1,549   $ 1,782  

Sales tax

        1,114     1,472  

Accrued vacation

    817     1,304     1,643  

Accrued bonus and commission

    910     2,086     2,032  

Accrued employee benefits

    145     366     316  

Accrued marketing expense

    124     228     236  

Other accrued liabilities

    554     1,124     1,547  

Accounts payable and accrued liabilities

  $ 3,583   $ 7,771   $ 9,028  

(9) Revolving Line of Credit

        In June 2013, we entered into a loan and security agreement, or LSA, with a bank providing us with a revolving line of credit, which was extended in May 2016 to $30.0 million. In May 2017, we amended the LSA to increase the maximum borrowing availability to $40.0 million and extend the maturity date to May 2018 (unaudited).

        Amounts available to draw under the LSA are calculated from a trailing three-month revenue base, which can differ from the maximum loan amount. Advances are subject to interest at the prime rate then in effect plus 0.50%, with a floor of 4.00% while our cash balance is greater than $8.0 million. While our cash balance is not greater than $8.0 million, advances are subject to interest at the prime rate then in effect plus 1.25%, with a floor of 4.75%. Principal is due at maturity.

        Borrowings are secured by substantially all of our assets. The LSA restricts our ability to pledge our intellectual property. The LSA contains certain affirmative and negative covenants, including, among other things, maintaining certain business performance levels and limitations on disposal of assets, certain fundamental business changes, incurrences of debt, incurrences of liens, payments of dividends, repurchases of stock, and engaging in affiliate transactions, in each case subject to certain exceptions. The LSA also contains certain events of default including, among other things, that during the existence of an event of default, interest on the obligations could be increased. We had $40.0 million available to draw and were in compliance with all financial covenants under the LSA as of June 30, 2017 (unaudited). No amounts were outstanding on the revolving line of credit as of June 30, 2017 or December 31, 2016 or 2015.

        We had no borrowing activity on the LSA during the years ended December 31, 2015 and 2016 or the six months ended June 30, 2017 (unaudited).

(10) Redeemable Convertible Preferred Stock

        In November 2016, the Board of Directors (the "Board") and stockholders amended our certificate of incorporation to authorize 2,400,000 shares of Series D Preferred Stock ("Series D Preferred"). We sold

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(10) Redeemable Convertible Preferred Stock (Continued)

2,329,072 shares of Series D Preferred at a per share price of $14.14029 with total proceeds of $32.8 million, net of stock issuance costs of $0.1 million.

        As of December 31, 2016 and June 30, 2017, our Series A Preferred Stock ("Series A Preferred"), Series A-1 Preferred Stock ("Series A-1 Preferred"), Series B Preferred Stock ("Series B Preferred"), Series C Preferred Stock ("Series C Preferred"), and Series D Preferred (collectively, "Preferred Stock") had the following characteristics in accordance with our certificate of incorporation:

(a)   Conversion

    Optional Conversion

        Each share of Preferred Stock may, at the option of the holder, be converted at any time into the number of fully paid, nonassessable shares of our common stock ("Common Stock") determined by the applicable conversion rate (as described in detail below).

    Mandatory Conversion

        Each share of Preferred Stock is convertible into a certain number of fully paid and nonassessable shares of Common Stock at a conversion rate determined by dividing the applicable original issue price per share by the applicable conversion price per share at the time of conversion. The per share conversion price for each series of Preferred Stock was initially equal to that series' original issue price, but each series' conversion price is subject to certain anti-dilution and adjustment provisions. As of December 31, 2016, the original issue price for each series of Preferred Stock remains equal to that series' conversion price; therefore, the rate at which each share of Preferred Stock currently converts into Common Stock is one for one for all series of Preferred Stock. The following table details aggregate liquidation value and events that trigger mandatory conversion of each series of Preferred Stock into Common Stock, which conversion would occur at the then-applicable conversion rate for such series of Preferred Stock:

Series
  Original
Issue Price
Per Share

  Mandatory Conversion Trigger Events
Series A Preferred

Series A-1 Preferred

Series B Preferred

Series C Preferred
  $

$

$

$
0.22

  0.66728

      2.764

        5.74
  (1) At any time upon the affirmative election of the holders of a majority of the then outstanding shares of that specific series of preferred shares voting as a separate class or (2) upon the closing of a firmly underwritten public offering of Common Stock shares at a per share price not less than two times the original issue price of the Series C Preferred (as adjusted for stock splits, dividends and the like) and for a total offering of not less than $50 million (before deduction of underwriters commissions and expenses)
Series D Preferred   $ 14.14029   (1) At any time upon the affirmative election of the holders of a majority of the then outstanding shares of Series D Preferred voting as a separate class or (2) upon the closing of a firmly underwritten public offering of Common Stock shares

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(10) Redeemable Convertible Preferred Stock (Continued)

(b)   Voting Rights

        On any matter presented to the stockholders, each holder of outstanding shares of Preferred Stock is entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock are convertible as of the record date. Except as provided by law or the certificate of incorporation, holders of shares of Preferred Stock vote together with the holders of Common Stock as a single class.

        The affirmative vote or written consent of the holders of at least 60% of the outstanding shares of Preferred Stock, voting together on an as-converted to Common Stock basis, is required: (i) to amend, alter, or repeal any provision of our certificate of incorporation or bylaws; (ii) to increase or decrease the authorized number of shares of Common Stock or Preferred Stock; (iii) to authorize or designate any new class or series of stock or other securities convertible into equity securities ranking on a parity with or senior to the Preferred Stock in certain rights or any increase in the authorized or designated number of any such new class or series; (iv) to redeem, repurchase, pay, or declare dividends or other distributions with respect to Common Stock or Preferred Stock, other than in connection with equity incentive agreements with service providers and certain dividends that result in Preferred Stock conversion-price adjustments; (v) to enter into any agreement by the Company or its stockholders effecting a Deemed Liquidation Event (as defined in our certificate of incorporation); (vi) to voluntarily dissolve, liquidate, or wind up the affairs of the Company or voluntarily petition for bankruptcy or assignment for the benefit of creditors; (vii) to exclusively license, lease, sell, distribute, or otherwise dispose of intellectual property outside the ordinary course of business; (viii) to create, or acquire capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Company, or to sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Company, or to permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose of all or substantially all of the assets of such subsidiary; (ix) to create or authorize the creation of any debt security if the Company's aggregate indebtedness for borrowed money (excluding accrued interest) would exceed $100,000 (excluding ordinary course vendor and supplier financing and non-debt obligations under customer contracts and strategic relationships); or (x) to increase or decrease the authorized number of members of the Board. The affirmative vote or written consent of a majority of the outstanding shares of Series D Preferred is required to amend, alter, or repeal any provision of our certificate of incorporation or bylaws in a manner that adversely affects the rights, preferences, or privileges of the Series D Preferred.

        The following table summarizes voting rights associated with election of Board members. Holders of each series of Preferred Stock and the Common Stock vote exclusively and as a separate class. Board members elected by each class or series of capital stock designated in the table below may be removed without cause only by the holders of that class or series.

Class or Series
 
Number of
Board Members
Series A-1 Preferred   1
Series B Preferred   1
Series D Preferred   1
Common   2

        The holders of Common Stock and Preferred Stock, voting together as a single class on an as-converted to Common Stock basis, are entitled to elect all remaining members of the Board.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(10) Redeemable Convertible Preferred Stock (Continued)

(c)   Dividends

        If the Board declares a dividend, the holders of Preferred Stock are entitled to receive noncumulative dividends in preference to any dividends on Common Stock. Dividends are paid out of any assets legally available at the following rates, each as adjusted for any stock dividends, combinations, splits, recapitalizations, or the like:

Series
  Noncumulative Dividend
Rate Per Share
 

Series A Preferred

  $ 0.0176  

Series A-1 Preferred

  $ 0.0534  

Series B Preferred

  $ 0.22112  

Series C Preferred

  $ 0.4592  

Series D Preferred

  $ 1.312232  

        In the event dividends are paid on Common Stock, the Company shall pay an additional dividend equal to that paid on Common Stock on all outstanding shares of Preferred Stock on an as-converted to Common Stock basis. Through December 31, 2016, no dividends have been declared or paid on the Preferred Stock. Additionally, no dividends were declared or paid on the Preferred Stock through June 30, 2017 (unaudited).

(d)   Redemption Feature

        The holders of Preferred Stock do not have any right to demand redemption. However, in the event of a Deemed Liquidation Event, under certain circumstances and subject to certain requirements, the holders of Preferred Stock may demand redemption of shares of Preferred Stock out of assets legally available for distribution in an amount per share equal to the original issue price applicable to such Preferred Stock.

        We have not accreted our Preferred Stock to liquidation value, as a deemed liquidation event is not considered probable until it occurs.

(e)   Liquidation Preferences

        In the event of any liquidation, dissolution, winding up of the Company, or Deemed Liquidation Event either voluntary or involuntary, the holders of outstanding shares of Preferred Stock shall be entitled to receive, prior to and in preference to any payment made to holders of Common Stock, the greater of (1) an amount equal to the original issue price applicable to such share of Preferred Stock, plus any declared and unpaid dividends thereon or (2) an amount per share as would have been payable had all shares of Preferred Stock been converted into Common Stock immediately prior to such liquidation, dissolution, winding up, or Deemed Liquidation Event.

        If upon any such liquidation, dissolution, or winding up of the Company, or Deemed Liquidation Event, the Company's assets available for distribution are insufficient to pay the Preferred stockholders the full amount to which they are entitled, they share ratably in any distribution of assets in proportion to the respective amounts that would otherwise be payable in full.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(11) Common Stock

(a)   Stock Option Plan

        In 2012, we created the 2012 Equity Incentive Plan (the Plan), which is the successor to and continuation of our Amended and Restated 2009 Equity Incentive Plan. In 2016, pursuant to Board and stockholder authorization, we increased the number of shares issuable under the Plan to 15,593,718 from 12,793,718. Of these shares, 2,575,617 were available for grant as of December 31, 2016, and 1,594,046 shares were available for grant as of June 30, 2017 (unaudited). Under the Plan, stock options may be granted at an exercise price not less than 100% of the fair value of common stock on the date of grant, as determined by the Board.

        Granted options generally vest over four years under one of the following vesting schedules:

    25% vesting on the first-year anniversary and the remaining 75% vesting in equal monthly installments thereafter

    1/12th vesting monthly beginning on the three-year anniversary

        Options expire no more than 10 years from the date of grant. We recognize compensation cost on a straight-line basis over the requisite service period for the entire award.

        The following tables summarize our stock option activity:

 
  Year Ended December 31, 2016  
 
  Options   Weighted
Average
Exercise Price
  Weighted
Average Grant
Date Fair
Value
  Weighted
Average
Remaining
Contractual
Life
(in years)
  Aggregate
Intrinsic Value
(in thousands)
 

Options outstanding at beginning of period

    8,158,243   $ 1.73   $ 0.81              

Granted

    1,873,222   $ 3.89   $ 1.72              

Exercised

    (157,237 ) $ 1.14   $ 0.58         $ 441  

Forfeited

    (538,830 ) $ 2.07   $ 0.96              

Options outstanding at end of period

    9,335,398   $ 2.15   $ 0.99     8.0   $ 21,663  

Options vested and exercisable as of end of period

    4,399,724   $ 1.48   $ 0.71     7.1   $ 13,158  

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(11) Common Stock (Continued)


 
  Six Months Ended June 30, 2017  
 
  Options   Weighted
Average
Exercise Price
  Weighted
Average Grant
Date Fair
Value
  Weighted
Average
Remaining
Contractual
Life
(in years)
  Aggregate
Intrinsic Value
(in thousands)
 
 
   
   
  (unaudited)
   
   
 

Options outstanding at beginning of period

    9,335,398   $ 2.15   $ 0.99              

Granted

    1,168,409   $ 5.74   $ 2.87              

Exercised

    (264,873 ) $ 1.00   $ 0.52         $ 994  

Forfeited

    (181,838 ) $ 3.24   $ 1.51              

Options outstanding at end of period

    10,057,096   $ 2.58   $ 1.21     7.8   $ 49,819  

Options vested and exercisable as of end of period

    5,021,321   $ 1.63   $ 0.77     6.8   $ 29,651  

        During the years ended December 31, 2014 and 2015, the weighted average grant date fair value of options granted was $0.83 and $1.02, respectively.

        During the years ended December 31, 2014 and 2015, the aggregate intrinsic value of options exercised was $0.2 million and $3.8 million, respectively.

        The following tables summarizes the total fair value of options that vested during each period:

 
  For the
Year Ended
December 31,
  For the
Six Months Ended
June 30,
 
 
  2014   2015   2016   2016
(unaudited)
  2017
(unaudited)
 
 
  (in thousands)
 

Fair value of shares vested

  $ 501   $ 1,231   $ 1,787   $ 844   $ 903  

        The following tables summarizes information about stock options outstanding and exercisable:

 
  As of December 31, 2016  
 
   
   
   
  Options Exercisable  
 
  Options Outstanding  
 
   
  Weighted
Average
Remaining
Contractual
Life
(in years)
   
 
 
  Number of
Options
Outstanding
  Weighted
Average
Remaining
Contractual
Life
  Weighted
Average
Exercise Price
  Number of
Options
Exercisable
  Weighted Average
Exercise Price
 

$0.01 - $1.00

    1,370,382     5.4   $ 0.64     1,336,287              

$1.01 - $1.50

    1,219,429     7.1   $ 1.33     868,456              

$1.51 - $2.00

    1,853,106     7.8   $ 1.83     1,113,305              

$2.01 - $2.50

    3,077,724     8.6   $ 2.31     1,072,960              

$2.51 - $3.00

    432,258     9.3   $ 2.79     8,349              

$4.01 - $4.24

    1,382,499     9.7   $ 4.24     367              

    9,335,398     8.0   $ 2.15     4,399,724     7.1   $ 1.48  

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(11) Common Stock (Continued)

 
  As of June 30, 2017 (unaudited)  
 
   
   
   
  Options Exercisable  
 
  Options Outstanding  
 
   
  Weighted
Average
Remaining
Contractual
Life
(in years)
   
 
 
  Number of
Options
Outstanding
  Weighted
Average
Remaining
Contractual
Life
  Weighted
Average
Exercise Price
  Number of
Options
Exercisable
  Weighted Average
Exercise Price
 

$0.01 - $1.00

    1,227,743     4.9   $ 0.64     1,227,743              

$1.01 - $1.50

    1,103,404     6.6   $ 1.33     910,679              

$1.51 - $2.00

    1,833,013     7.3   $ 1.83     1,306,616              

$2.01 - $2.50

    2,999,278     8.1   $ 2.31     1,407,179              

$2.51 - $3.00

    419,478     8.8   $ 2.79     119,684              

$4.01 - $7.58

    2,474,180     9.5   $ 4.93     49,420              

    10,057,096     7.8   $ 2.58     5,021,321     6.8   $ 1.63  

        In 2014, we granted 617,455 restricted stock units ("RSUs") at a value of $1.83 per share, which vest based on certain conditions including completion of a change in control, six months after an initial public offering of the Company's common stock, and continuous service over a period of 48 months. If there is a separation of service prior to a change in control, the vesting will accelerate as to the number of shares that would have vested had the employee been in continuous service for an additional six months after the date of separation and any remaining restricted shares will be forfeited. Upon a change in control or initial public offering, we will recognize compensation cost of $0.8 million related to the RSUs over the remaining service period (if any).

        For all periods presented, we computed the fair value of all options and restricted stock units granted using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding components of the model, including the fair value of our common stock, risk-free interest rates, volatility, expected dividend yield, and expected option life. The use of different assumptions could cause significant adjustments to the valuation. Given the absence of a public trading market, the Board considered an independent third-party valuation of our common stock and whether any new material information after the date of such valuation had materially affected the fair value of our common stock. We estimated a volatility factor utilizing an average of the stock volatility of peer companies and estimated forfeiture rates based on historical experience and future expectations. Given our limited history, we applied the simplified method (the average of the period from vesting to expiration) to determine the expected option life. The risk-free interest rate is based on the U.S. Treasury yield for treasury securities with maturities that align closely with the timing of the average remaining expected life

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Table of Contents


SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(11) Common Stock (Continued)

of our option grants. The following table summarizes the assumptions used and the resulting weighted average grant date fair value of the options granted:

 
   
   
   
  For the Six Months
Ended June 30,
 
  For the Year Ended December, 31,
 
  2016
(unaudited)
  2017
(unaudited)
 
  2014   2015   2016

Fair value of common stock

  $1.40 - $1.99   $2.07 - $2.41   $2.74 - $4.19   $2.74   $4.47 - $7.53

Risk-free interest rate

  1.8% - 2.2%   1.5% - 2.0%   1.2% - 1.6%   1.3% - 1.6%   1.8% - 2.1%

Expected life

  6.1 years   6.0 years   6.1 years   6.1 years   6.0 years

Expected dividend yield

         

Expected volatility

  45.0% - 55.7%   44.8% - 48.2%   45.2% - 46.6%   45.2% - 46.4%   50.5% - 54.0%

Weighted average grant date fair value of the options granted

  $0.83   $1.02   $1.72   $1.22   $2.87

        Stock options are granted at an exercise price not less than 100% of fair value on the date of grant. We record stock-based compensation expense net of estimated forfeitures, which are based on historical experience and future expectations. Stock-based compensation is allocated to the same expense categories as the base compensation for such employees. We recognized the following stock-based compensation expense for options and RSUs:

 
   
   
   
  For the Six Months
Ended June 30,
 
 
  For the Year Ended December 31,  
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  
 
  (In thousands)
 

Cost of revenue

  $ 103   $ 97   $ 131   $ 62   $ 151  

Research and development

    157     379     552     257     362  

Selling and marketing

    125     193     402     160     315  

General and administrative

    309     706     814     400     553  

Stock-based compensation

  $ 694   $ 1,375   $ 1,899   $ 879   $ 1,381  

        The following table summarizes our unrecognized compensation cost (net of expected forfeitures):

 
  As of
 
  December 31,
2016
  June 30, 2017
(unaudited)

Unrecognized compensation cost (in thousands)

  $4,678   $6,157

Expected annual forfeiture rate

  13.3%   12.4%

Weighted average remaining vesting period

  2.7 years   2.7 years

(b)   Common Stock

        In 2016, the Board authorized the amendment of our certificate of incorporation to increase the number of authorized shares of common stock to 50,000,000 from the prior level of 39,714,328. There was no change in the stated par value of the stock as a result of this transaction.

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Table of Contents


SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(12) Redeemable Preferred Stock Warrant Liability

        The following table summarizes information about the warrants to purchase redeemable convertible preferred stock outstanding as of all periods presented on the consolidated balance sheets:

Number of warrants outstanding

  54,269

Exercise price

  $2.76

Expiration

  June 2023

        Warrants are reported on the consolidated balance sheet as liabilities at their estimated fair value. Adjustments to the fair value are reflected in "adjustments to redeemable preferred stock warrant liability" on the consolidated statements of operations. The following table summarizes our redeemable preferred stock warrant liability and the associated adjustments to fair value:

 
  Redeemable Preferred
Stock Warrant Liability
 
 
  Level 3 Measurement  
 
  (in thousands)
 

Balance as of December 31, 2014

  $ 96  

Fair value adjustment

    19  

Balance as of December 31, 2015

    115  

Fair value adjustment

    86  

Balance as of December 31, 2016

    201  

Fair value adjustment

    518  

Balance as of June 30, 2017 (unaudited)

  $ 719  

        We issued a warrant to acquire up to 26,132 shares of our Series C preferred stock to a bank in connection with a loan and security agreement. This warrant was exercisable only upon the event we drew more than $10 million on the line of credit. Pursuant to ASC paragraph 505-50-30-S99-1, if we receive a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received. Consequently, there was no recognition of this warrant at the measurement date. The warrant was cancelled in May 2017.

        There is not an active market for our common stock, redeemable convertible preferred stock, or warrants. As a result, we determine the fair value of our warrants at each balance sheet date using a three-step process.

        First, we obtain an estimated enterprise value of the Company and value per common share using a combination of valuation methodologies with varying weighting applied to each methodology. Each methodology requires input from management and consideration of the following factors:

    contemporaneous valuations performed by an unrelated third-party valuation firm;

    the prices, rights, preferences, and privileges of our then outstanding preferred stock relative to our common stock;

    pricing and timing of transactions in our equity;

    the lack of marketability of our common stock, preferred stock, and warrants

    our actual operating and financial performance;

    current business conditions and projections;

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Table of Contents


SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(12) Redeemable Preferred Stock Warrant Liability (Continued)

    the market performance of comparable publicly traded companies;

    the likelihood of achieving a liquidity event, such as an initial public offering, merger, or acquisition of our business given prevailing market conditions; and

    U.S. and global capital market conditions.

        Second, we use the common share value as a proxy for determining the value of both our redeemable convertible preferred stock and the associated warrants.

        Third, we apply a discount for lack of marketability to account for a lack of access to an active public market.

        The primary valuation methodology used in the June 30, 2017 analysis (unaudited) was the Probability Weighted Expected Return Method ("PWERM") under which the value of our common stock was estimated based upon an analysis of values for the Company assuming an IPO as the most probable future exit event.

        We also utilized the Black-Scholes option pricing model. This model uses certain assumptions, including volatility, risk-free rates and the fair value of preferred stock underlying the warrant. We estimated volatility utilizing an average of the stock volatility of peer companies. The risk-free interest rates are based on U.S. Treasury yields for treasury securities of similar maturity. The following table summarizes the underlying assumptions used in the Black-Scholes model:

 
  For the Year Ended December, 31,   For the Six Months Ended June 30,
 
  2014   2015   2016   2016   2017
 
   
   
   
  (unaudited)

Risk-free interest rate

  0.9%   1.1%   0.7%   0.6%   1.60%

Expected life

  Remaining contractual term   Remaining contractual term   Remaining contractual term   Remaining contractual term   Remaining contractual term

Expected dividend yield

         

Expected volatility

  64.3%   63.1%   63.2%   53.9%   52.5%

        All factors and methodologies involve our best estimates and assumptions. A minor change in one or more estimates or assumption could have a material impact on the resulting fair value estimate. Specifically, in PWERM methodology, completion of an initial public offering within a shorter timeframe results in a higher enterprise value while a longer timeframe results in a lower enterprise value.

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Table of Contents


SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(13) Net Loss Per Share Attributed to Common Stockholders

        The following table summarizes our net loss per share:

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended December, 31,  
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  
 
  (in thousands, except per share amounts)
 

Net loss

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

Weighted average common shares outstanding

   
5,194
   
7,091
   
7,521
   
7,476
   
7,896
 

Net loss per share attributable to common stockholders

  $ (2.50 ) $ (0.83 ) $ (0.52 ) $ (0.47 ) $ (0.40 )

        For all periods presented, the rate at which each share of preferred stock converts into common stock is one for one for all series of preferred stock. Additionally, the rate at which each redeemable preferred stock warrant converts into a common stock warrant is one for one.

        The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because their effect would have been anti-dilutive:

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended
December, 31,
 
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  
 
  (in thousands)
 

Convertible preferred stock, series A

    3,227     3,227     3,227     3,227     3,227  

Convertible preferred stock, series A-1

    7,531     7,531     7,531     7,531     7,531  

Convertible preferred stock, series B

    7,838     7,838     7,838     7,838     7,838  

Convertible preferred stock, series C

    3,610     3,610     3,610     3,610     3,610  

Convertible preferred stock, series D

            2,329         2,329  

Stock options

    7,873     8,158     9,335     8,342     10,057  

Restricted stock units

    617     617     617     617     617  

Redeemable preferred stock warrants

    54     54     54     54     54  

    30,750     31,035     34,541     31,219     35,263  

F-32


Table of Contents


SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(13) Net Loss Per Share Attributed to Common Stockholders (Continued)

        The following unaudited pro forma net loss per share has been computed to give effect to the conversion of our redeemable convertible preferred stock and redeemable preferred stock warrant liability into common stock.

 
  For the Year Ended
December 31, 2016
  For the Six Months Ended
June 30, 2017
 
 
  (in thousands, except per share amounts)
 

Net loss

  $ (3,908 ) $ (3,134 )

Add: adjustment to redeemable preferred stock warrant liability

    86     518  

Pro forma net loss

  $ (3,822 ) $ (2,616 )

Weighted average common shares outstanding

   
7,521
   
7,896
 

Weighted average conversion of redeemable convertible preferred stock

    22,400     24,535  

Pro forma weighted average shares outstanding

    29,921     32,431  

Pro forma net loss per share (unaudited)

  $ (0.13 ) $ (0.08 )

(14) Segment and Geographic Information

        Our Chief Executive Officer and Chief Financial Officer / Chief Operating Officer are the chief operating decision makers. They regularly review financial information presented on a consolidated basis for the purposes of allocating resources and evaluating performance. Accordingly, we determined that we currently operate in one reportable business segment.

        Substantially all of our assets are located in the United States. We consider all revenue derived from customers with a U.S. billing address as U.S. revenue. All other revenue is considered international revenue.

        The following table summarizes revenue by geographic area:

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended December, 31,  
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  
 
  (in thousands)
 

United States

  $ 26,710   $ 36,754   $ 50,361   $ 22,822   $ 32,559  

International

    16,066     21,722     29,568     13,335     19,284  

  $ 42,776   $ 58,476   $ 79,929   $ 36,157   $ 51,843  

F-33


Table of Contents


SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(15) Income Taxes

        The following table presents domestic and foreign components of loss before income taxes:

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended December, 31,  
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  
 
  (in thousands)
 

United States

  $ (12,960 ) $ (5,868 ) $ (3,918 ) $ (3,486 ) $ (3,148 )

International

        14     10     5     14  

Total net loss before provision for income taxes

  $ (12,960 ) $ (5,854 ) $ (3,908 ) $ (3,481 ) $ (3,134 )

        For all periods presented, we recorded no expense for either current or deferred taxes in any jurisdiction.

        The following table presents a reconciliation of the statutory federal tax rate and our effective tax rate:

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended
December, 31,
 
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  

Tax benefit at federal statutory rate

    34 %   34 %   34 %   34 %   34 %

State tax, net of federal benefit

    5 %   4 %   4 %   4 %   4 %

Stock-based compensation

    (2 )%   (6 )%   (6 )%   (1 )%   (12 )%

Rate Change and Rate Differences

    (1 )%   (4 )%   (1 )%   0 %   0 %

Change in valuation allowance

    (34 )%   (24 )%   (25 )%   (33 )%   (14 )%

Deferred financing costs

    0 %   0 %   0 %   0 %   (4 )%

Other

    (2 )%   (4 )%   (6 )%   (4 )%   (8 )%

Effective tax rate

    0 %   0 %   0 %   0 %   0 %

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Table of Contents


SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(15) Income Taxes (Continued)

        The following table presents the significant components of our deferred tax assets and liabilities:

 
  As of December 31,   As of
June 30,
2017
(unaudited)
 
 
  2015   2016  
 
  (in thousands)
 

Deferred tax assets:

                   

Net operating loss carry forwards

  $ 11,915   $ 12,863   $ 14,554  

Accrued and prepaid expenses

    513     862     1,324  

Deferred Rent

    321     1,570     1,841  

Stock-based compensation

    75     690     823  

Miscellaneous

    25     42     72  

Property and equipment

    127          

Gross deferred tax assets

    12,976     16,027     18,614  

Valuation allowance

    (12,976 )   (13,951 )   (14,654 )

Net deferred tax assets

        2,076     3,960  

Deferred tax liabilities:

   
 
   
 
   
 
 

Property and equipment

        (2,076 )   (3,960 )

Net deferred tax assets

  $   $   $  

        For federal income tax purposes, we have net operating loss ("NOL") carryforwards of approximately $31.3 million, $33.9 million, and $38.3 million, respectively, as of December 31, 2015 and 2016 and June 30, 2017 (unaudited), which will begin to expire in 2029.

        A limitation may apply to the use of the net operating loss and credit carryforwards, under section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"), and similar state tax provisions that are applicable if the Company experiences an "ownership change." An ownership change may occur, for example, as a result of issuance of new equity. Should these limitations apply, the carryforwards would be subject to an annual limitation, resulting in a potential reduction in the gross deferred tax assets before considering the valuation allowance.

        As of December 31, 2016 and June 30, 2017 (unaudited), we had not performed a Section 382 limitation study. Depending on the outcome of such a study, the gross amount of net operating losses recognizable in future tax periods could be limited. A limitation in the carryforwards would decrease the carrying amount of the gross amount of the net operating loss carryforwards, with a corresponding decrease in the valuation allowance recorded against these gross deferred tax assets.

        Accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of our net deferred tax assets. We primarily considered such factors as our history of operating losses, the nature of our deferred tax assets, and the timing, likelihood, and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, we do not believe that it is more likely than not that the net deferred tax assets will be realized, accordingly, a full valuation allowance has been established. The valuation allowance increased by approximately $1.4 million, $1.0 million, respectively, during the years ended December 31, 2015 and 2016 and $0.7 million during the six months ended June 30, 2017 (unaudited).

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Table of Contents


SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(15) Income Taxes (Continued)

        We attribute net revenue, costs and expenses to domestic and foreign components based on the terms of our agreements with its subsidiaries. We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries, as such earnings are to be reinvested offshore indefinitely. The income tax liability would be insignificant if these earnings were to be repatriated. We have not incurred any material tax interest or penalties with respect to income taxes in the years ended December 31, 2014, 2015 and 2016 or the six months ended June 30, 2016 and 2017 (unaudited).

        Within 12 months of December 31, 2016 and June 30, 2017 (unaudited), we do not anticipate any significant change in uncertain tax positions, which are currently zero.

        We file U.S. federal income tax returns as well as income tax returns in many U.S. states and the United Kingdom. The tax years 2012 to 2015 remain open to examination by the major jurisdictions in which we are subject to tax.

(16) Commitments and Contingencies

(a)   Leases

        We have several operating leases for office space in Denver, Colorado, Orange, California, and Redwood City, California. As of December 31, 2016 and June 30, 2017 (unaudited), these lease agreements expired at various dates through 2024 and 2028, respectively.

        The rent reflected in each lease, net of tenant improvement allowance, is recorded on a straight-line basis over the life of the lease. Tenant improvements are recorded to property and equipment, and the allowance is recorded as deferred rent on the consolidated balance sheets. We record the difference between the rent paid and the straight-line rent expense as deferred rent.

        In March and July 2016, we entered into lease agreements for a new office in Denver and received a tenant improvement allowance of approximately $6.4 million.

        In March 2017, we entered into a lease agreement for a new office in Redwood City and received a tenant improvement allowance of approximately $0.9 million. This lease expires in 2028, and the total lease commitment is $17.5 million. In May 2017, we entered into a lease agreement for a new office in Irvine, California. This lease expires in 2028, and the total lease commitment is $7.4 million.

        Total rent expense was $1.5 million, $1.7 million, and $2.4 million, respectively, for the years ended December 31, 2014, 2015, and 2016 and $1.0 million and $1.1 million, respectively, for the six months ended June 30, 2016 and 2017 (unaudited). Rent expense is allocated to departments to the extent the space is occupied by the department.

        General and administrative expense includes costs related to facility closure and relocation of $0.4 million for the year ended December 31, 2016, and $0.1 million and $1.0 million, respectively, for the six months ended June 20, 2016 and 2017 (unaudited). There were no such costs during the years ended December 31, 2014 and 2015.

        As of December 31, 2016, and June 30, 2017 (unaudited) we had a $1.2 million unused standby letter of credit, which serves as a security deposit for the Denver lease. As of June 30, 2017 (unaudited), we had an additional $1.4 million unused standby letter of credit for our new Redwood City lease, which has a commencement date of September 1, 2017.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(16) Commitments and Contingencies (Continued)

        The following tables summarize our future minimum lease payments for operating and capital lease agreements and purchase commitments:

 
  As of  
Operating Leases
  December 31, 2016   June 30, 2017
(unaudited)
 
 
  (in thousands)
 

Calendar year of payment:

             

2017

  $ 1,255   $ 1,179  

2018

    2,729     4,537  

2019

    2,780     5,259  

2020

    2,433     4,986  

2021

    2,456     5,086  

Thereafter

    5,935     21,028  

  $ 17,588   $ 42,075  

 

 
  As of  
Capital Leases
  December 31, 2016   June 30, 2017
(unaudited)
 
 
  (in thousands)
 

Calendar year of payment:

             

2017

  $ 5,120   $ 3,162  

2018

    2,812     4,848  

2019

    1,837     3,960  

2020

    1,033     3,112  

2021

    5     632  

Thereafter

         

Total minimum lease payments

    10,807     15,714  

Less amount representing interest

    (157 )   (68 )

Present value of net minimum capital lease payments

  $ 10,650   $ 15,646  

 

 
  As of  
Purchase and Other Obligations
  December 31, 2016   June 30, 2017
(unaudited)
 
 
  (in thousands)
 

Calendar year of payment:

             

2017

  $ 1,986   $ 1,470  

2018

    1,318     3,103  

2019

    311     3,988  

2020

        5,680  

2021

        9,017  

Thereafter

        4,625  

  $ 3,615   $ 27,883  

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(16) Commitments and Contingencies (Continued)

        In June 2017, we entered into an agreement with Amazon Web Services for cloud infrastructure services. The agreement expires in 2022, and the total commitment is $24.4 million. The purchase order and other obligations table above includes these amounts.

        The commitment amounts in the tables above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The tables do not include obligations under agreements that we can cancel without a significant penalty.

(b)    Sales and Use Tax

        We conduct operations in many tax jurisdictions throughout the United States. In many of these jurisdictions, non-income-based taxes, such as sales and use taxes are assessed on our operations. Historically, we have not billed or collected these taxes. We record a provision for such tax exposure when it is both probable that a liability has been incurred and the amount of the exposure can be reasonably estimated. The liability is recorded in "accounts payable and accrued liabilities" and "other long-term liabilities" on the consolidated balance sheets. The table below summarizes the sales tax, interest, and penalty recorded:

 
   
   
   
  For the Six Months Ended
June 30,
 
 
  For the Year Ended
December, 31,
 
 
  2016
(unaudited)
  2017
(unaudited)
 
 
  2014   2015   2016  
 
  (in thousands)
 

Sales tax provision

  $ 213   $ 299   $ 437   $ 183   $ 297  

Interest

    7     15     24     11     18  

Penalties

    24     36     59     23     43  

  $ 244   $ 350   $ 520   $ 217   $ 358  

        These estimates include several key assumptions including, but not limited to, the taxability of our services, the jurisdictions in which we believe we have nexus, and the sourcing of revenues to those jurisdictions. In the event these jurisdictions challenge our assumptions and analysis, the actual exposure could differ materially from the current estimates.

(c)   Legal Proceedings

        In the normal course of business, we may, from time to time, be subject to pending and threatened legal actions and proceedings. These actions and occurrences are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

(d)   Indemnification

        Our arrangements with customers generally include an indemnification provision that we will indemnify and defend a customer in actions brought against the customer that claim our services infringe upon a valid patent, copyright, or trademark. Historically, we have not incurred any costs related to indemnification claims and do not expect to incur costs for services that have been provided. Accordingly, we do not maintain a reserve for such exposure.

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SENDGRID, INC.

Notes to Consolidated Financial Statements (Continued)

(17) Expense Associated with Defined Contribution Benefit Plans

        We sponsor a defined contribution plan ("the 401(k) Plan), which permits participants to make contributions through salary deductions pursuant to section 401(k) of the Internal Revenue Code. All full-time employees who are at least 21 years of age are generally eligible to participate. Participating employees can contribute up to the maximum annual amount allowed under the Internal Revenue Code, and can elect that a portion or all of the deferral contributions are Roth contributions that are includable in the participants' gross income at the time deferred. The combined elective deferrals between traditional pre-tax and designated Roth contributions cannot exceed the maximum annual amount allowed under the Internal Revenue Code.

        Unless an eligible employee affirmatively elects otherwise, compensation will be reduced by 4%, and we will make pre-tax deferral contributions in such amount on the employee's behalf. The 401(k) Plan provides for us, at our discretion, to make pretax matching contributions based on a percentage of each participant's compensation, as determined annually by management.

        We incurred expenses associated with matching contributions of $0.8 million, $1.0 million, $1.3 million, respectively, for the years ended December 31, 2014, 2015, and 2016 and $0.6 million and $0.8 million, respectively, for the six months ended June 30, 2016 and 2017 (unaudited).

(18) Subsequent Event

        In July 2017, our Board of Directors increased the number of authorized common shares to 51,350,000. Additionally, in August 2017, the Board reserved 466,571 common shares to fund and support SendGrid.org.

        We evaluated subsequent events through August 18, 2017, which is the date the financial statements were issued. Aside from the item noted above, there were no material subsequent events requiring disclosure.

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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution.

        The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee and the New York Stock Exchange initial listing fee.

 
  Amount to
be Paid
 

SEC registration fee

  $ 12,450  

FINRA filing fee

    15,500  

Exchange listing fee

                 *

Blue sky fees and expenses

                 *

Printing and engraving expenses

                 *

Legal fees and expenses

                 *

Accounting fees and expenses

                 *

Transfer agent and registrar fees and expenses

                 *

Miscellaneous fees and expenses

                 *

Total

  $              *

*
To be filed by amendment.

Item 14.    Indemnification of Directors and Officers.

        Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act. Our amended and restated certificate of incorporation to be in effect immediately after the closing of this offering allows for our indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law, and our amended and restated bylaws to be in effect immediately after the closing of this offering provide for indemnification of our directors and executive officers to the maximum extent permitted by the Delaware General Corporation Law.

        We have entered into indemnification agreements with our directors and executive officers, whereby we have agreed to indemnify our directors and executive officers to the fullest extent permitted by law, including indemnification against expenses and liabilities incurred in legal proceedings to which the director or executive officer was, or is threatened to be made, a party by reason of the fact that such director or executive officer is or was a director, officer, employee or agent of SendGrid, provided that such director or executive officer acted in good faith and in a manner that the director or executive officer reasonably believed to be in, or not opposed to, the best interest of SendGrid. At present, there is no pending litigation or proceeding involving a director or executive officer of SendGrid regarding which indemnification is sought, nor is the Registrant aware of any threatened litigation that may result in claims for indemnification.

        We maintain insurance policies that indemnify our directors and officers against various liabilities arising under the Securities Act and the Exchange Act that might be incurred by any director or officer in his or her capacity as such. The underwriters are obligated, under certain circumstances, pursuant to the underwriting agreement to be filed as Exhibit 1.1 hereto, to indemnify us, our officers and our directors against liabilities under the Securities Act.

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Item 15.    Recent Sales of Unregistered Securities.

        Since January 1, 2014, we have made sales of the following unregistered securities:

    (1)
    Between January 1, 2014, and October 15, 2017, we granted stock options under our 2012 Equity Incentive Plan to purchase an aggregate of 12,226,976 shares of our common stock at exercise prices ranging between $1.40 and $12.72 per share to a total of 590 employees, directors and consultants.

    (2)
    Between January 1, 2014, and October 15, 2017, we issued and sold to our employees, directors and consultants an aggregate of 2,908,785 shares of our common stock upon the exercise of options for aggregate proceeds of approximately $1,474,437.

    (3)
    Between October 20, 2014 and October 15, 2017, we issued RSUs for an aggregate of 652,172 shares of our common stock to a total of two employees.

    (4)
    On November 21, 2014, we issued an aggregate of 3,610,273 shares of our Series C convertible preferred stock to 11 accredited investors at a per share price of $5.74, for aggregate consideration of approximately $20,722,967.

    (5)
    On April 28, 2015, we issued a warrant exercisable for up to an aggregate of 26,132 shares of our Series C convertible preferred stock at an exercise price of $5.74 per share as partial consideration for lender services under a loan and security agreement, as amended. This warrant was cancelled in May 2017 and at no time was exercisable.

    (6)
    On November 17, 2016, we issued an aggregate of 2,329,072 shares of our Series D convertible preferred stock to seven accredited investors at a per share price of $14.14029, for aggregate consideration of approximately $32,933,754.

        Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of the transactions described in paragraphs (2), (4), (5), and (6) above represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof. Appropriate legends were placed upon the stock certificates issued in these transactions.

Item 16.    Exhibits and Financial Statement Schedules.

        The exhibits to the registration statement are listed in the Exhibit Index attached hereto and are incorporated by reference herein.

Item 17.    Undertakings.

        The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling

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person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned Registrant hereby undertakes that:

        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.

        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.

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EXHIBIT

Number
  Description of Document
  1.1   Form of Underwriting Agreement.
 
   
  3.1   Seventh Amended and Restated Certificate of Incorporation, as currently in effect.
 
   
  3.2   Amendment to Seventh Amended and Restated Certificate of Incorporation, as currently in effect.
 
   
  3.3 Second Amendment to Seventh Amended and Restated Certificate of Incorporation, as current in effect.
 
   
  3.4   Form of Amended and Restated Certificate of Incorporation to be effective upon completion of this offering.
 
   
  3.5   Amended and Restated Bylaws, as currently in effect.
 
   
  3.6   Form of Amended and Restated Bylaws to be effective upon completion of this offering.
 
   
  4.1   Reference is made to exhibits 3.1 through 3.6.
 
   
  4.2 Specimen stock certificate evidencing shares of Common Stock.
 
   
  4.3   Amended and Restated Registration Rights Agreement, dated as of November 17, 2016, by and among the Registrant and certain of its stockholders.
 
   
  4.4   Second Amended and Restated Warrant to Purchase Stock to purchase shares of Series B convertible preferred stock issued to PacWest Bancorp, dated as of May 8, 2017.
 
   
  5.1 Opinion of Cooley LLP as to legality.
 
   
  10.1 + 2009 Equity Incentive Plan, as amended to date.
 
   
  10.1.1 + Form of Stock Option Agreement under 2009 Equity Incentive Plan.
 
   
  10.2 + 2012 Equity Incentive Plan, as amended to date.
 
   
  10.2.1 + Form of Incentive Stock Option or Nonstatutory Stock Option Agreement under 2012 Equity Incentive Plan.
 
   
  10.2.2 + Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under 2012 Equity Incentive Plan.
 
   
  10.3 +† Form of 2017 Equity Incentive Plan.
 
   
  10.3.1 +† Form of Stock Option Grant Notice and Stock Option Agreement under 2017 Equity Incentive Plan.
 
   
  10.3.2 +† Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under 2017 Equity Incentive Plan.
 
   
  10.4 +† Form of 2017 Employee Stock Purchase Plan.
 
   
  10.5 + Form of Indemnity Agreement between the Registrant and each of its directors and executive officers.
 
   
  10.6 + Executive Severance Benefit Plan.
 
   
  10.7 + 2016 VP Bonus Plan.
 
   
  10.8 + 2017 Senior Executive Cash Incentive Bonus Plan.
 
   
  10.9   Lease Agreement by and among the Registrant, BOP 1801 California Street LLC, and BOP 1801 California Street II, LLC, dated as of March 25, 2016.
 
   

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Number
  Description of Document
  10.9.1   First Amendment of Lease by and among the Registrant, BOP 1801 California Street LLC, and BOP 1801 California Street II LLC dated July 25, 2016.
 
   
  10.9.2   Letter Agreement between BOP 1801 California Street LLC and Registrant dated April 4, 2017.
 
   
  10.10   Loan and Security Agreement by and between the Registrant and Square 1 Bank, dated as of June 27, 2013.
 
   
  10.10.1   First Amendment to Loan and Security Agreement by and between the Registrant and Square 1 Bank, dated as of April 28, 2014.
 
   
  10.10.2   Second Amendment to Loan and Security Agreement by and between the Registrant and Square 1 Bank, dated as of December 1, 2014.
 
   
  10.10.3   Third Amendment to Loan and Security Agreement by and between the Registrant and Square 1 Bank, dated as of April 28, 2015.
 
   
  10.10.4   Fourth Amendment to Loan and Security Agreement by and between the Registrant and Square 1 Bank, dated as of May 27, 2015.
 
   
  10.10.5   Fifth Amendment to Loan and Security Agreement by and between the Registrant and Pacific Western Bank (as successor in interest by merger to Square 1 Bank), dated as of May 4, 2016.
 
   
  10.10.6   Sixth Amendment to Loan and Security Agreement by and between the Registrant and Pacific Western Bank, dated May 8, 2017.
 
   
  10.11.1 + Offer Letter by and between the Registrant and Sameer Dholakia, dated August 28, 2014.
 
   
  10.11.2 + Offer Letter by and between the Registrant and Yancey Spruill, dated April 17, 2015.
 
   
  10.11.3 + Offer Letter by and between the Registrant and Scott Heimes, dated October 2, 2015.
 
   
  10.11.4 + Offer Letter by and between the Registrant and Leandra Fishman, dated July 18, 2016.
 
   
  10.11.5 + Offer Letter by and between the Registrant and Pattie Money, dated August 28, 2016.
 
   
  10.11.6 + Offer Letter by and between the Registrant and Stephen Sloan, dated September 23, 2015.
 
   
  10.11.7 + Offer Letter by and between the Registrant and Michael Tognetti, dated August 8, 2011.
 
   
  10.11.8 + Offer Letter by and between the Registrant and Craig Kaes, dated February 18, 2015.
 
   
  10.12 + Leandra Fishman 2017 Sales Commission Plan.
 
   
  21.1   Subsidiaries of the Registrant.
 
   
  23.1   Consent of KPMG US LLP, independent registered public accounting firm.
 
   
  23.2 Consent of Cooley LLP (included in Exhibit 5.1).
 
   
  24.1   Power of Attorney (included in signature pages).
 
   
  99.1   Consent of Egg Strategy.

To be filed by amendment.

+
Indicates management contract or compensatory plan.

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SIGNATURES

        Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on the 18th day of October, 2017.

 
   
   
    SENDGRID, INC.

 

 

By:

 

/s/ SAMEER DHOLAKIA

        Sameer Dholakia
President and Chief Executive Officer

        KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Sameer Dholakia, Yancey Spruill and Michael Tognetti, and each of them, his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv) take any and all actions which may be necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof.

        Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature
 
Title
 
Date

 

 

 

 

 
/s/ SAMEER DHOLAKIA

Sameer Dholakia
  President, Chief Executive Officer and Director (Principal Executive Officer)   October 18, 2017

/s/ YANCEY SPRUILL

Yancey Spruill

 

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

 

October 18, 2017

/s/ BYRON B. DEETER

Byron B. Deeter

 

Director

 

October 18, 2017

/s/ WARREN ADELMAN

Warren Adelman

 

Director

 

October 18, 2017

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Signature
 
Title
 
Date

 

 

 

 

 
/s/ AJAY AGARWAL

Ajay Agarwal
  Director   October 18, 2017

/s/ FRED BALL

Fred Ball

 

Director

 

October 18, 2017

/s/ HILARY SCHNEIDER

Hilary Schneider

 

Director

 

October 18, 2017

/s/ SRI VISWANATH

Sri Viswanath

 

Director

 

October 18, 2017



Exhibit 1.1

 

[ · ] SHARES

 

 

SENDGRID, INC.

 

COMMON STOCK, PAR VALUE $0.001 PER SHARE

 

 

UNDERWRITING AGREEMENT

 

 

[ · ], 2017

 



 

[ · ], 2017

 

Morgan Stanley & Co. LLC
J.P. Morgan Securities LLC

 

c/o             Morgan Stanley & Co. LLC
1585 Broadway
New York, New York 10036

 

c/o             J.P. Morgan Securities LLC
383 Madison Avenue
New York, New York 10179

 

Ladies and Gentlemen:

 

SendGrid, Inc., a Delaware corporation (the “ Company ”), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the “ Underwriters ”), for whom Morgan Stanley & Co. LLC (“ Morgan Stanley ”) and J.P. Morgan Securities LLC (“ J.P. Morgan ”) are acting as representatives (the “ Representatives ”), [ · ] shares of its common stock, par value $0.001 per share (the “ Firm Shares ”).

 

The Company also proposes to issue and sell to the several Underwriters not more than an additional [ · ] shares of its common stock, par value $0.001 per share (the “ Additional Shares ”) if and to the extent that you, as Representatives, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 2 hereof.  The Firm Shares and the Additional Shares are hereinafter collectively referred to as the “ Shares. ” The shares of common stock, par value $0.001 per share, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the “ Common Stock.

 

The Company has filed with the Securities and Exchange Commission (the “ Commission ”) a registration statement, including a prospectus, relating to the Shares.  The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the “ Securities Act ”), is hereinafter referred to as the “ Registration Statement ”; the prospectus in the form first used to confirm sales of Shares (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the “ Prospectus. ”  If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the “ Rule 462 Registration Statement ”), then any reference herein to the term “ Registration Statement ” shall be deemed to include such Rule 462 Registration Statement.

 

For purposes of this Underwriting Agreement (this “ Agreement ”), “ free writing prospectus ” has the meaning set forth in Rule 405 under the Securities Act, “ Time of Sale Prospectus ” means the preliminary prospectus contained in the Registration

 



 

Statement at the time of its effectiveness together with the documents and pricing information set forth in Schedule II hereto, and “ broadly available road show ” means a “bona fide electronic road show” as defined in Rule 433(h)(5) under the Securities Act that has been made available without restriction to any person.  As used herein, the terms “Registration Statement,” “preliminary prospectus,” “Time of Sale Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein as of the date hereof.

 

1.                              Representations and Warranties .  The Company represents and warrants to and agrees with each of the Underwriters that:

 

(a)                             The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the Company’s knowledge, threatened by the Commission.

 

(b)                             (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain, as of the date of such amendment or supplement, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will, as of the date of such amendment or supplement, comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (iii) the Time of Sale Prospectus does not, and at the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 4), the Time of Sale Prospectus, as then amended or supplemented by the Company, if applicable, 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, (iv) each broadly available road show, if any, when considered together with the Time of Sale Prospectus, does 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 and (v) the Prospectus, as of its date, does not contain and, as amended or supplemented, if applicable, will not contain, as of its date, as of the Closing Date and as of any Option Closing Date, 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, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement, the Time of Sale Prospectus or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.

 

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(c)                              The Company is not an “ineligible issuer” in connection with the offering pursuant to Rules 164, 405 and 433 under the Securities Act.  Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder.  Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or, if filed after the effective date of this Agreement, will comply, when filed, in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder.  Except for the free writing prospectuses, if any, identified in Schedule II hereto, and electronic road shows, if any, each furnished to you before first use, the Company has not prepared, used or referred to, and will not, without your prior consent, prepare, use or refer to, any free writing prospectus.

 

(d)                             The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction (to the extent the concept of good standing or an equivalent concept is applicable in such jurisdiction) in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole.

 

(e)                              Each subsidiary of the Company has been duly organized, is validly existing and in good standing under the laws of the jurisdiction of its organization (to the extent the concept of good standing or an equivalent concept is applicable in such jurisdiction), has the corporate or other organizational power and authority to own its property and to conduct its business as described in the Time of Sale Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction (to the extent the concept of good standing or an equivalent concept is applicable in such jurisdiction) in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable (to the extent that such concepts are applicable in such jurisdiction) and are owned directly by the Company or a subsidiary of the Company, free and clear of all liens, encumbrances, equities or claims.

 

(f)                               This Agreement has been duly authorized, executed and delivered by the Company.

 

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(g)                              As of the Closing Date, the authorized capital stock of the Company will conform as to legal matters to the description thereof contained in each of the Time of Sale Prospectus and the Prospectus.

 

(h)                             The shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable.

 

(i)                                 The Shares have been duly authorized and, when issued, delivered and paid for in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights that have not been validly waived.

 

(j)                                The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of (i) applicable law, (ii) the certificate of incorporation or bylaws of the Company, (iii) any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, except that in the case of clauses (i), (iii) and (iv) as would not, individually or in the aggregate, have a material adverse effect on the Company or on the power and ability of the Company to perform its obligations under this Agreement; and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as have been obtained or waived or as may be required by the securities or Blue Sky laws of the various states or foreign jurisdictions or the rules and regulations of the Financial Industry Regulatory Authority (“ FINRA ”) in connection with the offer and sale of the Shares.

 

(k)                             There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus.

 

(l)                                 There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject (i) other than proceedings accurately described in all material respects in the Time of Sale Prospectus and proceedings that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, or on the power or ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated by the Time of Sale Prospectus or (ii) that are required to be described in the Registration Statement or the Prospectus and are not so described in all material respects; and

 

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there are no statutes, regulations, contracts or other documents  that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described in all material respects or filed as required.

 

(m)                         Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder.

 

(n)                             The Company is not, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

 

(o)                             The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“ Environmental Laws ”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.

 

(p)                             There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole.

 

(q)                             Except as described in the Time of Sale Prospectus or validly waived or complied with in connection with the issuance and sale of the Shares contemplated hereby, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement.

 

(r)                                Neither the Company nor any of its subsidiaries or controlled affiliates, nor any director or officer thereof, nor, to the Company’s knowledge,

 

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any employee, agent or representative of the Company or of any of its subsidiaries or controlled affiliates, has taken any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any “government official” (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to improperly influence official action, or to any person in violation of any applicable anti-corruption laws; (i) the Company and its subsidiaries and controlled affiliates have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintained and will continue to maintain policies and procedures reasonably designed to promote and achieve compliance with such laws and with the representations and warranties contained herein; and (ii) neither the Company nor its subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any applicable anti-corruption laws.

 

(s)                               The operations of the Company and its subsidiaries are and have been conducted at all times in material compliance with all applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of jurisdictions where the Company and its subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency having jurisdiction over the Company or any of its subsidiaries (collectively, the “ Anti-Money Laundering Laws ”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

(t)                                (i) Neither the Company nor any of its subsidiaries, nor any director or officer thereof, nor, to the Company’s knowledge, any employee, agent, controlled affiliate or representative of the Company or any of its subsidiaries, is an individual or entity (“ Person ”) that is, or is owned or controlled by one or more Persons that are:

 

(A)                      the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “ Sanctions ”), or

 

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(B)                      located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Crimea, Cuba, Iran, North Korea, Sudan and Syria).

 

(ii)                                  The Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:

 

(A)                      to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or

 

(B)                      in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).

 

(iii)                               Except as disclosed in the Time of Sale Prospectus, for the past 5 years, the Company and its subsidiaries have not knowingly engaged in, are not now knowingly engaged in, and will not knowingly engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.

 

(u)                             Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) the Company and its subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction; (ii) the Company has not purchased any of its outstanding capital stock, other than from its employees or other service-providers in connection with the termination of their service pursuant to equity compensation plans or agreements or in connection with the exercise of the Company’s right of first refusal upon a proposed transfer, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock (other than the exercise of warrants outstanding as of such respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus or the exercise or settlement of equity awards or grants of equity awards or forfeiture of equity awards outstanding as of such respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, in each case granted pursuant to the equity compensation plans described in the Time of Sale Prospectus), short-term debt or long-term debt of the Company and its subsidiaries, except in each case as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, respectively.

 

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(v)                             The Company and its subsidiaries do not own any real property.  The Company and its subsidiaries have good and marketable title to all personal property (other than Intellectual Property, which is addressed exclusively in Section 1(w)) owned by them which is material to the business of the Company and its subsidiaries, taken as a whole, in each case free and clear of all liens, encumbrances and defects except such as are described in the Time of Sale Prospectus or such as do not materially diminish the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries, taken as a whole; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Time of Sale Prospectus.

 

(w)                           Except as disclosed in the Time of Sale Prospectus, the Company and its subsidiaries own or possess, or can acquire on commercially reasonable terms, sufficient rights to use all inventions, patents, trademarks, service marks, trade names, domain names, copyrights, licenses, technology, know-how, trade secrets and other intellectual property and proprietary or confidential information, systems or procedures (including all goodwill associated with, and all registrations of, and applications by the Company and its subsidiaries for registration of, the foregoing) (collectively, “ Intellectual Property ”) necessary for or material to the conduct of their respective businesses as currently conducted by them, except where the failure to own, possess or acquire any of the foregoing would not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.  The conduct of the respective businesses of the Company and its subsidiaries do not infringe, misappropriate or otherwise violate any Intellectual Property of others, except where such infringement, misappropriation or other violation would not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.  Except as disclosed in the Time of Sale Prospectus or except as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim (i) challenging the Company’s or any subsidiary of the Company’s rights in or to, or alleging the violation by the Company or any of its subsidiaries of any of the terms of, any of their Intellectual Property; (ii) alleging that the Company or any of its subsidiaries has infringed, misappropriated or otherwise violated or conflicted with any Intellectual Property of any third party; or (iii) challenging the validity, scope or enforceability of any Intellectual Property owned by or exclusively licensed to the Company or any of its subsidiaries. Except as disclosed in the Time of Sale Prospectus or except as would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the Company and its subsidiaries, taken as a whole, all Intellectual Property owned by the Company or its subsidiaries is owned solely by the Company or its subsidiaries, is owned free and clear of all liens,

 

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encumbrances, defects and other restrictions (except for non-exclusive licenses granted to third parties in the ordinary course of business consistent with past practice), and to the knowledge of the Company, no third party has infringed, misappropriated or otherwise violated any Intellectual Property owned by or exclusively licensed to the Company or any of its subsidiaries. The Company and its subsidiaries have at all times taken reasonable steps in accordance with customary industry practice to maintain the confidentiality of all Intellectual Property, the value of which to the Company or any of its subsidiaries is contingent upon maintaining the confidentiality thereof. All founders, current and former employees, contractors, consultants and other parties involved in the development of Intellectual Property for the Company or any subsidiary of the Company have signed confidentiality and invention assignment agreements with the Company or such subsidiary of the Company, as applicable, pursuant to which the Company or subsidiary of the Company, as applicable, either (x) has obtained ownership of and is the exclusive owner of such Intellectual Property, or (y) has obtained a valid right to exploit such Intellectual Property, sufficient for the conduct of its business as currently conducted and as proposed in the Registration Statement and the Prospectus, except where the failure to obtain such confidentiality and invention assignment agreements would not reasonably be expected to have a material adverse effect on the Company and its subsidiaries taken as a whole.

 

(x)                             The Company and its subsidiaries have used all software and other materials distributed under a “free , ” “open source,” or similar licensing model (including but not limited to the MIT License, Apache License, GNU General Public License, GNU Lesser General Public License and GNU Affero General Public License) (“ Open Source Software ”) in compliance with all license terms applicable to such Open Source Software, except where the failure to comply would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; and neither the Company nor any of its subsidiaries has used or distributed any Open Source Software in a manner that requires or has required (i) the Company or any of its subsidiaries to permit reverse engineering of any products or services of the Company or any of its subsidiaries, or any software code or other technology owned by the Company or any of its subsidiaries or (ii)any products or services of the Company or any of its subsidiaries, or any software code or other technology owned by the Company or any of its subsidiaries, to be (A) disclosed or distributed in source code form, (B) licensed for the purpose of making derivative works, or (C) redistributed at no charge, except, in the case of each of (i) and (ii) above, as would not have a material adverse effect on the Company and its subsidiaries, taken as a whole.

 

(y)                             The Company and its subsidiaries have complied, and are presently in compliance, in all material respects with their respective privacy policies and other legal obligations regarding the collection, use, transfer, storage, protection, disposal and disclosure by the Company and its subsidiaries of personal and user information gathered or accessed in the course of their respective operations, and with respect to all such information, the Company and its subsidiaries have at all

 

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times taken steps reasonably necessary in accordance with industry standard practices (including, without limitation, implementing and monitoring compliance with adequate measures with respect to technical and physical security) to protect such information against loss and against unauthorized access, use, modification, disclosure or other misuse, except in each case to the extent that the failure to do so would not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole. To the knowledge of the Company, except as disclosed in the Time of Sale Prospectus or as would not individually or in the aggregate have a material adverse effect on the Company and its subsidiaries, taken as a whole, there has been no unauthorized access to such information.

 

(z)                              No material labor dispute with the employees of the Company or any of its subsidiaries exists, except as described in the Time of Sale Prospectus, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that would have a material adverse effect on the Company and its subsidiaries, taken as a whole.

 

(aa)                      The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are, in the reasonable judgment of the Company, prudent and customary in the businesses in which they are engaged; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Time of Sale Prospectus.

 

(bb)                      The Company and its subsidiaries, taken as a whole, possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to obtain such certificates, authorizations and permits would not, individually or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Time of Sale Prospectus.

 

(cc)                        The consolidated financial statements (including the related notes thereto) of the Company included in the Registration Statement, the Time of Sale Prospectus and the Prospectus comply in all material respects with the applicable requirements of the Securities Act and present fairly in all material respects the

 

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consolidated financial position of the Company and its subsidiaries as of the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“ U.S. GAAP ”) applied on a consistent basis throughout the periods covered thereby. The other financial information included in the Registration Statement, the Time of Sale Prospectus and the Prospectus has been derived from the accounting records of the Company and its subsidiaries and presents fairly in all material respects the information shown thereby.

 

(dd)                      The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the Time of Sale Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (i) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (ii) no change in the Company’s internal control over financial reporting that has materially and adversely affected, or is reasonably likely to materially and adversely affect, the Company’s internal control over financial reporting.

 

(ee)                        Except as described in the Time of Sale Prospectus or the Registration Statement, the Company has not sold, issued or distributed any shares of Common Stock during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Securities Act, other than shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants.

 

(ff)                          The Company and each of its subsidiaries have filed all federal, state, local and foreign tax returns required to be filed by them through the date of this Agreement or have requested extensions thereof (except where the failure to file would not, individually or in the aggregate, have a material adverse effect on the Company and its subsidiaries taken as a whole) and have paid all taxes required to be paid thereon (except for cases in which the failure to pay would not, individually or in the aggregate, have a material adverse effect on the Company and its subsidiaries taken as a whole, or, except as currently being contested in good faith and for which reserves required by U.S. GAAP have been created in the financial statements of the Company), and no unpaid tax deficiency has been determined adversely to the Company or any of its subsidiaries which has had (nor does the Company nor any of its subsidiaries have any notice or knowledge of any unpaid tax deficiency which would reasonably be expected to be

 

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determined adversely to the Company or its subsidiaries and which would reasonably be expected to have) a material adverse effect on the Company and its subsidiaries taken as a whole.

 

(gg)                        From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “ Emerging Growth Company ”).  “ Testing-the-Waters Communication ” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.

 

(hh)                      The Company (i) has not alone engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications.  The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications.  The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule III hereto.  “ Written Testing-the-Waters Communication ” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.

 

(ii)                              As of the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers, none of (A) the Time of Sale Prospectus, (B) any free writing prospectus, when considered together with the Time of Sale Prospectus, and (C) any individual Written Testing-the-Waters Communication, when considered together with the Time of Sale Prospectus, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(jj)                            KPMG LLP, who have certified certain financial statements of the Company and its subsidiaries, are independent public accountants as required by the Securities Act and the rules and regulations of the Commission thereunder.

 

(kk)                      The statistical, industry-related and market-related data included in the Time of Sale Prospectus and the Prospectus are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate and such data is consistent with the sources from which they are derived, in each case in all material respects.

 

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2.                              Agreements to Sell and Purchase .  The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective numbers of Firm Shares set forth in Schedule I hereto opposite its name at $[ · ] a share (the “ Purchase Price ”).

 

On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have the right to purchase, severally and not jointly, up to [ · ] Additional Shares at the Purchase Price, provided, however, that the amount paid by the Underwriters for any Additional Shares shall be reduced by an amount per share equal to any dividends declared by the Company and payable on the Firm Shares but not payable on such Additional Shares.  You may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice not later than 30 days after the date of this Agreement.  Any exercise notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased.  Each purchase date must be at least one business day after the written notice is given and may not be earlier than the closing date for the Firm Shares nor later than ten business days after the date of such notice.  Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares.  On each day, if any, that Additional Shares are to be purchased (an “ Option Closing Date ”), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares.

 

3.                              Terms of Public Offering .  The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable.  The Company is further advised by you that the Shares are to be offered to the public initially at $[ · ] a share (the “ Public Offering Price ”) and to certain dealers selected by you at a price that represents a concession not in excess of $[ · ] a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $[ · ] a share, to any Underwriter or to certain other dealers.

 

4.                              Payment and Delivery .  Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on November [ · ], 2017, or at such other time on the same or such other date, not later than [ · ], 2017, as shall be designated in writing by you.  The time and date of such payment are hereinafter referred to as the “ Closing Date.

 

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Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 2 or at such other time on the same or on such other date, in any event not later than [ · ], 2017, as shall be designated in writing by you.

 

The Firm Shares and Additional Shares shall be registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the applicable Option Closing Date, as the case may be.  The Firm Shares and Additional Shares shall be delivered to you on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor.

 

5.                              Conditions to the Underwriters’ Obligations .  The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Registration Statement shall have become effective not later than [ · ] (New York City time) on the date hereof.

 

The several obligations of the Underwriters are subject to the following further conditions:

 

(a)                             Subsequent to the execution and delivery of this Agreement and prior to the Closing Date:

 

(i)                                     there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the securities of the Company or any of its subsidiaries by any “nationally recognized statistical rating organization,” as such term is defined in Section 3(a)(62) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”); and

 

(ii)                                  there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Time of Sale Prospectus that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus.

 

(b)                             The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed on behalf of the Company by an executive officer of the Company, to the effect set forth in Section 5(a)(i) above

 

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and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date.

 

The officer signing and delivering such certificate may rely upon his or her knowledge as to proceedings threatened.

 

(c)                              The Underwriters shall have received on the Closing Date an opinion and negative assurance letter of Cooley LLP, outside counsel for the Company, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

(d)                             The Underwriters shall have received on the Closing Date (i) an opinion and (ii) a negative assurance letter of Davis Polk & Wardwell LLP, counsel for the Underwriters, dated the Closing Date, in form and substance reasonably satisfactory to the Representatives.

 

With respect to Section 5(c) above, Cooley LLP, and with respect to Section 5(d) above, Davis Polk & Wardwell LLP may state that their opinions and beliefs are based upon their participation in the preparation of the Registration Statement, the Time of Sale Prospectus and the Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified.

 

The opinion of Cooley LLP described in Section 5(c) above shall be rendered to the Underwriters at the request of the Company and shall so state therein.

 

(e)                              The Underwriters shall have received, on each of the date hereof and the Closing Date, (i) a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Representatives, from KPMG LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus; provided that the letter delivered on the Closing Date shall use a “cut-off date” not earlier than the date hereof and (ii) a certificate, in form and substance reasonably satisfactory to the Representatives, signed by the Chief Financial Officer of the Company.

 

(f)                               The “lock-up” agreements, each substantially in the form of Exhibit A hereto, between you and certain shareholders, officers and directors of the Company relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date.

 

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(g)                              The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the applicable Option Closing Date of the following:

 

(i)                                     a certificate, dated the Option Closing Date and signed on behalf of the Company by an executive officer of the Company, confirming that the certificate delivered on the Closing Date pursuant to Section 5(b) hereof remains true and correct as of such Option Closing Date;

 

(ii)                                  an opinion and negative assurance letter of Cooley LLP, outside counsel for the Company, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion and negative assurance letter required by Section 5(c) hereof;

 

(iii)                               (A) an opinion and (B) a negative assurance letter of Davis Polk & Wardwell LLP, counsel for the Underwriters, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion and negative assurance letter required by Section 5(d) hereof;

 

(iv)                              a letter dated the Option Closing Date, in form and substance satisfactory to the Representatives, from KPMG LLP, independent public accountants, substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(e) hereof; provided that the letter delivered on the Option Closing Date shall use a “cut-off date” not earlier than three business days prior to such Option Closing Date; and

 

(v)                                 such other documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares to be sold on such Option Closing Date and other matters related to the issuance of such Additional Shares.

 

6.                              Covenants of the Company .  The Company covenants with each Underwriter as follows:

 

(a)                             To furnish to you, without charge, three signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 6(e) or 6(f) below, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request.

 

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(b)                             Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule.

 

(c)                              To furnish to you a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free writing prospectus to which you reasonably object.

 

(d)                             Not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder.

 

(e)                              If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when the Time of Sale Prospectus is delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.

 

(f)                               If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare,

 

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file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law.

 

(g)                              To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request; provided, however, that nothing contained herein shall require the Company to qualify to do business in any jurisdiction, to execute or file a general consent to service of process in any jurisdiction or to subject itself to taxation in any jurisdiction in which it is not otherwise subject.

 

(h)                             To make generally available to the Company’s security holders and to you as soon as practicable an earning statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the date of this Agreement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder.

 

(i)                                 Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including:  (i) the fees, disbursements and expenses of the Company’s counsel and the Company’s accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the reasonable, documented cost of printing or producing any Blue Sky or legal investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(g) hereof, including filing fees and the reasonable, documented fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and

 

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qualification of the offering of the Shares by FINRA (provided, that, the amount payable by the Company with respect to fees and disbursements of counsel for the Underwriters pursuant to subsections (iii) and (iv) shall not exceed $40,000), (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and all costs and expenses incident to listing the Shares on the NYSE, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any “ road show ” undertaken in connection with the marketing of the offering of the Shares, including, without limitation, expenses associated with the preparation or dissemination of any electronic road show, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the officers of the Company and any such consultants, and fifty percent (50%) of the cost of any aircraft chartered in connection with the road show (with the Underwriters agreeing to pay for the other fifty percent (50%)), (ix) the document production charges and expenses associated with printing this Agreement and (x) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section.  It is understood, however, that except as provided in this Section, Section 8 entitled “Indemnity and Contribution” and the last paragraph of Section 10 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make and all travel and other expenses of the Underwriters or any of their employees incurred by them in connection with participation in investor presentations on any “road show” undertaken in connection with the marketing of the offering of the Shares, other than the cost of aircraft chartered in connection with the roadshow, for which the Underwriters agree to pay for the other fifty percent (50%) not paid for by the Company, as described above.

 

(j)                                The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (a) completion of the distribution of the Shares within the meaning of the Securities Act and (b) completion of the Restricted Period (as defined in this Section 6).

 

(k)                             If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

 

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The Company also covenants with each Underwriter that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period ending 180 days after the date of the Prospectus (the “ Restricted Period ”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (3) file any registration statement with the Commission relating to the offering of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock.

 

The restrictions contained in the preceding paragraph shall not apply to (a) the Shares to be sold hereunder, (b) the issuance by the Company of shares of Common Stock or securities convertible into or exercisable for Common Stock pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options (including net exercise) or the settlement of restricted stock units (including net settlement), in each case outstanding on the date hereof and described in the Time of Sale Prospectus, (c) grants of stock options, stock awards, restricted stock, restricted stock units or other equity awards and the issuance of Common Stock or securities convertible into or exercisable for Common Stock (whether upon the exercise of stock options or otherwise) to employees, officers, directors, advisors, or consultants of the Company pursuant to the terms of a plan in effect on the date hereof and described in the Time of Sale Prospectus, (d) the entry into an agreement providing for the issuance by the Company of Common Stock or securities convertible into, exercisable for or which are otherwise exchangeable for or represent the right to receive Common Stock in connection with (x) the acquisition by the Company or any of its subsidiaries of the securities, business, technology, property or other assets of another person or entity or pursuant to an employee benefit plan assumed by the Company in connection with such acquisition, and the issuance of any Common Stock or securities convertible into, exercisable for or which are otherwise exchangeable for or represent the right to receive Common Stock pursuant to any such agreement or (y) the Company’s joint ventures, commercial relationships and other strategic transactions, provided that the aggregate number of shares of Common Stock securities convertible into, exercisable for or which are otherwise exchangeable for or represent the right to receive Common Stock that the Company may sell or issue or agree to sell or issue pursuant to this clause (d) shall not exceed 10% of the total number of shares of Common Stock outstanding as of the Closing Date immediately following the completion of the transactions contemplated by this Agreement to be completed as of that date and all recipients of any such securities shall enter into a lock-up letter substantially in the form of Exhibit A covering the remainder of the Restricted Period, or (e) the filing of any registration statement on Form S-8 relating to securities granted or to be granted pursuant to any plan in effect on the date hereof and described in the Time of Sale Prospectus or any assumed benefit plan contemplated by clause (d).

 

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If Morgan Stanley, in its sole discretion, agrees to release or waive the restrictions set forth in a lock-up letter described in Section   5(f) hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver.

 

7.                              Covenants of the Underwriters .  Each Underwriter severally covenants with the Company not to take any action that would result in the Company being required to file with the Commission under Rule 433(d) a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not be required to be filed by the Company thereunder, but for the action of the Underwriter.

 

8.                              Indemnity and Contribution .  (a) The Company agrees to indemnify and hold harmless each Underwriter, each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus, the Time of Sale Prospectus or any amendment or supplement thereto, any issuer free writing prospectus as defined in Rule 433(h) under the Securities Act, any Company information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any “road show” as defined in Rule 433(h) under the Securities Act (a “road show”), or the Prospectus or any amendment or supplement thereto, or any Written Testing-the-Waters Communication caused by 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, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein.

 

(b)                                  Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Time of Sale Prospectus, any issuer free writing prospectus, road show, the Prospectus or any amendment or supplement thereto, or any Written Testing-the-Waters Communication.

 

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(c)                                   In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the “ indemnified party ”) shall promptly notify the person against whom such indemnity may be sought (the “ indemnifying party ”) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonably incurred, documented fees and disbursements of such counsel related to such proceeding.  In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed in writing to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred.  Such firm shall be designated in writing by the Representatives, in the case of parties indemnified pursuant to Section 8(a), and by the Company, in the case of parties indemnified pursuant to Section 8(b).  The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment.  Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into (A) more than 90 days after receipt by such indemnifying party of the aforesaid request and (B) more than 15 days after receipt by such indemnifying party of notice specifying the terms of such settlement and that the indemnified party intends to enter into such settlement, and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement.  No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.

 

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(d)                                  To the extent the indemnification provided for in Section 8(a) or 8(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the offering of the Shares 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 indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares.  The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The Underwriters’ respective obligations to contribute pursuant to this Section 8 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint.

 

(e)                                   The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section   8(d).  The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 8(d) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 8, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall

 

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be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

 

(f)                                    The indemnity and contribution provisions contained in this Section 8 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares.

 

9.                              Termination .  The Underwriters may terminate this Agreement by notice given by you to the Company, if  after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange, the NYSE MKT or the NASDAQ Global Market, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in your judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus.

 

10.                       Effectiveness; Defaulting Underwriters .  This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.

 

If, on the Closing Date or an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter.  If, on the Closing Date, any Underwriter or

 

24



 

Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased on such date, and arrangements satisfactory to you and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company.  In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other documents or arrangements may be effected.  If, on an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased on such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Additional Shares to be sold on such Option Closing Date or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default.  Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

 

If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement required to be complied with or fulfilled by the Company, or if for any reason the Company shall be unable to perform its obligations under this Agreement (other than by reason of a default by the Underwriters or the occurrence of any of the events described in clauses (i), (iii), (iv) or (v) of Section 9), the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. Notwithstanding the foregoing sentence, if, after the Closing Date but prior to any Option Closing Date with respect to the purchase of any Additional Shares pursuant to a notice delivered by the Representatives to the Company under Section 2 hereof, the Company fails or refuses to comply with the terms or to fulfill any of the conditions of the Agreement in connection with such Option Closing Date, the Company will reimburse the Underwriters severally for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with the proposed purchase of any such Additional Shares pursuant to this Agreement.

 

11.                       Entire Agreement .  (a) This Agreement, together with any contemporaneous written agreements and any prior written agreements (to the extent not superseded by this Agreement) that relate to the offering of the Shares, represents the entire agreement between the Company and the Underwriters with respect to the preparation of any preliminary prospectus, the Time of Sale Prospectus, the Prospectus, the conduct of the offering, and the purchase and sale of the Shares.

 

25



 

(b)                                  The Company acknowledges that in connection with the offering of the Shares: (i) the Underwriters have acted at arms length, are not agents of, and owe no fiduciary duties to, the Company or any other person, (ii) the Underwriters owe the Company only those duties and obligations set forth in this Agreement and prior written agreements (to the extent not superseded by this Agreement), if any, and (iii) the Underwriters may have interests that differ from those of the Company.  The Company waives to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Shares.

 

12.                       Counterparts .  This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

13.                       Applicable Law .  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.

 

14.                       Headings .  The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.

 

15.                       Notices .  All communications hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to you at Morgan Stanley & Co. LLC, 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department and at J.P. Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179 (fax: (212) 622-8358); Attention: Equity Syndicate Desk; and if to the Company shall be delivered, mailed or sent to 1801 California Street, Suite 500, Denver, CO 80202, Attention: General Counsel.

 

[ Signature page follows. ]

 

26



 

 

 

Very truly yours,

 

 

 

 

 

SendGrid, Inc.

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

Accepted as of the date hereof

 

 

 

 

 

Morgan Stanley & Co. LLC

 

 

J.P. Morgan Securities LLC

 

 

 

 

 

Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto.

 

 

 

 

 

By:

Morgan Stanley & Co. LLC

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

By:

J.P. Morgan Securities LLC

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 



 

SCHEDULE I

 

Underwriter

 

Number of Firm Shares To
Be Purchased

 

Morgan Stanley & Co. LLC

 

 

 

J.P. Morgan Securities LLC

 

 

 

KeyBanc Capital Markets Inc.

 

 

 

Piper Jaffray & Co.

 

 

 

Stifel, Nicolaus & Company, Incorporated

 

 

 

William Blair & Company, L.L.C.

 

 

 

Total:

 

 

 

 



 

SCHEDULE II

 

Time of Sale Prospectus

 

1.                                       Preliminary Prospectus issued [date]

 

2.                                       [identify all free writing prospectuses filed by the Company under Rule 433(d) of the Securities Act]

 

3.                                       [free writing prospectus containing a description of terms that does not reflect final terms, if the Time of Sale Prospectus does not include a final term sheet]

 

4.                                       [orally communicated pricing information such as price per share and size of offering if a Rule 134 pricing term sheet is used at the time of sale instead of a pricing term sheet filed by the Company under Rule 433(d) as a free writing prospectus]

 


 

SCHEDULE III

 

Written Testing-the-Waters Communication

 



 

EXHIBIT A

 

FORM OF LOCK-UP LETTER

 

 

, 2017

 

Morgan Stanley & Co. LLC

J.P. Morgan Securities LLC

 

c/o        Morgan Stanley & Co. LLC
1585 Broadway
New York, NY 10036

 

c/o        J.P. Morgan Securities LLC
383 Madison Avenue
New York, NY 10179

 

Ladies and Gentlemen:

 

The undersigned understands that Morgan Stanley & Co. LLC (“ Morgan Stanley ”) and J.P. Morgan Securities LLC, (together with Morgan Stanley, the “ Representatives ”) propose to enter into an Underwriting Agreement (the “ Underwriting Agreement ”) with SendGrid, Inc., a Delaware corporation (the “ Company ”), providing for the public offering (the “ Public Offering ”) by the several Underwriters, including the Representatives (the “ Underwriters ”), of shares (the “ Shares ”) of the common stock, par value $0.001, of the Company (the “ Common Stock ”).

 

To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus (the “ Restricted Period ”) relating to the Public Offering (the “ Prospectus ”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock beneficially owned (as such term is used in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), by the undersigned or any other securities so owned convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise.  The foregoing sentence shall not apply to:

 



 

(a) transactions relating to shares of Common Stock or other securities acquired in the Public Offering or in open market transactions after the completion of the Public Offering, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with subsequent sales of Common Stock or other securities acquired in the Public Offering or in such open market transactions;

 

(b) transfers of shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock (i) as a bona fide gift, or gifts, or for bona fide estate planning purposes, (ii) upon death or by will, testamentary document or intestate succession, (iii) to an immediate family member of the undersigned or to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this agreement, “immediate family” shall mean any spouse or domestic partner and relationship by blood, current or former marriage or adoption, not more remote than first cousin) or (iv)  if the undersigned is a trust, to any beneficiary of the undersigned or the estate of any such beneficiary;

 

(c) distributions[, transfers or dispositions] (1) of shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock to [(i) another corporation, partnership, limited liability company, trust or other business entity that is an affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned, or to any investment fund or other entity controlled or managed by the undersigned or affiliates of the undersigned (collectively, “Affiliates”), or (ii) as part of a distribution, transfer or disposition without consideration by the undersigned to its](1) stockholders, current or former partners (general or limited) [or](2)[,](1) members [of the undersigned, as applicable](2), [beneficiaries or other equity holders,](1) or to the estates of any such stockholders, partners, [members or managers](2) [beneficiaries or other equity holders](1);

 

(d) (i) the receipt by the undersigned from the Company of shares of Common Stock upon the exercise of options or settlement of restricted stock units granted under a stock incentive plan or other equity award plan, which plan is described in the registration statement related to the Public Offering (the “ Registration Statement ”), or the exercise of warrants outstanding and which are described in the Registration Statement or the Prospectus, or (ii) the transfer of shares of Common Stock or any securities convertible into Common Stock to the Company upon a vesting or settlement event of the Company’s securities or upon the exercise of options or warrants to purchase the Company’s securities on a “cashless” or “net exercise” basis to the extent permitted by the instruments representing such options, restricted stock units or warrants (and any transfer to the Company necessary in respect of such amount needed for the payment of taxes, including estimated taxes, due as a result of such vesting or exercise whether by means of a “net settlement” or otherwise) so long as such “cashless” exercise or “net exercise” is effected solely by the surrender of outstanding options, restricted stock units

 


(1)  To be included in the Lock-Up Agreements of Major Investors.

(2)  To be included in the Lock-Up Agreements of non-Major Investors.

 



 

or warrants (or the Common Stock issuable upon the exercise thereof) to the Company and the Company’s cancellation of all or a portion thereof to pay the exercise price and/or withholding tax and remittance obligations; provided (x) the shares received upon exercise or settlement of the option, restricted stock unit, or warrant are subject to the terms of this agreement, and (y) that in the case of either (i) or (ii), no public announcement or filing under Section 16(a) of the Exchange Act, or any other public filing or disclosure of such receipt or transfer, shall be required or shall be voluntarily made by or on behalf of the undersigned within 60 days after the date of the Prospectus, and after such 60 th  day and during the Restricted Period, any filing under Section 16(a) of the Exchange Act shall clearly indicate in the footnotes thereto that (A) the filing relates to the circumstances described in (i) or (ii), as the case may be, (B) no shares were sold by the reporting person and (C) in the case of (i) the shares of Common Stock received upon exercise or settlement of the option, warrant or restricted stock unit are subject to a lock-up agreement with the Underwriters of the Public Offering;

 

(e) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of Common Stock, provided that (i) such plan does not provide for the transfer of Common Stock during the Restricted Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the undersigned or the Company regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of Common Stock may be made under such plan during the Restricted Period;

 

(f) the transfer of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock that occurs by operation of law pursuant to a qualified domestic order in connection with a divorce settlement or other court order;

 

(g) any transfer of Common Stock to the Company pursuant to arrangements under which the Company has the option to repurchase such shares or a right of first refusal with respect to transfers of such shares;

 

(h) the conversion of the outstanding preferred stock of the Company into shares of Common Stock prior to or in connection with the consummation of the Public Offering, provided that any such shares of Common Stock received upon such conversion shall be subject to the terms of this agreement;

 

(i) sales of Common Stock to the Underwriters pursuant to the terms of the Underwriting Agreement; and

 

(j) the transfer of shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction, that is approved by the Board of Directors of the Company, made to all holders of Common Stock involving a Change of Control (as defined below), provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed, the Common Stock owned by the undersigned shall remain subject to the restrictions contained in this agreement;

 



 

provided that in the case of any transfer or distribution pursuant to clause (b), (c) or (f), each transferee, donee or distributee shall sign and deliver a lock-up agreement substantially in the form of this agreement;

 

provided further that in the case of any transfer or distribution pursuant to clause (b) [or (c)](2), no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made during the Restricted Period; [and](2)

 

[ provided further that in the case of any distribution, disposition or transfer pursuant to clause (c), if any filing under Section 16(a) of the Exchange Act or any other public filing or disclosure of such distribution, disposition or transfer by or on behalf of the undersigned, reporting a reduction in the beneficial ownership of the Common Stock, is required or voluntarily made, then it shall be a condition that any such distribution, disposition or transfer be only to distributees, donees or transferees that are either Affiliates or are stockholders, partners, members, beneficiaries or other equity holders of the general partner of the undersigned; and](1)

 

provided further that in the case of any transfer pursuant to clause [(c),](1) (f) or (g), no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made during the Restricted Period, unless such filing is required and clearly indicates in the footnotes thereto [in the case of clause (c) the nature and conditions of such transfer and in the case of clause (f) or (g)](1) that the transfer is by operation of law, court order, or in connection with a divorce settlement, or a repurchase by the Company, as the case may be.

 

For the purposes of clause (j) of the second paragraph hereof, “ Change of Control ” shall mean the consummation of any bona fide third-party tender offer, merger, consolidation or other similar transaction the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, other than the Company, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of 50% of total voting power of the voting stock of the Company.

 

In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, in connection with the Public Offering nor during the Restricted Period, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock.  The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s shares of Common Stock except in compliance with the foregoing restrictions.

 

[The undersigned represents that it is (1) a party to the Company’s Amended and Restated Registration Rights Agreement, dated as of November 17, 2016 (the “ Registration Rights Agreement ”) and (2) a “Major Investor” as defined in the Registration Rights Agreement  (each, a “ Major Investor ”). On the basis of the representations in the previous sentence, any discretionary release, waiver or termination of the restrictions (each, a “ Lock-Up Release ”) pursuant to any lock-up agreement with

 



 

respect to the Public Offering (each, a “ Released Lock-Up Agreement” ) executed by any other Major Investor or any officer or director of the Company (each, a “ Pro Rata Release Holder” ), shall be deemed to apply to the undersigned on a pro rata basis, based on the percentage of such other Pro Rata Release Holders’ shares which are the subject of such Lock-Up Release relative to the aggregate number of shares of such other Pro Rata Release Holder subject to a Released Lock-Up Agreement as of immediately prior to such Lock-Up Release.  The provisions of this paragraph will not apply if (i)(a) the Lock-Up Release is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this agreement to the extent and for the duration that such terms remain in effect at the time of such transfer; or (ii) the Lock-Up Release is granted to a holder of Common Stock in connection with a follow-on public offering of Common Stock pursuant to a registration statement filed with the SEC and the undersigned has been given an opportunity to participate with other selling stockholders in such public offering on a pro rata basis .  Morgan Stanley shall use commercially reasonable efforts to notify the Company of any discretionary waiver or termination of the restrictions pursuant to such Pro Rata Holder Lock-Up, provided that the failure to provide such notice shall not give rise to any claim or liability against Morgan Stanley or the Underwriters. The undersigned further acknowledges that Morgan Stanley is under no obligation to inquire into whether, or to ensure that, the Company notifies the undersigned of the delivery by Morgan Stanley on behalf of the Underwriters of any such notice, which is a matter between the undersigned and the Company. Notwithstanding any other provisions of this agreement, if Morgan Stanley in its sole discretion determines that a record or beneficial owner of Common Stock, or other securities convertible into or exercisable or exchangeable for Common Stock, should be granted an early Lock-Up Release due to circumstances of emergency or hardship, then the undersigned shall not have any right to be granted a Lock-Up Release pursuant to the terms of this paragraph.](1)

 

The undersigned agrees that, to the extent that the terms of this agreement conflict with or are in any way inconsistent with any prior investor rights agreement, prior registration rights agreement, prior market standoff agreement or any other prior lock-up or similar prior agreement to which the undersigned and the Company may be a party, this agreement supersedes such prior agreement.

 

If the undersigned is an officer or director of the Company, the undersigned further agrees that, notwithstanding clause (a) of the second paragraph hereof, the foregoing provisions shall be equally applicable to any issuer-directed Shares the undersigned may purchase in the Public Offering.

 

If the undersigned is an officer or director of the Company, (i) Morgan Stanley agrees that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, Morgan Stanley will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver.  Any release or waiver granted by Morgan Stanley hereunder to any such officer or director shall only be effective two business days after the publication date of such press release.  The provisions of this paragraph will not

 



 

apply if (a) the release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.

 

The undersigned understands that the Company and the Underwriters are relying upon this agreement in proceeding toward consummation of the Public Offering.  The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.

 

Notwithstanding anything to the contrary contained herein, this agreement will automatically terminate and the undersigned will be released from all of his, her or its obligations hereunder upon the earliest to occur, if any, of (i) the date that the Company, on the one hand, or Morgan Stanley, on the other hand, advises in writing, prior to the execution of the Underwriting Agreement, that it has determined not to proceed with the Public Offering, (ii) the date that the Company withdraws the Registration Statement, (iii) the date that the Underwriting Agreement is executed but is terminated (other than the provisions thereof which survive termination) prior to payment for and delivery of the Shares to be sold thereunder, or (iv) March 31, 2018, in the event that the Underwriting Agreement has not been executed by such date (provided that the Company may by written notice to the undersigned prior to March 31, 2018 extend such date for a period of up to an additional three months).

 

The undersigned hereby waives any and all notice requirements and rights with respect to the registration of securities pursuant to any agreement, understanding or anything otherwise setting forth the terms of any security of the Company held by the undersigned, including any registration rights agreement to which the undersigned and the Company may be party; provided , however , that such waiver shall apply only to the proposed Public Offering, and any other action taken by the Company in connection with the proposed Public Offering.

 

The undersigned hereby consents to receipt of this agreement in electronic form and understands and agrees that this agreement may be signed electronically. In the event that any signature is delivered by facsimile transmission, electronic mail, or otherwise by electronic transmission evidencing an intent to sign this agreement, such facsimile transmission, electronic mail or other electronic transmission shall create a valid and binding obligation of the undersigned with the same force and effect as if such signature were an original. Execution and delivery of this agreement by facsimile transmission, electronic mail or other electronic transmission is legal, valid and binding for all purposes.

 

Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions.  Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

 



 

Very truly yours,

 

 

IF AN INDIVIDUAL:

IF AN ENTITY:

 

 

 

 

 

(duly authorized signature)

 

(please print complete name of entity)

 

 

 

Name:

 

 

By:

 

 

(please print full name)

 

 

(duly authorized signature)

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

(please print full name)

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

(please print full title)

 

 

 

 

 

Address:

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E-mail:

 

 

E-mail:

 

 



 

EXHIBIT B

 

FORM OF WAIVER OF LOCK-UP

 

 

, 20

 

[Name and Address of
Officer or Director
Requesting Waiver]

 

Dear Mr./Ms. [Name]:

 

This letter is being delivered to you in connection with the offering by SendGrid, Inc. (the “ Company ”) of [ · ] shares of common stock, $0.001 par value (the “ Common Stock ”), of the Company and the lock-up letter dated     , 2017 (the “ Lock-up Letter ”), executed by you in connection with such offering, and your request for a [waiver] [release] dated     , 20  , with respect to      shares of Common Stock (the “ Shares ”).

 

Morgan Stanley & Co. LLC hereby agrees to [waive] [release] the transfer restrictions set forth in the Lock-up Letter, but only with respect to the Shares, effective      , 20  ; provided, however, that such [waiver] [release] is conditioned on the Company announcing the impending [waiver] [release] by press release through a major news service at least two business days before effectiveness of such [waiver] [release].  This letter will serve as notice to the Company of the impending [waiver] [release].

 

Except as expressly [waived] [released] hereby, the Lock-up Letter shall remain in full force and effect.

 

 

Very truly yours,

 

 

 

Morgan Stanley & Co. LLC

 

Acting severally on behalf of themselves and the several Underwriters named in Schedule I to the Underwriting Agreement

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

cc:  Compan y

 



 

FORM OF PRESS RELEASE

 

SendGrid, Inc.
[Date]

 

SendGrid, Inc. (the “ Company ”) announced today that Morgan Stanley & Co. LLC, the lead book-running manager in the Company’s recent public sale of [ · ] shares of common stock is [waiving][releasing] a lock-up restriction with respect to      shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company.  The [waiver][release] will take effect on     , 20   , and the shares may be sold on or after such date.

 

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 




Exhibit 3.1

SEVENTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SENDGRID, INC.

 

(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)

 

SendGrid, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “ General Corporation Law ”),

 

DOES HEREBY CERTIFY:

 

1.                                       That the name of this corporation is SendGrid, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on July 20, 2009 under the name SendGrid, Inc.

 

2.                                       That the Board of Directors of this corporation (the “ Board ”) duly adopted resolutions proposing to amend and restate the Sixth Amended and Restated Certificate of Incorporation of this corporation declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

 

RESOLVED , that the Sixth Amended and Restated Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

 

FIRST:   The name of this corporation is SendGrid, Inc. (the “ Corporation ”).

 

SECOND:   The address of the registered office of the Corporation in the State of Delaware is 160 Greentree Drive, Suite 101, in the City of Dover, County of Kent, 19904.  The name of its registered agent at such address is National Registered Agents, Inc.

 

THIRD:   The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

 

FOURTH:   The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 50,000,000 shares of Common Stock, $0.001 par value per share (“ Common Stock ”), and (ii) 24,697,410 shares of Preferred Stock, $0.001 par value per share (“ Preferred Stock ”).

 

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 



 

A.                                     COMMON STOCK

 

1.                                       General .  The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.                                       Voting .  The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings); provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to the Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the Certificate of Incorporation or pursuant to the General Corporation Law.  There shall be no cumulative voting.  The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

 

B.                                     PREFERRED STOCK

 

2,400,000 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series D Preferred Stock” (the “ Series D Preferred ”); 3,636,405 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series C Preferred Stock” (the “ Series C Preferred ”); 7,903,185 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series B Preferred Stock” (the “ Series B Preferred ”); 7,530,555 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series A-1 Preferred Stock” (the “ Series A-1 Preferred ”); and 3,227,265 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock” (the “ Series A Preferred ” and, together with the Series D Preferred, Series C Preferred, Series B Preferred and Series A-1 Preferred, the “ Series Preferred ”).  The Series Preferred shall have the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “Sections” or “Subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth.

 

1.                                       Dividends .  The holders of shares of Series Preferred shall be entitled to receive dividends, payable only when, as, and if declared by the Board out of funds legally available therefor, prior and in preference to any declaration or payment (or setting aside for payment) of any dividend on the Common Stock, at the rate per annum, as applicable, of $1.1312232 per share on each outstanding share of Series D Preferred, $0.4592 per share on each outstanding share of Series C Preferred, $0.22112 per share on each outstanding share of Series B Preferred,

 

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$0.05340 per share on each outstanding share of Series A-1 Preferred), and $0.01760 per share on each outstanding share of Series A Preferred, each as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares (collectively, the “ Series Preferred Dividends ”).  The Series Preferred Dividends shall not be cumulative and no right to the Series Preferred Dividends shall accrue to the holders of Series Preferred unless declared by the Board.  The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the Corporation shall first declare and pay a Series Preferred Dividend on each share of Series Preferred, and pay the amount of any declared and unpaid Series Preferred Dividends on each such share of Series Preferred.  In addition to the foregoing, the holders of shares of Series Preferred shall be entitled to participate pro rata (on an as converted basis) in any dividends declared by the Board on shares of Common Stock.  Notwithstanding the foregoing, in the event that the Corporation determines, subject to Subsection 3.3 and without limitation to Section 2, to distribute the proceeds (cash or otherwise) resulting from any sale or other transfer of its securities or sale, license and/or other transfer of its assets (other than any sale, license or other transfer of its assets effected in the ordinary course of business of the Corporation for which the Corporation is not required to obtain any consent pursuant to Subsection 3.3), the proceeds resulting therefrom (including in respect of any ongoing payments, such as a royalty or milestone payment) shall be distributed in accordance with Subsections 2.1, 2.2 and 2.3, and not this Section 1.

 

2.                                       Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

 

2.1                                Payments to Holders of Series Preferred .  The “Series D Original Issue Price” shall mean $14.14029 per share , the “Series C Original Issue Price” shall mean $5.74 per share, the “ Series B Original Issue Price ” shall mean $2.76400 per share, the “ Series A-1 Original Issue Price ” shall mean $0.66728 per share, and the “ Series A Original Issue Price ” shall mean $0.22000 per share per share, subject in each case to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Preferred, Series C Preferred, the Series B Preferred, the Series A-1 Preferred or Series A Preferred, respectively.  In the event of any voluntary or involuntary liquidation, dissolution, winding up of the Corporation, or Deemed Liquidation Event, the holders of shares of Series Preferred then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) one times the Series D Original Issue Price, Series C Original Issue Price, Series B Original Issue Price, Series A-1 Original Issue Price or Series A Original Issue Price, as applicable, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series Preferred been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up, or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the “ Series Preferred Liquidation Amount ”).  If upon any such liquidation, dissolution or winding

 

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up of the Corporation, or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series Preferred the full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of Series Preferred shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

2.2                                Payments to Holders of Common Stock .  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Series Preferred, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.

 

2.3                                Deemed Liquidation Events .

 

2.3.1                      Each of the following events shall be considered a “ Deemed Liquidation Event ” unless the holders of at least 60% of the outstanding shares of Series Preferred, voting together on an as-converted to Common Stock basis (the “ Required Consent Threshold ”), elect otherwise by written notice sent to the Corporation at least fifteen (15) days prior to the effective date of any such event:

 

(a)                                  a merger or consolidation in which:

 

(i)                                      the Corporation is a constituent party; or

 

(ii)                                   a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

 

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation ( provided that , for the purpose of this Subsection 2.3.1, all shares of Common Stock issuable upon exercise of Options (as defined below) outstanding immediately prior to such merger or consolidation or upon conversion of Convertible Securities (as defined below) outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); or

 

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(b)                                  the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

 

2.3.2                      Effecting a Deemed Liquidation Event .  The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “ Merger Agreement ”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2, unless the holders of the Required Consent Threshold elect otherwise.

 

(b)                                  In the event of a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within 90 days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Series Preferred no later than the 90th day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (ii)  to require the redemption of such shares of Series Preferred, and (ii) if the holders of the Required Consent Threshold so request in a written instrument delivered to the Corporation not later than 120 days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board), together with any other assets of the Corporation available for distribution to its stockholders (the “ Available Proceeds ”), to the extent legally available therefor, on the 150th day after such Deemed Liquidation Event, to redeem all outstanding shares of Series Preferred at a price per share equal to the Series D Original Issue Price, Series C Original Issue Price, Series B Original Issue Price, Series A-1 Original Issue Price or the Series A Original Issue Price, as applicable.  Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series Preferred, the Corporation shall redeem a pro rata portion of each holder’s shares of Series Preferred to the fullest extent of such Available Proceeds, based on the respective amounts that would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares to have been redeemed as soon as practicable after the Corporation has funds legally available therefor.  Prior to the completion of the full distribution or redemption provided for in this Subsection 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.

 

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2.3.3                      Amount Deemed Paid or Distributed .  The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity.  The value of such property, rights or securities shall be determined in good faith by the Board.

 

2.3.4                      Allocation of Escrow .  In the event of a Deemed Liquidation Event pursuant to Subsection 2.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is placed into escrow and/or is payable to the stockholders of the Corporation subject to contingencies, the Merger Agreement shall provide that (a) the portion of such consideration that is not placed in escrow and not subject to any contingencies (the “ Initial Consideration ”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event and (b)  any additional consideration which becomes payable to the stockholders of the Corporation upon release from escrow or satisfaction of contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction; provided, however, that this Section 2.3.4 may be waived by the holders of the Required Consent Threshold.

 

3.                                       Voting

 

3.1                                General .  On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series Preferred shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series Preferred held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.  Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Series Preferred shall vote together with the holders of Common Stock as a single class.  There shall be no cumulative voting.

 

3.2                                Election of Directors .  So long as any shares of Series D Preferred remain outstanding, the holders of record of the shares of Series D Preferred, exclusively and as a separate class, shall be entitled to elect one director of the Corporation (the “ Series D Director ”). So long as any shares of Series B Preferred remain outstanding, the holders of record of the shares of Series B Preferred, exclusively and as a separate class, shall be entitled to elect one director of the Corporation (the “ Series B Director ”); so long as any shares of Series A-1 Preferred remain outstanding, the holders of record of the shares of Series A-1 Preferred, exclusively and as a separate class, shall be entitled to elect one director of the Corporation (the “ Series A-1 Director ”); and the holders of record of the shares of Common Stock, exclusively and as a separate class, shall be entitled to elect two directors of the Corporation.  Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the

 

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affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders.  If the holders of shares of Series D Preferred, Series B Preferred, Series A-1 Preferred or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Series D Preferred, Series B Preferred, Series A-1 Preferred or Common Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class.  Any additional directors of the Corporation shall be elected by the holders of Common Stock and Preferred Stock voting together as a single class on an as-converted to Common Stock basis.  At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.  Except as otherwise provided in this Subsection 3.2, a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection 3.2.

 

3.3                                Series Preferred Protective Provisions . For so long as any shares of Series Preferred remain outstanding, in addition to any other vote or consent required herein or by law, the vote or written consent of the holders of the Required Consent Threshold shall be necessary for effecting or validating the following actions (whether directly or indirectly by merger, recapitalization or otherwise):

 

3.3.1                      Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or the Bylaws of the Corporation (including any filing of a Certificate of Designation);

 

3.3.2                      Any increase or decrease in the authorized number of shares of Common Stock or Preferred Stock;

 

3.3.3                      Any authorization or any designation, whether by reclassification or otherwise, of any new class or series of stock or any other securities convertible into equity securities of the Corporation ranking on a parity with or senior to the Series Preferred in right of redemption, liquidation preference, voting or dividend rights or any increase in the authorized or designated number of any such new class or series;

 

3.3.4                      Any redemption, repurchase, payment or declaration of dividends or other distributions with respect to Common Stock or Preferred Stock other than dividends described in Section 4.6, 4.7 or 4.8 below that result in an adjustment to the Series Preferred Conversion Prices then in effect and other than pursuant to equity

 

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incentive agreements with service providers giving the Corporation the right to repurchase shares upon the termination of services at the original purchase price;

 

3.3.5                      Any agreement by the Corporation or its stockholders effecting a Deemed Liquidation Event;

 

3.3.6                      Any voluntary dissolution, liquidation or winding up of the affairs of the Corporation or voluntary petition for bankruptcy or assignment for the benefit of creditors;

 

3.3.7                      Any exclusive license, lease, sale, distribution, or other disposition of the Corporation’s intellectual property outside the ordinary course of business;

 

3.3.8                      Any creation, or ownership of capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or any sale, transfer or other disposal of any capital stock of any direct or indirect subsidiary of the Corporation, or the permitting of any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary;

 

3.3.9                      Any creation or authorization of the creation of any debt security if the Corporation’s aggregate indebtedness for borrowed money (excluding accrued interest) would exceed $100,000 (excluding ordinary course vendor and supplier financing and non-debt obligations under customer contracts and strategic relationships); or

 

3.3.10               Any increase or decrease in the authorized number of members of the Board.

 

Provided that this Subsection 3.3 shall terminate upon a Qualified IPO (as defined below).

 

3.4                                Series D Preferred Protective Provisions .  For so long as any shares of Series D Preferred remain outstanding, in addition to any other vote or consent required herein or by law, the vote or written consent of the holders of a majority of the outstanding Series D Preferred shall be necessary for effecting or validating (whether directly or indirectly by merger, recapitalization or otherwise) any amendment, alteration or repeal of any provision of the Certificate of Incorporation or the Bylaws of the Corporation (including any filing of a Certificate of Designation) in a manner that adversely affects the rights, preferences or privileges of the Series D Preferred.

 

4.                                       Optional Conversion . The holders of the Series Preferred shall have conversion rights as follows (the “ Conversion Rights ”):

 

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4.1                                Right to Convert .

 

4.1.1                      Conversion Ratio .  Each share of Series Preferred shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price applicable to such share of Series Preferred by the Conversion Price (as defined below) applicable to such share of Series Preferred in effect at the time of conversion.  The “ Series D Conversion Price ” shall initially be equal to $14.14029.  The “ Series C Conversion Price ” shall initially be equal to $5.74.  The “ Series B Conversion Price ” shall initially be equal to $2.764.  The “ Series A-1 Conversion Price ” shall initially be equal to $0.66728. The “ Series A Conversion Price ” shall initially be equal to $0.22.  Each of the foregoing conversion prices shall be referred to as the “ Conversion Price ” applicable to a share of Series Preferred and are collectively referred to as the “ Series Preferred Conversion Prices .” Such initial Conversion Prices, and the rate at which shares of Series Preferred may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

4.1.2                      Termination of Conversion Rights .  In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series Preferred, provided that any conversion elections made contingent upon such dissolution, winding up or Deemed Liquidation Event that are received prior to such time shall be observed in accordance with their terms.

 

4.2                                Fractional Shares .  No fractional shares of Common Stock shall be issued upon conversion of the Series Preferred.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board.  Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series Preferred the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3                                Mechanics of Conversion .

 

4.3.1                      Notice of Conversion .  In order for a holder of Series Preferred to voluntarily convert shares of Series Preferred into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series Preferred (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Series Preferred (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of

 

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the Series Preferred represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent.  Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued.  If 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 his, her or its attorney duly authorized in writing.  The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion (subject to the qualification at the end of this sentence, the “ Conversion Time ”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date; provided, however, that any conversion elections made contingent upon dissolution, winding up or Deemed Liquidation Event shall instead be effective at the time set forth therein.  The Corporation shall, as soon as practicable after the Conversion Time, (i) issue and deliver to such holder of Series Preferred, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Series Preferred represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Series Preferred converted.

 

4.3.2                      Reservation of Shares .  The Corporation shall at all times when the Series Preferred shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series Preferred, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series Preferred; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series Preferred, the Corporation shall 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 purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation.  Before taking any action which would cause an adjustment reducing the Series Preferred Conversion Prices below the then par value of the shares of Common Stock issuable upon conversion of the Series Preferred, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Series Preferred Conversion Prices.

 

4.3.3                      Effect of Conversion .  All shares of Series Preferred which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise

 

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issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends declared but unpaid thereon.  Any shares of Series Preferred so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series Preferred accordingly.

 

4.3.4                      No Further Adjustment .  Upon any such conversion, no adjustment to the Series Preferred Conversion Prices shall be made for any declared but unpaid dividends on the Series Preferred surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5                      Taxes .  The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series Preferred pursuant to this Section 4.  The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series Preferred so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance 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.

 

4.4                                Adjustments to Series Preferred Conversion Prices for Diluting Issues .

 

4.4.1                      Special Definitions .  For purposes of this Article Fourth, the following definitions shall apply:

 

(a)                                  Option ” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b)                                  Series D Original Issue Date ” shall mean the date on which the first share of Series D Preferred was issued.

 

(c)                                   Convertible Securities ” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(d)                                  Additional Shares of Common Stock ” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series D Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “ Exempted Securities ”):

 

(i)                                      shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series Preferred;

 

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(ii)                                   shares of Common Stock issued upon conversion of the Series Preferred;

 

(iii)                                shares of Common Stock issued pursuant to the exercise or conversion of Convertible Securities;

 

(iv)                               shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6, 4.7 or 4.8;

 

(v)                                  shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to the Corporation’s 2012 Equity Incentive Plan, as may be amended (including without limitation to increase the number of shares of Common Stock reserved for issuance thereunder) with the approval of the Board, including the Series B Director;

 

(vi)                               shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;

 

(vii)                            shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board, including the Series B Director;

 

(viii)                         shares of Common Stock, Options or Convertible Securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition, strategic alliance or similar business combination approved by the Board, including the Series B Director; or

 

(ix)                               shares of Common Stock or Convertible Securities that the holders of a majority of the outstanding

 

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shares of Series Preferred elect in writing to exclude from the definition of “Additional Shares of Common Stock” for purposes of this Article Fourth.

 

4.4.2                      No Adjustment of Series Preferred Conversion Prices .  No adjustment in the Conversion Price of a series of Series Preferred shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of a majority of the then outstanding shares of such series agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

 

4.4.3                      Deemed Issue of Additional Shares of Common Stock .

 

(a)                                  If the Corporation at any time or from time to time after the Series D Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)                                  If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series Preferred Conversion Prices pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series Preferred Conversion Prices computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Series Preferred Conversion Prices as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security.  Notwithstanding the foregoing, no readjustment pursuant to this clause (b)  shall have the effect of increasing the Series Preferred Conversion Prices to an amount that exceeds the lower of (i) the Series Preferred Conversion Prices in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Series Preferred Conversion Prices that would have resulted from any issuances of

 

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Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(c)                                   If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Series Preferred Conversion Prices pursuant to the terms of Subsection 4.4.4 (either because the consideration per share, determined pursuant to Subsection 4.4.5, of the Additional Shares of Common Stock subject thereto was equal to or greater than the Series Preferred Conversion Prices then in effect, or because such Option or Convertible Security was issued before the Series D Original Issue Date), are revised after the Series D Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(d)                                  Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series Preferred Conversion Prices pursuant to the terms of Subsection 4.4.4, the Series Preferred Conversion Prices shall be readjusted to such Series Preferred Conversion Prices as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)                                   If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series Preferred Conversion Prices provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3).  If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Series Preferred Conversion Prices that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable

 

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(even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series Preferred Conversion Prices that such issuance or amendment took place at the time such calculation can first be made.

 

4.4.4                      Adjustment of Series Preferred Conversion Prices Upon Issuance of Additional Shares of Common Stock .  In the event the Corporation shall at any time after the Series D Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than the Series D Conversion Price, Series C Conversion Price, Series B Conversion Price, Series A-1 Conversion Price or Series A Conversion Price, as applicable, in effect immediately prior to such issue, then and in each such case the Series D Conversion Price, Series C Conversion Price, Series B Conversion Price, Series A-1 Conversion Price or Series A Conversion Price, as applicable, shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

 

CP 2  = CP 1 * (A+B) ÷ (A+C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(a)                                  “CP 2 ” shall mean the applicable Conversion Price in effect immediately after such issue of Additional Shares of Common Stock;

 

(b)                                  “CP 1 ” shall mean the applicable Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;

 

(c)                                   “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Series Preferred) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

 

(d)                                  “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP 1  (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP 1 ); and

 

(e)                                   “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5                      Determination of Consideration .  For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

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(a)                                  Cash and Property :  Such consideration shall:

 

(i)                                      insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)                                   insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and

 

(iii)                                in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board.

 

(b)                                  Options and Convertible Securities .  The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:

 

(i)                                      the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(ii)                                   the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the

 

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conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6                      Multiple Closing Dates .  In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Series Preferred Conversion Prices pursuant to the terms of Subsection 4.4.4, then, upon the final such issuance, the Series Preferred Conversion Prices shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5                                Adjustment for Stock Splits and Combinations .   If the Corporation shall at any time or from time to time after the Series D Original Issue Date effect a subdivision of the outstanding Common Stock, the Series Preferred Conversion Prices in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding.  If the Corporation shall at any time or from time to time after the Series D Original Issue Date combine the outstanding shares of Common Stock, the Series Preferred Conversion Prices in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding.  Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.6                                Adjustment for Certain Dividends and Distributions .  In the event the Corporation at any time or from time to time after the Series D Original Issue Date 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 on the Common Stock in additional shares of Common Stock, then and in each such event the Series Preferred Conversion Prices in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series Preferred Conversion Prices then in effect by a fraction:

 

(1)                                  the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(2)                                  the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date

 

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plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series Preferred Conversion Prices shall be recomputed accordingly as of the close of business on such record date and thereafter the Series Preferred Conversion Prices shall be adjusted pursuant to this Subsection 4.6 as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Series Preferred simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series Preferred had been converted into Common Stock on the date of such event.

 

4.7                                Adjustments for Other Dividends and Distributions .  In the event the Corporation at any time or from time to time after the Series D Original Issue Date 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 of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Series Preferred shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Series Preferred had been converted into Common Stock on the date of such event.

 

4.8                                Adjustment for Merger or Reorganization, etc.   Subject to the provisions of Subsection 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series Preferred) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series Preferred shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series Preferred immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Series Preferred, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Series Preferred Conversion Prices) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series Preferred.

 

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4.9                                Certificate as to Adjustments .  Upon the occurrence of each adjustment or readjustment of the Series Preferred Conversion Prices pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series Preferred a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series Preferred is convertible) and showing in detail the facts upon which such adjustment or readjustment is based.  The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Series Preferred (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series Preferred Conversion Prices then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series Preferred.

 

4.10                         Notice of Record Date .  In the event:

 

(a)                                  the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series Preferred) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)                                  of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)                                   of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Series Preferred a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series Preferred) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series Preferred and the Common Stock.  Such notice shall be sent at least 10 days prior to the record date or effective date for the event specified in such notice.

 

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5.                                       Mandatory Conversion .

 

5.1                                Trigger Events .

 

5.1.1                      Upon the closing of a firmly underwritten public offering of shares of Common Stock of the Corporation at a per share price not less than two times the Series C Original Issue Price (as adjusted for stock splits, dividends and the like) per share and for a total offering of not less than $50,000,000 (before deduction of underwriters commissions and expenses) (a “ Qualified IPO ”) (i) all outstanding shares of Series Preferred (other than Series D Preferred) shall automatically be converted into shares of Common Stock, at the then effective conversion rate applicable to each series of Series Preferred, and (ii) such shares may not be reissued by the Corporation.  Upon the closing of a firmly underwritten public offering of shares of Common Stock of the Corporation, (i) all outstanding shares of Series D Preferred shall automatically be converted into shares of Common Stock, at the then effective conversion rate applicable to the Series D Preferred, and (ii) such shares may not be reissued by the Corporation.

 

5.1.2                      Upon the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Series A Preferred (i) all outstanding shares of Series A Preferred (or such smaller proportion thereof as shall be designated in such notice, which proportion shall be applied on a pro rata basis among all holders of then-outstanding shares of Series A Preferred) shall automatically be converted into shares of Common Stock, at the then effective conversion rate, and (ii) such shares may not be reissued by the Corporation.

 

5.1.3                      Upon the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Series A-1 Preferred (i) all outstanding shares of Series A-1 Preferred (or such smaller proportion thereof as shall be designated in such notice, which proportion shall be applied on a pro rata basis among all holders of then-outstanding shares of Series A-1 Preferred) shall automatically be converted into shares of Common Stock, at the then effective conversion rate, and (ii) such shares may not be reissued by the Corporation.

 

5.1.4                      Upon the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Series B Preferred (i) all outstanding shares of Series B Preferred (or such smaller proportion thereof as shall be designated in such notice, which proportion shall be applied on a pro rata basis among all holders of then-outstanding shares of Series B Preferred) shall automatically be converted into shares of Common Stock, at the then effective conversion rate, and (ii) such shares may not be reissued by the Corporation.

 

5.1.5                      Upon the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Series C Preferred (i) all outstanding shares of Series C Preferred (or such smaller proportion thereof as shall be designated in such notice, which proportion shall be applied on a pro rata basis among all holders of then-outstanding shares of Series C Preferred) shall automatically be converted

 

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into shares of Common Stock, at the then effective conversion rate, and (ii) such shares may not be reissued by the Corporation.

 

5.1.6       Upon the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the then outstanding shares of Series D Preferred (i) all outstanding shares of Series D Preferred (or such smaller proportion thereof as shall be designated in such notice, which proportion shall be applied on a pro rata basis among all holders of then-outstanding shares of Series D Preferred) shall automatically be converted into shares of Common Stock, at the then effective conversion rate, and (ii) such shares may not be reissued by the Corporation.

 

The time of a closing described above in Subsection 5.1.1 or the date and time specified or the time of the event specified in a vote or written consent described above in Subsection 5.1.2, Subsection 5.1.3, Subsection 5.1.4, Subsection 5.1.5 or Subsection 5.1.6 is referred to herein as the “ Mandatory Conversion Time ” with respect to all Series Preferred, the Series A Preferred, the Series A-1 Preferred, the Series B Preferred, the Series C Preferred or the Series D Preferred, or portion thereof, as applicable, and such conversion is referred to herein as the “ Mandatory Conversion ”.

 

5.2          Procedural Requirements .  All holders of record of shares of Series Preferred converted or to be converted as a result of such Mandatory Conversion shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Series Preferred pursuant to this Section 5.  Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time.  Upon receipt of such notice, each holder of shares of Series Preferred converted or to be converted as a result of such Mandatory Conversion shall surrender his, her or its certificate or certificates for all such shares converted or to be converted as a result of the Mandatory Conversion (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice.  If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by 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.  All rights with respect to the Series Preferred converted or to be converted as a result of such Mandatory Conversion, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2.  As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Series Preferred converted or to be converted as a result of such Mandatory Conversion, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, (a) a certificate

 

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or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, (b) cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Series Preferred converted and (c) in the event of a Mandatory Conversion of less than all outstanding shares of Series Preferred, as contemplated by Subsections 5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.5 and 5.1.6 above, a certificate or certificates for the number of full shares of Series Preferred, not converted.  Such converted Series Preferred shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series Preferred accordingly.

 

6.             Redeemed or Otherwise Acquired Shares .  Any shares of Series Preferred that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred.  Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Series Preferred following redemption.

 

7.             Waiver .  Any of the rights, powers, preferences and other terms of the Series Preferred set forth herein may be waived on behalf of all holders of Series Preferred by the affirmative written consent or vote of the holders of the Required Consent Threshold.

 

8.             Notices .  Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Series Preferred shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

FIFTH:   Subject to any additional vote required by the Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

 

SIXTH:   Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

 

SEVENTH:   Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

EIGHTH:   Meetings of stockholders may be held within or outside of the State of Delaware, as the Bylaws of the Corporation may provide.  The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

 

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NINTH:   To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.  If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

 

Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

TENTH:   To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

 

Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.

 

ELEVENTH:   The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity.  An “ Excluded Opportunity ” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Series Preferred or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “ Covered Persons ”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.

 

3.              That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

 

4.              That this Seventh Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of

 

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Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

 

*     *     *

 

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IN WITNESS WHEREOF , this Seventh Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 17 th  day of November, 2016.

 

 

 

 

 

 

By:

/s/ Sameer Dholakia

 

 

Sameer Dholakia, CEO

 




Exhibit 3.2

 

CERTIFICATE OF AMENDMENT TO
THE SEVENTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SENDGRID, INC.

 

SENDGRID, INC. , a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), does hereby certify as follows:

 

FIRST :                                           The name of the Corporation is SENDGRID, INC .

 

SECOND :                            The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on July 20, 2009 under the name SendGrid, Inc.

 

THIRD :                                       The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware (“ DGCL ”), adopted resolutions approving an amendment to the Corporation’s Seventh Amended and Restated Certificate of Incorporation (the “ Restated Certificate ”), as follows:

 

1.                                       The first paragraph of Article FOURTH of the Restated Certificate is hereby amended and restated to read in its entirety as follows:

 

“The total number of shares of all classes of stock which the Corporation shall authority to issue is (i) 51,350,000 shares of Common Stock, $0.001 par value per share (“ Common Stock ”), and (ii) 24,697,410 shares of Preferred Stock, $0.001 par value per share (“ Preferred Stock ”).”

 

FOURTH :                          After adoption of and pursuant to a resolution by the Board, this Certificate of Amendment was submitted to the stockholders of the Corporation and approved by such stockholders in accordance with the provisions of Sections 228 and 242 of the DGCL.

 

*   *   *   *

 

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IN WITNESS WHEREOF , SendGrid, Inc. has caused this Certificate of Amendment to be signed by its President and Chief Executive Officer dated as of July 26, 2017.

 

 

SENDGRID, INC.

 

 

 

By:

/s/ Sameer Dholakia

 

 

Sameer Dholakia

 

 

President and Chief Executive Officer

 

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Exhibit 3.4

 

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

SENDGRID, INC.

 

Sameer Dholakia hereby certifies that:

 

ONE:              The original name of this company is SendGrid, Inc. and the date of filing the original Certificate of Incorporation of this company with the Secretary of State of the State of Delaware was on July 20, 2009.

 

TWO:             He is the duly elected and acting President and Chief Executive Officer of SendGrid, Inc., a Delaware corporation.

 

THREE:        The Certificate of Incorporation of this company is hereby amended and restated to read as follows:

 

I.

 

The name of this company is SENDGRID, INC. (the “ Company ”).

 

II.

 

The address of the registered office of the Company in the State of Delaware is 160 Greentree Drive, Suite 101, in the City of Dover, County of Kent, 19904, and the name of the registered agent of the Company in the State of Delaware at such address is National Registered Agents, Inc.

 

III.

 

The purpose of the Company is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (“ DGCL ”).

 

IV.

 

A.             This Company is authorized to issue two classes of stock to be designated, respectively, “ Common Stock ” and “ Preferred Stock .” The total number of shares which the Company is authorized to issue is two hundred sixty million (260,000,000) shares. Two hundred fifty million (250,000,000) shares shall be Common Stock, having a par value per share of $0.001. Ten Million (10,000,000) shares shall be Preferred Stock, having a par value per share of $0.001.

 

B.            The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Company (the “ Board of Directors ”) is hereby expressly authorized to provide for the issue of all or any of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors

 

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providing for the issuance of such shares and as may be permitted by the DGCL. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. The number of authorized shares of Preferred Stock 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 the voting power of the stock of the Company entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.

 

C.             Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Company for their vote; provided, however , that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

 

V.

 

For the management of the business and for the conduct of the affairs of the Company, and in further definition, limitation and regulation of the powers of the Company, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

 

A.             MANAGEMENT OF BUSINESS. The management of the business and the conduct of the affairs of the Company shall be vested in its Board of Directors. The number of directors which shall constitute the Board of Directors shall be fixed exclusively by resolutions adopted by a majority of the authorized number of directors constituting the Board of Directors.

 

B.             BOARD OF DIRECTORS.  Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, following the closing of the initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “ 1933 Act ”), covering the offer and sale of Common Stock to the public (the “ Initial Public Offering ”), the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively.  The Board of Directors is authorized to assign members of the Board of Directors already in office to such classes at the time the classification becomes effective.  At the first annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years.  At the second annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years.  At the third annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term

 

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of three years.  At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

 

Notwithstanding the foregoing provisions of this section, each director shall serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal.  No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

C.             REMOVAL OF DIRECTORS.

 

1.              Subject to the rights of any series of Preferred Stock to elect additional directors under specified circumstances, following the closing of the Initial Public Offering, neither the Board of Directors nor any individual director may be removed without cause.

 

2.              Subject to any limitation imposed by applicable law, any individual director or directors may be removed with cause by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all then-outstanding shares of capital stock of the Company entitled to vote generally at an election of directors.

 

D.             VACANCIES.       Subject to any limitations imposed by applicable law and subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders and except as otherwise provided by applicable law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified.

 

E.             BYLAW AMENDMENTS.

 

1.              The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the Company. Any adoption, amendment or repeal of the Bylaws of the Company by the Board of Directors shall require the approval of a majority of the authorized number of directors. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Company; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Company required by law or by this Amended and Restated Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class.

 

2.              The directors of the Company need not be elected by written ballot unless the Bylaws so provide.

 

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3.              No action shall be taken by the stockholders of the Company except at an annual or special meeting of stockholders called in accordance with the Bylaws, and no action shall be taken by the stockholders by written consent or electronic transmission.

 

4.              Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Company shall be given in the manner provided in the Bylaws of the Company.

 

VI.

 

A.             The liability of the directors for monetary damages shall be eliminated to the fullest extent under applicable law.

 

B.             To the fullest extent permitted by applicable law, the Company is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Company (and any other persons to which applicable law permits the Company to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise in excess of the indemnification and advancement otherwise permitted by such applicable law. If applicable law is amended after approval by the stockholders of this Article VI to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director to the Company shall be eliminated or limited to the fullest extent permitted by applicable law as so amended.

 

C.             Any repeal or modification of this Article VI shall only be prospective and shall not affect the rights or protections or increase the liability of any director under this Article VI in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification.

 

VII.

 

Unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (A) any derivative action or proceeding brought on behalf of the Company; (B) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders; (C) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the DGCL, this Amended and Restated Certificate of Incorporation or the Bylaws of the Company; or (D) any action asserting a claim against the Company or any director or officer or other employee of the Company governed by the internal affairs doctrine.

 

Unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the 1933 Act.

 

Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Company shall be deemed to have notice of and to have consented to the provisions of this Article VII.

 

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VIII.

 

A.             The Company 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 statute, except as provided in paragraph B. of this Article VIII, and all rights conferred upon the stockholders herein are granted subject to this reservation.

 

B.             Notwithstanding any other provisions of this Amended and Restated Certificate of Incorporation or any provision of applicable law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock of the Company required by law or by this Amended and Restated Certificate of Incorporation or any certificate of designation filed with respect to a series of Preferred Stock, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI, VII and VIII.

 

* * * *

 

FOUR:            This Amended and Restated Certificate of Incorporation has been duly approved by the Board of Directors of the Company.

 

FIVE:             This Amended and Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of the Company in accordance with Section 228 of the DGCL. This Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the DGCL by the stockholders of the Company.

 

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IN WITNESS WHEREOF , SendGrid, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by its President and Chief Executive Officer this [      ] day of [            ], 2017.

 

 

 

SENDGRID, INC.

 

 

 

 

 

 

By:

 

 

 

Sameer Dholakia

 

 

President and Chief Executive Officer

 

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Exhibit 3.5

 

AMENDED AND RESTATED BYLAWS

 

OF

 

SENDGRID, INC.
(A DELAWARE CORPORATION)

 

Adopted January 9, 2012

 



 

AMENDED AND RESTATED BYLAWS

 

OF

 

SENDGRID, INC.
(A DELAWARE CORPORATION)

 

ARTICLE I

 

OFFICES

 

Section 1.1                                    Registered Office .  The registered office of the corporation in the State of Delaware shall be as set forth in the Certificate of Incorporation of the corporation unless changed as provided by applicable law.

 

Section 1.2                                    Other Offices .  The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the corporation may require.

 

ARTICLE II

 

CORPORATE SEAL

 

Section 2.1                                    Corporate Seal .  The Board of Directors may adopt a corporate seal.  The corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal-Delaware.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

 

ARTICLE III

 

STOCKHOLDERS’ MEETINGS

 

Section 3.1                                    Place of Meetings .  Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors.  The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (“ DGCL ”).

 

Section 3.2                                    Annual Meeting .

 

(a)                                  The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors.  Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of

 

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stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Article III Section 3.2(b) below.

 

(b)                                  At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting.  For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Article III Section 3.2(a) above, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under the DGCL, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in this Article III Section 3.2(b)), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Article III Section 3.2.  To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier than the close of business on the one hundred twentieth (120th) 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 advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made.  In no event shall the public announcement of an adjournment of an annual meeting commence a new 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 proposed to nominate for election or reelection as a director 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 Regulation 14A under the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”) and Rule 14a-4(d) thereunder (including 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 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

 

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(i) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “ Solicitation Notice ”).

 

(c)                                   Notwithstanding anything in the second sentence of Article III Section 3.2(b) of these Bylaws to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation 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 Article III Section 3.2 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the corporation.

 

(d)                                  Only such persons who are nominated in accordance with the procedures set forth in this Article III Section 3.2 shall be eligible 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 Article III Section 3.2.  Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty 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 these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

 

(e)                                   Notwithstanding the foregoing provisions of this Article III Section 3.2, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act.  Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act.

 

(f)                                    For purposes of this Article III Section 3.2, “public announcement” shall mean 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 1934 Act.

 

Section 3.3                                    Special Meetings .

 

(a)                                  Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive

 

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Officer, (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption) or (iv) by the holders of shares entitled to cast not less than twenty percent (20%) of the votes at the meeting , and shall be held at such place, on such date, and at such time as the Board of Directors shall fix.

 

(b)                                  If a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by certified or registered mail, return receipt requested, or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation.  No business may be transacted at such special meeting otherwise than specified in such notice.  The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request.  Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Article III Section 3.4 below.  Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

 

Section 3.4                                    Notice of Meetings .  Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders 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, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at any such meeting.  If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation.  Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder 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.  Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

 

Section 3.5                                    Quorum .  At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business.  In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting.  The stockholders present at a duly called or convened meeting, at which a quorum is

 

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present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.  Except as otherwise provided by statute, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of a majority of shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders.  Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the election of directors.  Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter.  Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series.

 

Section 3.6                                    Adjournment and Notice of Adjourned Meetings .  Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy.  When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, 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 for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

Section 3.7                                    Voting Rights .  For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Article III Section 3.9 of these Bylaws, shall be entitled to vote at any meeting of stockholders.  Every person entitled to vote or execute consents shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law.  An agent so appointed need not be a stockholder.  No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

 

Section 3.8                                    Joint Owners of Stock .  If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if

 

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more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b).  If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

 

Section 3.9                                    List of Stockholders .  The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, 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, on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or during ordinary business hours, at the principal place of business of the corporation.  In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation.  The list shall be open to examination of any stockholder during the time of the meeting as provided by law.

 

Section 3.10                             Action Without Meeting .

 

(a)                                  Unless otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, or by electronic transmission 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.

 

(b)                                  Every written consent or electronic transmission shall bear the date of signature of each stockholder who signs the consent, and no written consent or electronic transmission shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered to the corporation in the manner herein required, written consents or electronic transmissions signed by a sufficient number of stockholders to take action are 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 proceedings of meetings of stockholders are recorded.  Delivery made to a corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

 

(c)                                   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 or by electronic transmission 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 stockholders to take action were delivered to the corporation as provided in Section 228(c) of the DGCL.  If the action which is consented to is such as would have required the filing of a certificate under any section of the

 

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DGCL if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

 

(d)                                  A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (i) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder and (ii) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission.  The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed.  No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form 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 proceedings of meetings of stockholders are recorded.  Delivery made to a corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested.  Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the board of directors of the corporation.  Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

 

Section 3.11                             Organization .

 

(a)                                  At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman.  The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

 

(b)                                  The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient.  Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and

 

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constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot.  The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.  Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

 

ARTICLE IV

 

DIRECTORS

 

Section 4.1                                    Number and Term of Office .  The authorized number of directors of the corporation shall be fixed by the Board of Directors from time to time.  Directors need not be stockholders unless so required by the Certificate of Incorporation.  If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient.

 

Section 4.2                                    Powers .  The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.

 

Section 4.3                                    Term of Directors .  Subject to the rights of the holders of capital stock to elect additional directors under specified circumstances, directors shall be elected at each annual meeting of stockholders for a term of one year.  Each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal.  No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

Section 4.4                                    Vacancies .  Unless otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series of capital stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors.  Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified.  A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

 

Section 4.5                                    Resignation .  Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors.  If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors.  When one or more directors shall resign from the Board of

 

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Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified.

 

Section 4.6                                    Removal .  Subject to any limitations imposed by applicable law, the Board of Directors or any director may be removed from office at any time (i) with cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors or (ii) without cause by the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of all then-outstanding shares of capital stock of the corporation, entitled to vote generally at an election of directors.

 

Section 4.7                                    Meetings .

 

(a)                                  Regular Meetings .  Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, including a voice-messaging system or other system designated to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means.  No further notice shall be required for a regular meeting of the Board of Directors.

 

(b)                                  Special Meetings .  Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the President or any director.

 

(c)                                   Meetings by Electronic Communications Equipment .  Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

(d)                                  Notice of Special Meetings .  Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting.  If notice is sent by US mail, it shall be sent by first class mail, postage prepaid at least three (3) days before the date of the meeting.  Notice of any meeting may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the 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.

 

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(e)                                   Waiver of Notice .  The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission.  All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

 

Section 4.8                                    Quorum and Voting .

 

(a)                                  Unless the Certificate of Incorporation requires a greater number, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation; provided, however, at any meeting, whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

 

(b)                                  At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.

 

Section 4.9                                    Action Without 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 members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee.  Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

Section 4.10                             Fees and Compensation .  Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors.  Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

 

Section 4.11                             Committees .

 

(a)                                  Executive Committee .  The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of Directors.  The Executive Committee, to the extent permitted by law and 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

 

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corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any bylaw of the corporation.

 

(b)                                  Other Committees .  The Board of Directors may, from time to time, appoint such other committees as may be permitted by law.  Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws.

 

(c)                                   Term .  The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock and the provisions of subsections (a) or (b) of this Bylaw may at any time increase or decrease the number of members of a committee or terminate the existence of a committee.  The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors.  The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee.  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, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute 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.

 

(d)                                  Meetings .  Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Article IV Section 4.11 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter.  Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors.  Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special 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.  Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

 

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Section 4.12                             Organization .  At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or if the President is absent, the most senior Vice President, (if a director) or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting.  The Secretary, or in his absence, any Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

 

ARTICLE V

 

OFFICERS

 

Section 5.1                                    Officers Designated .  The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, the Chief Technology Officer, the Chief Operations Officer, the Treasurer and the Controller, all of whom shall be elected at the annual organizational meeting of the Board of Directors.  The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents with such powers and duties as it shall deem necessary.  The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate.  Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law.  The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

 

Section 5.2                                    Tenure and Duties of Officers .

 

(a)                                  General .  All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed.  Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors.  If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

 

(b)                                  Duties of Chairman of the Board of Directors .  The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors.  The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.  If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Article V Section 5.2.

 

(c)                                   Duties of President .  The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present.  The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.  (Del. Code Ann., tit. 8, § 142(a))

 

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(d)                                  Duties of Vice Presidents .  The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant.  The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.  (Del. Code Ann., tit. 8, § 142(a))

 

(e)                                   Duties of Secretary .  The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation.  The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice.  The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.  The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

(f)                                    Duties of Chief Financial Officer .  The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President.  The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation.  The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.  The President may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

(g)                                  Delegation of Authority .  The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

 

Section 5.3                                    Resignations .  Any officer may resign at any time by giving notice in writing or by electronic transmission notice to the Board of Directors or to the President or to the Secretary.  Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time.  Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective.  Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

 

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Section 5.4                                    Removal .  Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.

 

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION

 

Section 6.1                                    Execution of Corporate Instruments .  The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.

 

All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.

 

Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

Section 6.2                                    Voting of Securities Owned by the Corporation .  All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

 

ARTICLE VII

 

SHARES OF STOCK

 

Section 7.1                                    Form and Execution of Certificates .  Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law.  Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation.  Any or all of the signatures on the certificate may be facsimiles.  In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may

 

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be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.  Each certificate shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.  Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

 

Section 7.2                                    Lost Certificates .  A new certificate or certificates shall 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.  The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount 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 7.3                                    Transfers .

 

(a)                                  No holder of any of the shares of common stock of the corporation (other than common stock acquired upon the conversion of preferred stock of the corporation) may sell, transfer, assign, pledge, or otherwise dispose of or encumber any of the shares of stock of the corporation or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise without the prior written consent of the corporation, upon duly authorized action of its Board of Directors.  The corporation may withhold consent for any legitimate corporate purpose, as determined by the Board of Directors.

 

(b)                                  Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

 

(c)                                   The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

 

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Section 7.4                                    Fixing Record Dates .

 

(a)                                  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, the Board of Directors may fix, in advance, 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 shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting.  If no record date is fixed by the Board of Directors, 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. 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.

 

(b)                                  In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, 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 date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors.  Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date.  The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received, adopt a resolution fixing the record date.  If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable 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 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 proceedings of meetings 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.  If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

 

(c)                                   In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders 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 record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action.  If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

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Section 7.5                                    Registered Stockholders .  The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

ARTICLE VIII

 

OTHER SECURITIES OF THE CORPORATION

 

Section 8.1                                    Execution of Other Securities .  All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Article VII Section 7.1), may be signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President, or such other person as may be authorized by the Board of Directors.  Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person.  In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

 

ARTICLE IX

 

DIVIDENDS

 

Section 9.1                                    Declaration of Dividends .  Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting.  Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable law.

 

Section 9.2                                    Dividend Reserve .  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 Board of 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 Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

 

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ARTICLE X

 

FISCAL YEAR

 

Section 10.1                             Fiscal Year .  The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

ARTICLE XI

 

INDEMNIFICATION

 

Section 11.1                             Indemnification of Directors, Executive Officers, Other Officers, Employees and Other Agents .

 

(a)                                  Directors and Officers .  The corporation shall indemnify its directors and officers to the fullest extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that the corporation shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the Delaware General Corporation Law or any other applicable law or (iv) such indemnification is required to be made under subsection (d).

 

(b)                                  Employees and Other Agents .  The corporation shall have power to indemnify its employees and other agents as set forth in the DGCL or any other applicable law.  The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person as the Board of Directors shall determine.

 

(c)                                   Expenses .  The corporation shall advance to any person who 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 is or was a director or officer, of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding, provided, however, that, if the DGCL requires, an advancement of expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Article XI or otherwise.

 

Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation, in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by a majority vote of a quorum consisting of directors who were not parties to the proceeding, even if

 

19



 

not a quorum, or (ii) by a committee of such directors designated by a majority of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

 

(d)                                  Enforcement .  Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or officer.  Any right to indemnification or advances granted by this Bylaw to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor.  The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim.  In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed.  In connection with any claim by an officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful.  Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.  In any suit brought by a director or officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or officer is not entitled to be indemnified, or to such advancement of expenses, under this Article XI or otherwise shall be on the corporation.

 

(e)                                   Non-Exclusivity of Rights .  The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office.  The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL or any other applicable law.

 

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(f)                                    Survival of Rights .  The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

(g)                                  Insurance .  To the fullest extent permitted by the DGCL, or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Bylaw.

 

(h)                                  Amendments .  Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

 

(i)                                     Saving Clause .  If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law.  If this Article XI shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and officer to the full extent under applicable law.

 

(j)                                     Certain Definitions .  For the purposes of this Bylaw, the following definitions shall apply:

 

(1)                                  The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

(2)                                  The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 

(3)                                  The term the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

 

(4)                                  References to a “director,” “executive officer,” “officer,” “employee,” or “agent” of the corporation shall include, without limitation, situations where such

 

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person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 

(5)                                  References to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Bylaw.

 

ARTICLE XII

 

NOTICES

 

Section 12.1                             Notices .

 

(a)                                  Notice to Stockholders .  Written notice to stockholders of stockholder meetings shall be given as provided in Article III Section 3.4 above.  Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by United States mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

 

(b)                                  Notice to Directors .  Any notice required to be given to any director may be given by the method stated in subsection (a), or as provided for in Article IV Section 4.7 of these Bylaws.  If such notice is not delivered personally, it shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.

 

(c)                                   Affidavit of Mailing .  An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

 

(d)                                  Methods of Notice .  It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

 

(e)                                   Notice to Person with Whom Communication Is Unlawful .  Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or

 

22



 

Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person.  Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given.  In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

ARTICLE XIII

 

AMENDMENTS

 

Section 13.1                             Amendments .  The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the corporation.  The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the corporation.

 

ARTICLE XIV

 

RIGHT OF FIRST REFUSAL

 

Section 14.1                             Right of First Refusal .  No stockholder shall sell, assign, pledge, or in any manner transfer any of the shares of common stock of the corporation or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise, except by a transfer which meets the requirements hereinafter set forth in this bylaw:

 

(a)                                  If the stockholder desires to sell or otherwise transfer any of his shares of common stock, then the stockholder shall first give written notice thereof to the corporation.  The notice shall name the proposed transferee and state the number of shares to be transferred, the proposed consideration, and all other terms and conditions of the proposed transfer.

 

(b)                                  For thirty (30) days following receipt of such notice, the corporation shall have the option to purchase all (but not less than all) of the shares specified in the notice at the price and upon the terms set forth in such notice; provided, however, that, with the consent of the stockholder, the corporation shall have the option to purchase a lesser portion of the shares specified in said notice at the price and upon the terms set forth therein.  In the event of a gift, property settlement or other transfer in which the proposed transferee is not paying the full price for the shares, and that is not otherwise exempted from the provisions of this Article XIV Section 14.1, the price shall be deemed to be the fair market value of the stock at such time as determined in good faith by the Board of Directors.  In the event the corporation elects to purchase all of the shares or, with consent of the stockholder, a lesser portion of the shares, it

 

23



 

shall give written notice to the transferring stockholder of its election and settlement for said shares shall be made as provided below in paragraph (d).

 

(c)                                   The corporation may assign its rights hereunder.

 

(d)                                  In the event the corporation and/or its assignee(s) elect to acquire any of the shares of the transferring stockholder as specified in said transferring stockholder’s notice, the Secretary of the corporation shall so notify the transferring stockholder and settlement thereof shall be made in cash within thirty (30) days after the Secretary of the corporation receives said transferring stockholder’s notice; provided that if the terms of payment set forth in said transferring stockholder’s notice were other than cash against delivery, the corporation and/or its assignee(s) shall pay for said shares on the same terms and conditions set forth in said transferring stockholder’s notice.

 

(e)                                   In the event the corporation and/or its assignees(s) do not elect to acquire all of the shares specified in the transferring stockholder’s notice, said transferring stockholder may, within the sixty-day period following the expiration of the option rights granted to the corporation and/or its assignees(s) herein, transfer the shares specified in said transferring stockholder’s notice which were not acquired by the corporation and/or its assignees(s) as specified in said transferring stockholder’s notice.  All shares so sold by said transferring stockholder shall continue to be subject to the provisions of this bylaw in the same manner as before said transfer.

 

(f)                                    Anything to the contrary contained herein notwithstanding, the following transactions shall be exempt from the provisions of this bylaw:

 

(1)                                  A stockholder’s transfer of any or all shares held either during such stockholder’s lifetime or on death by will or intestacy to such stockholder’s immediate family or to any custodian or trustee for the account of such stockholder or such stockholder’s immediate family or to any limited partnership of which the stockholder, members of such stockholder’s immediate family or any trust for the account of such stockholder or such stockholder’s immediate family will be the general of limited partner(s) of such partnership.  “Immediate family” as used herein shall mean spouse, lineal descendant, father, mother, brother, or sister of the stockholder making such transfer.

 

(2)                                  A stockholder’s transfer of any shares of common stock of the corporation issued upon conversion or exchange of shares of the corporation’s preferred stock.

 

(3)                                  A stockholder’s transfer of any or all of such stockholder’s shares to the corporation.

 

(4)                                  A transfer by a stockholder which is a limited liability company to any or all of its members.

 

(5)                                  A corporate stockholder’s transfer of any or all of its shares pursuant to and in accordance with the terms of any merger, consolidation, reclassification of shares or capital reorganization of the corporate stockholder, or pursuant to a sale of all or substantially all of the stock or assets of a corporate stockholder.

 

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(6)                                  A corporate stockholder’s transfer of any or all of its shares to any or all of its stockholders.

 

(7)                                  A transfer by a stockholder which is a limited or general partnership to any or all of its partners or former partners.

 

In any such case, the transferee, assignee, or other recipient shall receive and hold such stock subject to the provisions of this bylaw, and there shall be no further transfer of such stock except in accord with this bylaw.

 

(g)                                  The provisions of this bylaw may be waived with respect to any transfer either by the corporation, upon duly authorized action of its Board of Directors, or by the stockholders, upon the express written consent of the owners of a majority of the voting power of the corporation (excluding the votes represented by those shares to be transferred by the transferring stockholder).  This bylaw may be amended or repealed either by a duly authorized action of the Board of Directors or by the stockholders, upon the express written consent of the owners of a majority of the voting power of the corporation.

 

(h)                                  Any sale or transfer, or purported sale or transfer, of securities of the corporation shall be null and void unless the terms, conditions, and provisions of this bylaw are strictly observed and followed.

 

(i)                                     The foregoing right of first refusal shall terminate on either of the following dates, whichever shall first occur:

 

(1)                                  On April 19, 2020; or

 

(2)                                  Upon the date securities of the corporation are first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States Securities and Exchange Commission under the Securities Act of 1933, as amended.

 

(j)                                     The certificates representing shares of common stock of the corporation shall bear on their face the following legend so long as the foregoing right of first refusal remains in effect:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE CORPORATION.”

 

ARTICLE XV

 

LOANS TO OFFICERS

 

Section 15.1                             Loans to Officers .  The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation.  The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation.  Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

 

25




Exhibit 3.6

 

AMENDED AND RESTATED BYLAWS

 

OF

 

SENDGRID, INC.
(A DELAWARE CORPORATION)

 



 

Table of Contents

 

 

 

Page

 

 

 

ARTICLE I

OFFICES

1

 

 

 

Section 1.

Registered Office

1

 

 

 

Section 2.

Other Offices

1

 

 

 

ARTICLE II

CORPORATE SEAL

1

 

 

 

Section 3.

Corporate Seal

1

 

 

 

ARTICLE III

STOCKHOLDERS’ MEETINGS

1

 

 

 

Section 4.

Place of Meetings

1

 

 

 

Section 5.

Annual Meetings

1

 

 

 

Section 6.

Special Meetings

5

 

 

 

Section 7.

Notice Of Meetings

5

 

 

 

Section 8.

Quorum

6

 

 

 

Section 9.

Adjournment and Notice of Adjourned Meetings

6

 

 

 

Section 10.

Voting Rights

7

 

 

 

Section 11.

Joint Owners of Stock

7

 

 

 

Section 12.

List of Stockholders

7

 

 

 

Section 13.

Action Without Meeting

7

 

 

 

Section 14.

Organization

7

 

 

 

ARTICLE IV

DIRECTORS

8

 

 

 

Section 15.

Number and Term of Office

8

 

 

 

Section 16.

Powers

8

 

 

 

Section 17.

Classes of Directors

8

 

 

 

Section 18.

Vacancies

9

 

 

 

Section 19.

Resignation

9

 

 

 

Section 20.

Removal

9

 

 

 

Section 21.

Meetings

9

 

 

 

Section 22.

Quorum And Voting

10

 

 

 

Section 23.

Action Without Meeting

10

 

 

 

Section 24.

Fees And Compensation

11

 

 

 

Section 25.

Committees

11

 

 

 

Section 26.

Duties of Chairperson of the Board of Directors and Lead Independent Director

12

 

 

 

Section 27.

Organization

12

 

 

 

ARTICLE V

OFFICERS

12

 

i



 

Table of Contents

(continued)

 

 

 

Page

 

 

 

Section 28.

Officers Designated

12

 

 

 

Section 29.

Tenure And Duties Of Officers

13

 

 

 

Section 30.

Delegation Of Authority

14

 

 

 

Section 31.

Resignations

14

 

 

 

Section 32.

Removal

14

 

 

 

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION

15

 

 

 

Section 33.

Execution Of Corporate Instruments

15

 

 

 

Section 34.

Voting Of Securities Owned By The Corporation

15

 

 

 

ARTICLE VII

SHARES OF STOCK

15

 

 

 

Section 35.

Form And Execution Of Certificates

15

 

 

 

Section 36.

Lost Certificates

15

 

 

 

Section 37.

Transfers

16

 

 

 

Section 38.

Fixing Record Dates

16

 

 

 

Section 39.

Registered Stockholders

16

 

 

 

ARTICLE VIII

OTHER SECURITIES OF THE CORPORATION

16

 

 

 

Section 40.

Execution Of Other Securities

16

 

 

 

ARTICLE IX

DIVIDENDS

17

 

 

 

Section 41.

Declaration Of Dividends

17

 

 

 

Section 42.

Dividend Reserve

17

 

 

 

ARTICLE X

FISCAL YEAR

17

 

 

 

Section 43.

Fiscal Year

17

 

 

 

ARTICLE XI

INDEMNIFICATION

18

 

 

 

Section 44.

Indemnification of Directors, Executive Officers, Other Officers, Employees and Other Agents

18

 

 

 

ARTICLE XII

NOTICES

21

 

 

 

Section 45.

Notices

21

 

 

 

ARTICLE XIII

AMENDMENTS

22

 

 

 

Section 46.

Amendments

22

 

 

 

ARTICLE XIV

LOANS TO OFFICERS

22

 

 

 

Section 47.

Loans To Officers

22

 

ii



 

AMENDED AND RESTATED BYLAWS

 

OF

 

SENDGRID, INC.
(A DELAWARE CORPORATION)

 

ARTICLE I

 

OFFICES

 

Section 1.               Registered Office. The registered office of the corporation in the State of Delaware shall be in the City of Dover, County of Kent.

 

Section 2.               Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.

 

ARTICLE II

 

CORPORATE SEAL

 

Section 3.               Corporate Seal. The Board of Directors may adopt a corporate seal. If adopted, the corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal-Delaware.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

 

ARTICLE III

 

STOCKHOLDERS’ MEETINGS

 

Section 4.               Place of Meetings. Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (“ DGCL ”).

 

Section 5.               Annual Meeting.

 

(a)            The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may properly come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders (with respect to business other than nominations); (ii) brought specifically by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving the stockholder’s notice provided for in Section 5(b) below, who is entitled to vote at the meeting and who complied with the notice procedures set forth in Section 5. For the avoidance of doubt, clause (iii) above shall be the exclusive means for a

 

1



 

stockholder to make nominations and submit other business (other than matters properly included in the corporation’s notice of meeting of stockholders and proxy statement under Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the “ 1934 Act ”)) before an annual meeting of stockholders.

 

(b)            At an annual meeting of the stockholders, only such business shall be conducted as is a proper matter for stockholder action under Delaware law and as shall have been properly brought before the meeting in accordance with the procedures below.

 

(i)             For nominations for the election to the Board of Directors to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, the stockholder must deliver written notice to the Secretary at the principal executive offices of the corporation on a timely basis as set forth in Section 5(b)(iii) and must update and supplement such written notice on a timely basis as set forth in Section 5(c). Such stockholder’s notice shall set forth: (A) as to each nominee such stockholder proposes to nominate at the meeting: (1) the name, age, business address and residence address of such nominee, (2) the principal occupation or employment of such nominee, (3) the class and number of shares of each class of capital stock of the corporation which are owned of record and beneficially by such nominee, (4) the date or dates on which such shares were acquired and the investment intent of such acquisition, (5) a statement whether such nominee, if elected, intends to tender, promptly following such person’s failure to receive the required vote for election or re-election at the next meeting at which such person would face election or re-election, an irrevocable resignation effective upon acceptance of such resignation by the Board of Directors and (6) such other information concerning such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved), or that is otherwise required to be disclosed pursuant to Section 14 of the 1934 Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named as a nominee and to serving as a director if elected); and (B) the information required by Section 5(b)(iv). 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 an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such proposed nominee.

 

(ii)            Other than proposals sought to be included in the corporation’s proxy materials pursuant to Rule 14(a)-8 under the 1934 Act, for business other than nominations for the election to the Board of Directors to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, the stockholder must deliver written notice to the Secretary at the principal executive offices of the corporation on a timely basis as set forth in Section 5(b)(iii), and must update and supplement such written notice on a timely basis as set forth in Section 5(c). Such stockholder’s notice shall set forth: (A) as to each matter such stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting, and any material interest (including any anticipated benefit of such business to any Proponent (as defined below) other than solely as a result of its ownership of the corporation’s capital stock, that is material to any Proponent individually, or to the Proponents in the aggregate) in such business of any Proponent; and (B) the information required by Section 5(b)(iv).

 

(iii)          To be timely, the written notice required by Section 5(b)(i) or 5(b)(ii) must be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the ninetieth (90 th ) day nor earlier than the close of business on the one hundred twentieth (120 th ) day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that, subject to the last sentence of this Section 5(b)(iii), in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the

 

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anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so received not earlier than the close of business on the one hundred twentieth (120 th ) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90 th ) day prior to such annual meeting or the tenth (10 th ) day following the day on which public announcement of the date of such meeting is first made. In no event shall an adjournment or a postponement of an annual meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the giving of a stockholder’s notice as described above.

 

(iv)           The written notice required by Section 5(b)(i) or 5(b)(ii) shall also set forth, as of the date of the notice and as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (each, a “ Proponent ” and collectively, the “ Proponents ”): (A) the name and address of each Proponent, as they appear on the corporation’s books; (B) the class, series and number of shares of the corporation that are owned beneficially and of record by each Proponent; (C) a description of any agreement, arrangement or understanding (whether oral or in writing) with respect to such nomination or proposal between or among any Proponent and any of its affiliates or associates, and any others (including their names) acting in concert, or otherwise under the agreement, arrangement or understanding, with any of the foregoing; (D) a representation that the Proponents are holders of record or beneficial owners, as the case may be, of shares of the corporation entitled to vote at the meeting and intend to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice (with respect to a notice under Section 5(b)(i)) or to propose the business that is specified in the notice (with respect to a notice under Section 5(b)(ii)); (E) a representation as to whether the Proponents intend to deliver a proxy statement and form of proxy to holders of a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (with respect to a notice under Section 5(b)(i)) or to carry such proposal (with respect to a notice under Section 5(b)(ii)); (F) to the extent known by any Proponent, the name and address of any other stockholder supporting the proposal on the date of such stockholder’s notice; and (G) a description of all Derivative Transactions (as defined below) by each Proponent during the previous twelve (12) month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic terms of, such Derivative Transactions.

 

(c)            A stockholder providing written notice required by Section 5(b)(i) or (ii) shall update and supplement such notice in writing, if necessary, so that the information provided or required to be provided in such notice is true and correct in all material respects as of (i) the record date for the meeting and (ii) the date that is five (5) business days prior to the meeting and, in the event of any adjournment or postponement thereof, five (5) business days prior to such adjourned or postponed meeting. In the case of an update and supplement pursuant to clause (i) of this Section 5(c), such update and supplement shall be received by the Secretary at the principal executive offices of the corporation not later than five (5) business days after the record date for the meeting. In the case of an update and supplement pursuant to clause (ii) of this Section 5(c), such update and supplement shall be received by the Secretary at the principal executive offices of the corporation not later than two (2) business days prior to the date for the meeting, and, in the event of any adjournment or postponement thereof, two (2) business days prior to such adjourned or postponed meeting.

 

(d)            Notwithstanding anything in Section 5(b)(iii) to the contrary, in the event that the number of directors in an Expiring Class is increased and there is no public announcement of the appointment of a director to such class, or, if no appointment was made, of the vacancy in such class, made by the corporation at least ten (10) days before the last day a stockholder may deliver a notice of nomination in accordance with Section 5(b)(iii), a stockholder’s notice required by this Section 5 and which complies with the requirements in Section 5(b)(i), other than the timing requirements in Section 5(b)(iii), shall also be considered timely, but only with respect to nominees for any new positions in such Expiring Class created by such increase, if it shall be received by the Secretary at the principal executive

 

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offices of the corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the corporation.  For purposes of this section, an “ Expiring Class ” shall mean a class of directors whose term shall expire at the next annual meeting of stockholders.

 

(e)            A person shall not be eligible for election or re-election as a director unless the person is nominated either in accordance with clause (ii) of Section 5(a), or in accordance with clause (iii) of Section 5(a). Except as otherwise required by law, the chairperson of the meeting shall have the power and duty 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 these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, or the Proponent does not act in accordance with the representations in Sections 5(b)(iv)(D) and 5(b)(iv)(E), to declare that such proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded, notwithstanding that proxies in respect of such nominations or such business may have been solicited or received.

 

(f)             Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act; provided, however, that any references in these Bylaws to the 1934 Act or the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to proposals and/or nominations to be considered pursuant to Section 5(a)(iii) of these Bylaws.

 

(g)            For purposes of Sections 5 and 6,

 

(i)             “ affiliates ” and “ associates ” shall have the meanings set forth in Rule 405 under the Securities Act of 1933, as amended (the “ 1933 Act ”).

 

(ii)            a “ Derivative Transaction ” means any agreement, arrangement, interest or understanding entered into by, or on behalf or for the benefit of, any Proponent or any of its affiliates or associates, whether record or beneficial:

 

(w)          the value of which is derived in whole or in part from the value of any class or series of shares or other securities of the corporation,

 

(x)           which otherwise provides any direct or indirect opportunity to gain or share in any gain derived from a change in the value of securities of the corporation,

 

(y)           the effect or intent of which is to mitigate loss, manage risk or benefit of security value or price changes, or

 

(z)           which provides the right to vote or increase or decrease the voting power of, such Proponent, or any of its affiliates or associates, with respect to any securities of the corporation,

 

which agreement, arrangement, interest or understanding may include, without limitation, any option, warrant, debt position, note, bond, convertible security, swap, stock appreciation right, short position, profit interest, hedge, right to dividends, voting agreement, performance-related fee or arrangement to borrow or lend shares (whether or not subject to payment, settlement, exercise or conversion in any such class or series), and any proportionate interest of such Proponent in the securities of the corporation held

 

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by any general or limited partnership, or any limited liability company, of which such Proponent is, directly or indirectly, a general partner or managing member; and

 

(iii)          “ public announcement ” shall mean 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 1934 Act.

 

Section 6.               Special Meetings.

 

(a)            Special meetings of the stockholders of the corporation may be called, for any purpose as is a proper matter for stockholder action under Delaware law, by (i) the Chairperson of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption).

 

(b)            For a special meeting called pursuant to Section 6(a), the Board of Directors shall determine the time and place, if any, of such special meeting. Upon determination of the time and place, if any, of the meeting, the Secretary shall cause a notice of meeting to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. No business may be transacted at a special meeting otherwise than as specified in the notice of meeting.

 

(c)            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 (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is a stockholder of record at the time of giving notice provided for in this paragraph, who shall be entitled to vote at the meeting and who delivers written notice to the Secretary of the corporation setting forth the information required by Section 5(b)(i). 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 of record 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 written notice setting forth the information required by Section 5(b)(i) of these Bylaws shall be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the later of the ninetieth (90 th ) day prior to such meeting or the tenth (10 th ) 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. The stockholder shall also update and supplement such information as required under Section 5(c). In no event shall an adjournment or a postponement of a special meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the giving of a stockholder’s notice as described above.

 

(d)            Notwithstanding the foregoing provisions of this Section 6, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder with respect to matters set forth in this Section 6. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act; provided, however, that any references in these Bylaws to the 1934 Act or the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to nominations for the election to the Board of Directors or proposals of other businesses to be considered pursuant to Section 6(c) of these Bylaws.

 

Section 7.               Notice of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less than ten (10) 

 

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nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at any such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. If sent via electronic transmission, notice is given as of the sending time recorded at the time of transmission. Notice of the time, place, if any, and purpose of any meeting of stockholders (to the extent required) may be waived in writing, signed by the person entitled to notice thereof, or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his or her attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder 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. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

 

Section 8.               Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the voting power of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairperson of the meeting or by vote of the holders of a majority of the voting power of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute or by applicable stock exchange rules, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the holders of a majority of the voting power of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws or by applicable stock exchange rules, a majority of the voting power of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws or by applicable stock exchange rules, the affirmative vote of the holders of a majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series.

 

Section 9.               Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairperson of the meeting or by the vote of the holders of a majority of the voting power of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting. When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the

 

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adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

Section 10.             Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

 

Section 11.             Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his or her act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

 

Section 12.             List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number and class 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, (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. The list shall be open to examination of any stockholder during the time of the meeting as provided by law.

 

Section 13.             Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation, no action shall be taken by the stockholders of the corporation except at an annual or a special meeting of the stockholders called in accordance with these Bylaws, and no action of the stockholders of the corporation may be taken by written consent or electronic transmission.

 

Section 14.             Organization.

 

(a)            At every meeting of stockholders, the Chairperson of the Board of Directors, or, if a Chairperson has not been appointed or is absent, the Chief Executive Officer, or if no Chief Executive Officer is then serving or is absent, the President, or, if the President is absent, a chairperson of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy duly authorized, shall act as chairperson. The Chairperson of the Board may appoint the Chief Executive Officer as chairperson of the meeting. The Secretary, or, in his or her absence, an Assistant Secretary or

 

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other officer or other person directed to do so by the chairperson of the meeting, shall act as secretary of the meeting.

 

(b)            The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairperson of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairperson shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board of Directors or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

 

ARTICLE IV

 

DIRECTORS

 

Section 15.             Number and Term of Office. The authorized number of directors of the corporation shall be fixed in accordance with the Certificate of Incorporation. Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.

 

Section 16.             Powers. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.

 

Section 17.             Classes of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, following the closing of the initial public offering pursuant to an effective registration statement under the 1933 Act, covering the offer and sale of common stock of the corporation to the public (the “ Initial Public Offering ”), the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. The Board of Directors is authorized to assign members of the Board of Directors already in office to such classes at the time the classification becomes effective. At the first annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the Initial Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

 

Notwithstanding the foregoing provisions of this Section 17, each director shall serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. No

 

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decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

 

Section 18.             Vacancies .  Unless otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series of preferred stock or as otherwise provided by applicable law, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall be filled by the affirmative vote of (a) a majority of the directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, or (b) the holders of a majority of the voting power of all then outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors, provided , however , that whenever the holders of any series of preferred stock are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such series will, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships will be filled by stockholders, be filled by a majority of the directors elected by such series then in office, or by a sole remaining director so elected, and not by the stockholders.  Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

 

Section 19.             Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time. If no such specification is made, the Secretary, in his or her discretion, may either (a) require confirmation from the director prior to deeming the resignation effective, in which case the resignation will be deemed effective upon receipt of such confirmation, or (b) deem the resignation effective at the time of delivery of the resignation to the Secretary. 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 so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his or her successor shall have been duly elected and qualified.

 

Section 20.             Removal.

 

(a)            Subject to the rights of any series of preferred stock to elect additional directors under specified circumstances, neither the Board of Directors nor any individual director may be removed without cause.

 

(b)            Subject to any limitation imposed by applicable law, any individual director or directors may be removed from office with cause by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all then outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors, voting together as a single class.

 

Section 21.             Meetings.

 

(a)            Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile, telegraph or telex, or by

 

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electronic mail or other electronic means. No further notice shall be required for regular meetings of the Board of Directors.

 

(b)            Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairperson of the Board, the Chief Executive Officer or a majority of the total number of authorized directors.

 

(c)            Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

(d)            Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting. If notice is sent by US mail, it shall be sent by first class mail, postage prepaid, at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing, or by electronic transmission, at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the 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.

 

(e)            Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though it had been transacted at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

 

Section 22.             Quorum and Voting.

 

(a)            Unless the Certificate of Incorporation requires a greater number, and except with respect to questions related to indemnification arising under Section 44 for which a quorum shall be one-third of the exact number of directors fixed from time to time, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

 

(b)            At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.

 

Section 23.             Action Without 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 members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and

 

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such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

Section 24.             Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

 

Section 25.             Committees.

 

(a)            Executive Committee. The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and 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; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any Bylaw of the corporation.

 

(b)            Other Committees. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws.

 

(c)            Term. The Board of Directors, subject to any requirements of any outstanding series of preferred stock and the provisions of subsections (a) or (b) of this Section 25, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his or her death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. 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, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute 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.

 

(d)            Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place

 

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of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special 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. Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

 

Section 26.             Duties of Chairperson of the Board of Directors and Lead Independent Director.

 

(a)            The Chairperson of the Board of Directors, if appointed and when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairperson of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

 

(b)            The Chairperson of the Board of Directors, or if the Chairperson is not an independent director, one of the independent directors, may be designated by the Board of Directors as lead independent director to serve until replaced by the Board of Directors (“ Lead Independent Directo r”). The Lead Independent Director will: with the Chairperson of the Board of Directors, establish the agenda for regular Board meetings and serve as chairperson of Board of Directors meetings in the absence of the Chairperson of the Board of Directors; establish the agenda for meetings of the independent directors; coordinate with the committee chairs regarding meeting agendas and informational requirements; preside over meetings of the independent directors; preside over any portions of meetings of the Board of Directors at which the evaluation or compensation of the Chief Executive Officer is presented or discussed; preside over any portions of meetings of the Board of Directors at which the performance of the Board of Directors is presented or discussed; and perform such other duties as may be established or delegated by the Board of Directors.

 

Section 27.             Organization. At every meeting of the directors, the Chairperson of the Board of Directors, or, if a Chairperson has not been appointed or is absent, the Lead Independent Director, or if the Lead Independent Director has not been appointed or is absent, the Chief Executive Officer (if a director), or, if a Chief Executive Officer is absent, the President (if a director), or if the President is absent, the most senior Vice President (if a director), or, in the absence of any such person, a chairperson of the meeting chosen by a majority of the directors present, shall preside over the meeting.  The Secretary, or in his or her absence, any Assistant Secretary or other officer, director or other person directed to do so by the person presiding over the meeting, shall act as secretary of the meeting.

 

ARTICLE V

 

OFFICERS

 

Section 28.             Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer and the Treasurer. The Board of Directors may also appoint one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any

 

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number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors or a committee thereof to which the Board of Directors has delegated such responsibility.

 

Section 29.             Tenure and Duties of Officers.

 

(a)            General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

 

(b)            Duties of Chief Executive Officer. The Chief Executive Officer shall preside at all meetings of the stockholders and at all meetings of the Board of Directors (if a director), unless the Chairperson of the Board of Directors or the Lead Independent Director has been appointed and is present. Unless an officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. To the extent that a Chief Executive Officer has been appointed and no President has been appointed, all references in these Bylaws to the President shall be deemed references to the Chief Executive Officer. The Chief Executive Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.

 

(c)            Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors (if a director), unless the Chairperson of the Board of Directors, the Lead Independent Director or the Chief Executive Officer has been appointed and is present. Unless another officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors (or the Chief Executive Officer, if the Chief Executive Officer and President are not the same person and the Board of Directors has delegated the designation of the President’s duties to the Chief Executive Officer)shall designate from time to time.

 

(d)            Duties of Vice Presidents. A Vice President may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant (unless the duties of the President are being filled by the Chief Executive Officer). A Vice President shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or, if the Chief Executive Officer has not been appointed or is absent, the President shall designate from time to time.

 

(e)            Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time. The Chief Executive Officer, or if no Chief Executive Officer

 

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is then serving, the President may direct any Assistant Secretary or other officer to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time.

 

(f)             Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time. To the extent that a Chief Financial Officer has been appointed and no Treasurer has been appointed, all references in these Bylaws to the Treasurer shall be deemed references to the Chief Financial Officer. The President may direct the Treasurer, if any, or any Assistant Treasurer, or the controller or any assistant controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each controller and assistant controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time.

 

(g)            Duties of Treasurer. Unless another officer has been appointed Chief Financial Officer of the corporation, the Treasurer shall be the chief financial officer of the corporation and shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President, and, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Treasurer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President and Chief Financial Officer (if not Treasurer) shall designate from time to time.

 

Section 30.             Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

 

Section 31.             Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

 

Section 32.             Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or by the Chief

 

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Executive Officer or by other superior officers upon whom such power of removal may have been conferred by the Board of Directors.

 

ARTICLE VI

 

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION

 

Section 33.             Execution of Corporate Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.

 

All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.

 

Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

Section 34.             Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairperson of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

 

ARTICLE VII

 

SHARES OF STOCK

 

Section 35.             Form and Execution of Certificates. The shares of the corporation shall be represented by certificates, or shall be uncertificated if so provided by resolution or resolutions of the Board of Directors. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation represented by certificate shall be entitled to have a certificate signed by or in the name of the corporation by the Chairperson of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

 

Section 36.             Lost Certificates. A new certificate or certificates shall 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. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to

 

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give the corporation a surety bond in such form and amount 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 37.             Transfers.

 

(a)            Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

 

(b)            The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

 

Section 38.             Fixing Record Dates.

 

(a)            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, 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 shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, 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. 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.

 

(b)            In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders 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 record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

Section 39.             Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

ARTICLE VIII

 

OTHER SECURITIES OF THE CORPORATION

 

Section 40.             Execution of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 35), may be signed by the

 

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Chairperson of the Board of Directors, the Chief Executive Officer, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

 

ARTICLE IX

 

DIVIDENDS

 

Section 41.             Declaration of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable law.

 

Section 42.             Dividend Reserve. 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 Board of 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 Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

 

ARTICLE X

 

FISCAL YEAR

 

Section 43.             Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

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ARTICLE XI

 

INDEMNIFICATION

 

Section 44.                                    Indemnification of Directors, Executive Officers, Other Officers, Employees and Other Agents.

 

(a)                                  Directors and executive officers. The corporation shall indemnify its directors and executive officers (for the purposes of this Article XI, “ executive officers ” shall have the meaning defined in Rule 3b-7 promulgated under the 1934 Act) to the extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and executive officers; and, provided, further, that the corporation shall not be required to indemnify any director or executive officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the DGCL or any other applicable law or (iv) such indemnification is required to be made under subsection (d).

 

(b)                                  Other Officers, Employees and Other Agents. The corporation shall have the power to indemnify (including the power to advance expenses in a manner consistent with subsection (c)) its other officers, employees and other agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination of whether indemnification shall be given to any such person except executive officers to such officers or other persons as the Board of Directors shall determine.

 

(c)                                   Expenses. The corporation shall advance to any person who 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 is or was a director or executive officer, of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or executive officer in connection with such proceeding provided, however, that if the DGCL requires, an advancement of expenses incurred by a director or executive officer in his or her capacity as a director or executive officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking (hereinafter an “ undertaking ”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “ final adjudication ”) that such indemnitee is not entitled to be indemnified for such expenses under this section or otherwise.

 

Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this section, no advance shall be made by the corporation to an executive officer of the corporation (except by reason of the fact that such executive officer is or was a director of the corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by a majority vote of directors who were not parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and

 

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convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

 

(d)                                  Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and executive officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or executive officer. Any right to indemnification or advances granted by this section to a director or executive officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. To the extent permitted by law, the claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an executive officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such executive officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his or her conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a director or executive officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or executive officer is not entitled to be indemnified, or to such advancement of expenses, under this section or otherwise shall be on the corporation.

 

(e)                                   Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL, or by any other applicable law.

 

(f)                                    Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director or executive officer or officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

(g)                                  Insurance. To the fullest extent permitted by the DGCL or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this section.

 

(h)                                  Amendments. Any repeal or modification of this section shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

 

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(i)                                     Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and executive officer to the full extent not prohibited by any applicable portion of this section that shall not have been invalidated, or by any other applicable law. If this section shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director and executive officer to the full extent under any other applicable law.

 

(j)                                     Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:

 

(i)                                     The term “ proceeding ” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

(ii)                                 The term “ expenses ” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 

(iii)                             The term the “ corporation ” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

 

(iv)                              References to a “ director ,” “ executive officer ,” “ officer ,” “ employee ,” or “ agent ” of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 

(v)                                  References to “ other enterprises ” shall include employee benefit plans; references to “ fines ” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “ serving at the request of the corporation ” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the corporation ” as referred to in this section.

 

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ARTICLE XII

 

NOTICES

 

Section 45.                                    Notices.

 

(a)                                  Notice to Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 herein. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by U.S. mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

 

(b)                                  Notice to Directors. Any notice required to be given to any director may be given by the method stated in subsection (a) or as otherwise provided in these Bylaws, with notice other than one which is delivered personally to be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known address of such director.

 

(c)                                   Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

 

(d)                                  Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

 

(e)                                   Notice to Person With Whom Communication is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

(f)                                    Notice to Stockholders Sharing an Address. Except as otherwise prohibited under DGCL, any notice given under the provisions of DGCL, the Certificate of Incorporation or the Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the corporation within sixty (60) days of having been given notice by the corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the corporation.

 

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ARTICLE XIII

 

AMENDMENTS

 

Section 46.                                    Subject to the limitations set forth in Section 44(h) of these Bylaws or the provisions of the Certificate of Incorporation, the Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation. Any adoption, amendment or repeal of the Bylaws of the corporation by the Board of Directors shall require the approval of a majority of the authorized number of directors. The stockholders also shall have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class.

 

ARTICLE XIV

 

LOANS TO OFFICERS

 

Section 47.                                    Loans To Officers. Except as otherwise prohibited by applicable law, the corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

 

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CERTIFICATION OF AMENDED AND RESTATED BYLAWS

OF

SENDGRID, INC.

 

a Delaware Corporation

 

I, Michael Tognetti, certify that I am Secretary of SendGrid, Inc., a Delaware corporation (the “ Corporation ”), that I am duly authorized to make and deliver this certification, that the attached Amended and Restated Bylaws are a true and complete copy of the Amended and Restated Bylaws of the Corporation in effect as of the date of this certificate.

 

Dated:       , 2017

 

 

 

 

 

Michael Tognetti, Secretary

 

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Exhibit 4.3

 

SENDGRID, INC.

 

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

 



 

SENDGRID, INC.

 

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

 

This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made as of November 17, 2016, by and among SENDGRID, INC. , a Delaware corporation (the “ Company ”), and each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “ Investor ” and any Additional Purchaser (as defined in the Purchase Agreement) that becomes a party to this Agreement in accordance with Section 3.9 hereof.

 

RECITALS

 

A.                                     Certain of the Investors (the “ Prior Investors ”) are parties to that certain Amended and Restated Registration Rights Agreement, dated as of January 10, 2012, as amended November 21, 2014, by and among the Company and such Prior Investors (the “ Prior Agreement ”).

 

B.                                     The Company and certain of the Investors desire to amend and restate the Prior Agreement in accordance with Section 3.6 thereof to provide the Stockholders the rights and obligations set forth in this Agreement.

 

C.                                     The Company and certain of the Investors are parties to the Series D Preferred Stock Purchase Agreement of even date herewith (the “ Purchase Agreement ”).

 

D.                                     In order to induce the Company to enter into the Purchase Agreement and to induce the Investors to invest funds in the Company pursuant to the Purchase Agreement, the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors.

 

NOW, THEREFORE , in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree hereto as follows:

 

1A.                              Amendment of Prior Agreement . Effective and contingent upon execution of this Agreement by the Company and the holders of at least 60% of the Registrable Securities (as defined in the Prior Agreement) held on the date hereof, the Prior Agreement is hereby amended and restated in its entirety to read as set forth in this Agreement, and the Company and the Investors hereby agree to be bound by the provisions hereof as the sole agreement of the Company and the Investors with respect to the subject matter hereof.

 

1.                                       DEFINITIONS. For purposes of this Agreement:

 

(a)                                  Affiliate ” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

(b)                                  Common Stock ” means shares of the Company’s common stock, par value $0.001 per share.

 

(c)                                   Damages ” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary

 

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to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

(d)                                  Derivative Securities ” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.

 

(e)                                   Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

(f)                                    Excluded Registration ” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

(g)                                  Form S-1 ” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

(h)                                  Form S-3 ” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

(i)                                     Holder ” means any holder of Registrable Securities who is a party to this Agreement.

 

(j)                                     Immediate Family Member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.

 

(k)                                  Initiating Holders ” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

(l)                                     IPO ” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

 

(m)                              Major Investor ” means any Investor who, together with its Affiliates, holds at least 1,250,000 shares of Preferred Stock and/or Common Stock issued upon conversion thereof (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like following the date hereof).

 

(n)                                  Person ” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

(o)                                  Preferred Stock ” means, collectively, shares of the Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A-1 Preferred Stock and Series A Preferred Stock.

 

(p)                                  [Reserved].

 

(q)                                  Registrable Securities ” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock; and (ii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above-described securities; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned

 

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pursuant to Section 3.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.13 of this Agreement.

 

(r)                                   Registrable Securities then outstanding ” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

(s)                                    Restricted Securities ” means the securities of the Company required to bear the legend set forth in Section 2.12(b) hereof.

 

(t)                                     SEC ” means the Securities and Exchange Commission.

 

(u)                                  SEC Rule 144 ” means Rule 144 promulgated by the SEC under the Securities Act.

 

(v)                                  SEC Rule 145 ” means Rule 145 promulgated by the SEC under

 

(w)                                Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

(x)                                  Selling Expenses ” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.6.

 

(y)                                  Series A Preferred Stock ” means shares of the Company’s Series A Preferred Stock, par value $0.001 per share.

 

(z)                                   Series A-1 Preferred Stock ” means shares of the Company’s Series A-1 Preferred Stock, par value $0.001 per share.

 

(aa)                           Series B Preferred Stock ” means shares of the Company’s Series B Preferred Stock, par value $0.001 per share.

 

(bb)                           Series C Preferred Stock ” means shares of the Company’s Series C Preferred Stock, par value $0.001 per share.

 

(cc)                             Series D Preferred Stock ” means shares of the Company’s Series D Preferred Stock, par value $0.001 per share.

 

2.                                       REGISTRATION RIGHTS . The Company covenants and agrees as follows:

 

2.1                                Demand Registration .

 

(a)                                  Form S-1 Demand. If, at any time after the earlier of (i) three (3) years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of more than fifty percent (50%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to at least sixty percent (60%) of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of Selling Expenses, would exceed $10 million), then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “ Demand Notice ”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in

 

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such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(c) and Section 2.3.

 

(b)                                  Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $1 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(c) and Section 2.3.

 

(c)                                   Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such ninety (90) day period other than an Excluded Registration.

 

(d)                                  The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective. A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d).

 

2.2                                Company Registration . If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

 

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2.3                                Underwriting Requirements .

 

(a)                                  If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 2.3, if the underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

 

(b)                                  In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below thirty percent (30%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. In no event will shares of any other selling stockholder be included in such registration that would reduce the number of shares that may be included by Holders without the written consent of Holders of not less than a majority of the Registrable Securities proposed to be sold in the offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

(c)                                   For purposes of Section 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than fifty percent (50%) of

 

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the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

2.4                                Obligations of the Company . Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)                                  prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of at least 60% of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended for up to thirty (30) days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

 

(b)                                  prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)                                   furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)                                  use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e)                                   in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

 

(f)                                    use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(g)                                  provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(h)                                  promptly make available for inspection by the selling Holders, any underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

 

(i)                                     notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

 

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(j)                                     after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

2.5                                Furnish Information . It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.6                                Expenses of Registration . All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $35,000, of one counsel for the selling Holders (“ Selling Holder Counsel ”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of at least 60% of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of at least 60% of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 2.1(a) or Section 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition or business of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 2.1(a) or Section 2.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

2.7                                Delay of Registration . No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.8                                Indemnification.   If any Registrable Securities are included in a registration statement under this Section 2:

 

(a)                                  To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

(b)                                  To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the

 

7



 

Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

(c)                                   Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

 

(d)                                  To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

(e)                                   Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

8



 

(f)                                    Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

 

2.9                                Reports Under Exchange Act . With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

 

(a)                                  make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

 

(b)                                  use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c)                                   furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety

 

(90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

2.10                         Limitations on Subsequent Registration Rights . Other than as provided in Section 3.9, after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of at least sixty percent (60%) of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder rights to demand the registration of shares of the Company’s capital stock, or to include such shares in a registration statement that would reduce the number of shares includable by the Holders.

 

2.11                         “Market Stand-off” Agreement . Each Holder hereby agrees he or she shall not, without the prior written consent of the managing underwriter(s) and Company, sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or other securities) of the Company held by Holder (other than those included in the registration) during the 180-day period following the effective date of the first firm commitment underwritten public offering of the Company’s Common Stock registered under the Securities Act (or such longer period, not to exceed 180 days after the expiration of the 180-day period, as the managing underwriter or the Company shall request in order to facilitate compliance with FINRA Rule 2711). The obligations described in this Section 2.11) shall not apply to a registration relating solely to employee benefit plans on Form S-1 or SEC Form S-8 or similar forms that may be promulgated in the future by the SEC, or a registration relating solely to a transaction on SEC Form S-4 or similar forms that may be promulgated in the future. If requested by the Company or the managing underwriter of shares (or other securities) of the Company, the Holder will enter into an agreement regarding his, her or its compliance with this requirement that will survive the term of this Agreement. The foregoing provisions of this Section 2.11 shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). Any discretionary waiver or termination of

 

9


 

the restrictions of any or all of lockup agreements by the Company or the underwriters shall apply pro rata to all Major Investors subject to such agreements based on the number of shares subject to such agreement held by each.

 

2.12                         Restrictions on Transfer .

 

(a)                                  The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

(b)                                  Each certificate or instrument representing (i) the Preferred Stock,

 

(ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(c)) be stamped or otherwise imprinted with a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12.

 

(c)                                   The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company.

 

(d)                                  Notwithstanding the provisions of subsection (c) above, no such restriction shall apply to a transfer for no consideration by a Holder that is (A) a partnership transferring to its partners or former partners in accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder, (C) a limited liability company transferring to its

 

10



 

members or former members in accordance with their interest in the limited liability company, (D) an individual, or a trust for the benefit of an individual Holder, transferring to an Immediate Family Member of the Holder, grantor of the Holder or beneficiary of the Holder, (E) transferring to an affiliate of the Holder, as that term is defined in Rule 405 of the Securities Act, including any venture capital fund now or hereafter existing that is controlled by or under common control with one or more managers or general partners of or shares the same management company with such Holder; or (F) transferring to a transferee that, after such transfer, is a Major Investor; provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if such transferee were an original Holder hereunder.

 

(e)                                   Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(b), except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

2.13                         Termination of Registration Rights . The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of:

 

(a)                                  the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation;

 

(b)                                  when all of such Holder’s Registrable Securities could be sold without restriction under SEC Rule 144; and

 

(c)                                   the seventh anniversary of the IPO.

 

3.                                       MISCELLANEOUS .

 

3.1                                Successors and Assigns . The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is a partner or retired partner of a Holder that is a partnership, that is a member of a Holder that is a limited liability company, or that is an equity holder of a Holder that is a corporation; (ii) is any Affiliate of a Holder; (iii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iv) after such transfer, is a Major Investor; provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate, partner or retired partner, member or equity holder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

3.2                                Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.

 

11



 

3.3                                Counterparts; Facsimile . 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 also be executed and delivered by facsimile or electronic signature and 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.

 

3.4                                Titles and Subtitles . The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

 

3.5                                Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 3.5. If notice is given to the Company, a copy shall also be sent to Cooley LLP, Attn: Michael Platt, 380 Interlocken Crescent, Suite 900, Broomfield, Colorado 80212, and if notice is given to Investors, a copy shall also be given to (i) Hawley Troxell Ennis & Hawley LLP, Attn: Stephen C. Hardesty, 877 Main Street, Suite 1000, Boise, Idaho 83702, (ii) Cooley LLP, Attn: Eric C. Jensen, Five Palo Alto Square, 3000 El Camino Real, Palo Alto, California 94306-2155 and (iii) Anthony McCusker, 135 Commonwealth Drive, Menlo Park, California 94125.

 

3.6                                Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of at least 60% of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 3.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision. The Company shall give prompt written notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination or waiver.

 

3.7                                Severability . In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

 

3.8                                Aggregation of Stock . All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate. To avoid any possible confusion, Highway 12 Venture Fund II, L.P., a Delaware limited partnership, and Highway 12 Venture Fund II-B, L.P., a Delaware limited partnership shall be considered Affiliates for purposes of this Agreement.

 

12



 

3.9                                Additional Investors . Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of Series D Preferred Stock after the date hereof pursuant to the Purchase Agreement, any purchaser or such shares of Series D Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “ Investor ” for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “ Investor ” hereunder.

 

3.10                         Entire Agreement . This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

3.11                         Delays or Omissions . No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

3.12                         Acknowledgment . The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF , the parties have executed this Amended and Restated Registration Rights Agreement as of the date first written above.

 

 

COMPANY

 

 

 

SENDGRID, INC.

 

 

 

By:

/s/ Sameer Dholakia

 

 

 

Name: Sameer Dholakia

 

 

 

Title: Chief Executive Officer

 

(SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT)

 



 

 

INVESTORS:

 

 

 

BAIN CAPITAL VENTURE FUND 2014, L.P.

 

 

 

By:   Bain Capital Venture Partners 2014, L.P., its General Partner

 

 

 

By:   Bain Capital Venture Investors, LLC, its General Partner

 

 

 

By:

/s/ Ajay Agarwal

 

 

 

Name: Ajay Agarwal

 

 

 

Title: Managing Director

 

 

 

BCIP VENTURE ASSOCIATES

 

 

 

By:   Boylston Coinvestors, LLC, its Managing Partner

 

 

 

By:

/s/ Ajay Agarwal

 

 

 

Name: Ajay Agarwal

 

 

 

Title: Managing Director

 

 

 

BCIP VENTURE ASSOCIATES-B

 

 

 

By:Boylston Coinvestors, LLC, its Managing Partner

 

 

 

By:

/s/ Ajay Agarwal

 

 

 

Name: Ajay Agarwal

 

 

 

Title: Managing Director

 

(SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT)

 



 

 

INVESTORS:

 

 

 

BESSEMER VENTURE PARTNERS VIII L.P.

 

 

 

BESSEMER VENTURE PARTNERS VIII INSTITUTIONAL L.P.

 

 

 

By:   Deer VIII & Co. L.P., their General Partner

 

 

 

By:   Deer VIII & Co., Ltd., its General Partner

 

 

 

By:

/s/ J. Edmund Colloton

 

 

 

Name: J. Edmund Colloton

 

 

 

Title: Director

 

(SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT)

 



 

 

INVESTORS:

 

 

 

FOUNDRY GROUP SELECT FUND, L.P.

 

 

 

By:   Foundry Select Fund GP, LLC Its: General Partner

 

 

 

By:   Deer VIII & Co., Ltd., its General Partner

 

 

 

By:

/s/ Ryan McIntyre

 

 

 

Name: Ryan McIntyre

 

 

 

Title: Managing Director

 

 

 

FOUNDRY VENTURE CAPITAL 2007, L.P.

 

 

 

By:   Foundry Venture 2007, LLC Its: General Partner

 

 

 

By:

/s/ Ryan McIntyre

 

 

 

Name: Ryan McIntyre

 

 

 

Title: Managing Director

 

(SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT)

 



 

 

HIGHWAY 12 VENTURE FUND II, L.P.

 

 

 

By:   Highway 12 Capital Partners II, LLC, its General Partner

 

 

 

By:   Highway 12 Ventures II, Inc., its Manager

 

 

 

By:

/s/ Mark Solon

 

 

 

Name: Mark Solon

 

 

 

Title: Authorized Officer

 

 

 

HIGHWAY 12 VENTURE FUND II-B, L.P.

 

 

 

By:   Highway 12 Capital Partners II, LLC, its General Partner

 

 

 

By:   Highway 12 Ventures II, Inc., its Manager

 

 

 

By:

/s/ Mark Solon

 

 

 

Name: Mark Solon

 

 

 

Title: Authorized Officer

 

(SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT)

 



 

 

SOFTTECH VC II, L.P.

 

 

 

By:   SOFTTECH VC II, L.L.C., its General Partner

 

 

 

By:

/s/ Jean-Francois Clavier

 

 

 

Name: Jean-Francois Clavier

 

 

 

Title: Managing Member

 

 

 

SOFTTECH VC PLUS, LP

 

 

 

By:   SOFTTECH VC PLUS, LLC, its General Partner

 

 

 

By:

/s/ Jean-Francois Clavier

 

 

 

Name: Jean-Francois Clavier

 

 

 

Title: Managing Member

 

(SIGNATURE PAGE TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT)

 



 

EXHIBIT A

 

INVESTORS

 

500 STARTUPS, L.P.

 

AUDREY CAPITAL, LLC

 

BAIN CAPITAL VENTURE FUND 2014, L.P.

 

BCIP VENTURE ASSOCIATES

 

BCIP VENTURE ASSOCIATES-B

 

BESSEMER VENTURE PARTNERS VIII L.P.

 

BESSEMER VENTURE PARTNERS VIII INSTITUTIONAL L.P.

 

BRIAN MAKARE AND CLAIRE CAMPBELL, JTWROS

 

BULLET TIME VENTURES, LP

 

FF ANGEL LLC

 

FOUNDRY GROUP SELECT FUND, L.P.

 

FOUNDRY VENTURE CAPITAL 2007, L.P.

 

GC&H INVESTMENTS, LLC

 

HIGHWAY 12 VENTURE FUND II, L.P.

 

HIGHWAY 12 VENTURE FUND II-B, L.P.

 

JEFF EPSTEIN

 

PETE SHEINBAUM

 

SCOTT PETRY

 

SOFTTECH VC II, L.P.

 

SOFTTECH VC PLUS, LP

 

TOM KELLER

 




Exhibit 4.4

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.

 

SECOND AMENDED AND RESTATED

WARRANT TO PURCHASE STOCK

 

Corporation:

 

SendGrid, Inc.

Number of Shares:

 

54,269

Class of Stock:

 

Series B Preferred

Initial Exercise Price:

 

$2.764 per share

Original Issue Date:

 

June 27, 2013

Amendment Date:

 

May 16, 2014

Second Amendment Date:

 

May 8, 2017

Expiration Date:

 

June 27, 2023

 

THIS SECOND AMENDED AND RESTATED WARRANT CERTIFIES THAT, for good and valuable consideration, the receipt of which is hereby acknowledged, PACWEST BANCORP or its assignee (“ Holder ”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “ Shares ”) of the corporation (the “ Company ”) at the initial exercise price per Share (the “ Warrant Price ”) all as set forth above and as adjusted pursuant to Article 2 or this warrant, subject to the provisions and upon the terms and conditions set forth in this warrant,

 

This warrant amends and restates in its entirety that certain Amended and Restated Warrant to Purchase Stock issued by the Company to the Holder on June 27, 2013, and amended and restated as of the Amendment Date (the “ Original Warrant ”), in order to reflect (a) adjustments to the Number of Shares and (b) the transfer of the Original Warrant to Square 1 Financial, Inc. and subsequent assignment by operation of law of the Original Warrant to PacWest Bancorp and replaces and supersedes the Original Warrant in its entirety.

 

ARTICLE 1

 

EXERCISE

 

1.1           Method of Exercise . Holder may exercise this warrant by delivering this warrant and a duly executed Notice of Exercise in substantially the form attached hereto as Appendix I to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.

 

1.2           Conversion Right . In lieu of exercising this warrant as specified in Section 1.1, Holder may from time to time convert this warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this warrant minus the aggregate Warrant Price of such Shares (or zero if the foregoing is less than zero) by (b) the fair market value of one Share. The

 

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fair market value of the Shares shall be determined pursuant to Section 1.3. Upon conversion of the warrant in whole pursuant to this Section 1.2, this warrant shall terminate and be of no further force or effect.

 

1.3           Fair Market Value . If the Shares are traded regularly in a public market, the Fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company’s stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company; provided, however, that in the event that this warrant is exercised pursuant to Section 1.2 in connection with the Company’s initial public offering of its common stock, the fair market value of the Shares shall be the product of (i) the per share offering price to the public of the Company’s initial public offering, and (ii) the number of shares of common stock into which each Shure is convertible at the time of such exercise. If the Shares are not regularly traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

 

1.4           Delivery of Certificate and New Warrant . Promptly after Holder exercises or converts this warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this warrant has not been fully exercised or converted and has not expired, a new warrant representing the Shares not so acquired.

 

1.5           Replacement of Warrants . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this warrant, the Company at its expense shall execute and deliver, in lieu of this warrant, a new warrant of like tenor.

 

1.6           Repurchase on Sale, Merger, or Consolidation of the Company .

 

1.6.1        “ Acquisition. ” For the purpose of this warrant, “Acquisition” means (a) any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company, or (b) any reorganization, consolidation, merger or sale of the voting securities of the Company or any other transaction where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction; provided, however, that neither of the following shall be considered an Acquisition: (x) a merger effected exclusively for the purpose of changing the domicile of the Company and (y) a bona fide equity financing in which the Company is the surviving Company and where the consideration received by the Company is cash, the cancellation or conversion of indebtedness, or a combination of both.

 

1.6.2        Assumption of Warrant. If upon the closing of any Acquisition the successor entity assumes the obligations of this warrant, then this warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price shall be adjusted accordingly. 

 

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The Company shall use reasonable efforts to cause the surviving corporation to assume the obligations of this warrant.

 

1.6.3        Nonassumption. If upon the closing of any Acquisition the successor entity does not assume the obligations of this warrant and Holder has not otherwise exercised this warrant in full, then Holder shall be deemed to have been automatically converted in whole pursuant to Section 1.2 and thereafter Holder shall participate in the Acquisition on the same terms as other holders of the same class of securities of the Company.

 

ARTICLE 2

 

ADJUSTMENTS TO THE SHARES

 

2.1           Stock Dividends, Splits, Etc. If after the Amendment Date the Company declares or pays a dividend on its Series B Preferred Stock payable in Series B Preferred stock, or other securities, or subdivides the outstanding Series B Preferred Stock into a greater amount of Series B Preferred Stock, then upon exercise of this warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.

 

2.2           Reclassification, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this warrant after the Amendment Date, Holder shall be entitled to receive, upon exercise or conversion of this warrant, the number and kind of securities and property that Holder would have received for the Shares if this warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s then in effect Certificate of Incorporation (the “ Certificate of Incorporation ”) upon the closing of a registered public offering of the Company’s common stock, The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property, The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

 

2.3           Adjustments for Combinations, Etc . If after the Amendment Date the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. If after the Amendment Date the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a greater number of shares, the Warrant Price shall be proportionately decreased.

 

2.4           Adjustments for Diluting Issuances . In the event of the issuance (a “Diluting Issuance”) by the Company after the Amendment Date of securities at a price per share that results in the adjustment of the Conversion Price (as defined in the Certificate of Incorporation)

 

3



 

of the Series B Preferred Stock in accordance with the terms of the Certificate of Incorporation, and such adjustment has not otherwise been waived by the requisite stockholders, then the number of shares of common stock issuable upon conversion of the Shares shall be adjusted in accordance with the Certificate of Incorporation,

 

2.5           Certificate as to Adjustments . Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, Furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

 

2.6           Fractional Shares . No fractional Shares shall be issuable upon exercise or conversion of the warrant and the Number of Shares to be issued shall be rounded down to the nearest whole Share. IF a fractional share interest arises upon any exercise or conversion of the warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.

 

ARTICLE 3

 

REPRESENTATIONS AND COVENANTS OF THE COMPANY

 

3.1           Representations and Warranties . The Company hereby represents and warrants to the Holder as follows:

 

(a)            The initial Warrant Price referenced on the first page of this warrant is not greater than the price per share at which the Company most recently sold shares of its Series B Preferred Stock to investors.

 

(b)            All Shares which may be issued upon the exercise of the purchase right represented by this warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

 

(c)            The Company’s capitalization table delivered to Holder as of the Second Amendment Date is true and complete as of the Second Amendment Date.

 

3.2           Notice of Certain Events. The Company shall provide Holder with not less than 10 days prior written notice, including a description of the material facts surrounding, any of the following events: (a) declaration of any dividend or distribution upon its Series B Preferred Stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) offering for subscription pro rata to all of the holders of the Series B Preferred Stock or the stock into which the Series B Preferred Stock is convertible any additional shares of stock of any class or series or other rights; (c) effecting any reclassification or recapitalization of the Series B Preferred Stock or the stock into which the Series B Preferred Stock is convertible; or (d) an Acquisition or liquidation, dissolution or winding up of the Company.

 

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3.3           Information Rights . So long as the Holder holds this warrant and/or any of the Shares, the Company shall deliver to the Holder (a) promptly after mailing, copies of all communiques to the shareholders of the Company, (b) within one hundred eighty (180) days after the end of each fiscal year of the Company, the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (c) within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements. All information received by Holder pursuant to this Section 3.3 shall be subject to the restrictions set forth in Section 8.4 of that certain Amended and Restated Shareholders Agreement, dated as of January 10, 2012, by and among the Company and certain of its stockholders, as it may be amended from time to time (the “ Shareholders Agreement ”),

 

3.4           Registration Under Securities Act of 1933, as amended . The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall be “ Registrable Securities ”, and Holder shall be a “ Holder ” under the Amended and Restated Registration Rights Agreement among the Company and other persons dated as of January 10, 2012, as it may be amended from time to time (the “ IRA ”).

 

3.5           No Stockholder Rights Prior to Exercise . Prior to exercise pursuant to Article 1, this warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

 

ARTICLE 4

 

REPRESENTATIONS AND COVENANTS OF HOLDER

 

With respect to the acquisition of this warrant and any of the Shares, Holder hereby represents and warrants to, and agrees with, the Company as follows:

 

4.1           Purchase Entirely for Own Account . This warrant is issued to Holder in reliance upon Holder’s representation to the Company that this warrant and the Shares will be acquired for investment for Holder’s, or its affiliates, own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof other than to an affiliate, and that Holder has no present intention of selling, granting any participation in, or otherwise distributing the same other than to an affiliate. By executing this warrant, Holder further represents that Holder does not have any contract, undertaking, agreement or arrangement with any person, other than an affiliate, to sell, transfer or grant participations to such person or to any third person with respect to any of the Shares.

 

4.2           Reliance upon Holder’s Representations . Holder understands that this warrant and the Shares are not registered under the Act on the ground that the issuance of such securities is exempt from registration under the Act, and that the Company’s reliance on such exemption is predicated on Holder’s representations set forth herein.

 

4.3           Accredited Investor Status . Holder represents to the Company that Holder is an accredited investor (as defined in the Act).

 

5



 

4.4           Restricted Securities . Holder understands that this warrant and the Shares are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such federal securities laws and applicable regulations such securities may be resold without registration under the Act only in certain limited circumstances.

 

4.5           Market Stand-Off Agreement . Holder hereby agrees it shall not, without the prior written consent of the managing underwriter, sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of common stock (or other securities) of the Company held by Holder (other than those included in the registration) during the 180-day period following the effective date of the Company’s first limn commitment underwritten public offering of its common stock registered under the Act (or such longer period, not to exceed 18 days after the expiration of the 180-day period, as the managing underwriter or the Company shall request in order to facilitate compliance with FINRA Rule 2711); provided, that, all officers and directors of the Company and holders of at least one percent (1%) of the Company’s voting securities are bound by and have entered into similar agreements. The foregoing provisions of this Section 4.5 shall not apply to (i) the sale of any shares to an underwriter pursuant to an underwriting agreement, or (ii) transfers to affiliates, partners, members, charitable institutions and stockholders of 1-lolder (each of whom shall have furnished to the Company and the managing underwriter their written consent to be bound by the provisions of this warrant).

 

ARTICLE 5

 

MISCELLANEOUS

 

5.1           Term: Exercise Upon Expiration . This warrant is exercisable in whole or in part, at any time and from time to time on or before the Expiration Date set forth above; provided, however, that if the Company completes its initial public offering within the 270-day period immediately prior to the Expiration Date, the Expiration Date shall automatically be extended until the date that is 270 days after the effective date of the Company’s initial public offering. If this warrant has not been exercised prior to the Expiration Date, this warrant shall be deemed to have been automatically exercised on the Expiration Date by “cashless” conversion pursuant to Section 1.2.

 

5.2           Legends . The Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form (together with any legends required pursuant to the Certificate of Incorporation, Bylaws of the Company, the Shareholders Agreement and the IRA, from time to time):

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER. THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.

 

5.3           Compliance with Securities Laws on Transfer . This warrant and the Shares issuable upon exercise of this warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without

 

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compliance with applicable federal and state securities laws by the transferor and the transferee. The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule I44(c), Holder represents that it has complied with Rule 144 (d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(1), and the Company is provided with a copy of Holder’s notice of proposed sale.

 

5.4           Transfer Procedure . Subject to the provisions of Section 5.3, Holder may transfer all or part of this warrant or the Shares issuable upon exercise of this warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice of the portion of the warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable). No surrender or reissuance shall be required if the transfer is to an affiliate of Holder.

 

5.5           Notices . All  notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time. All notices to the Holder shall be addressed as follows:

 

PacWest Bancorp

Attn: Warrant Administrator

406 Blackwell Street, Suite 240

Durham, NC 27701

 

5.6           Amendments . This warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

5.7           Attorneys’ Fees . In the event of any dispute between the parties concerning the terms and provisions of this warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

5.8           Governing Law . This warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.

 

[ Signature Page Follows ]

 

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In Witness Whereof, the undersigned has executed this Second Amended and Restated Warrant to Purchase Stock as of the date set forth above,

 

 

 

 

SENDGRID, INC.

 

 

 

 

 

 

By:

/s/ Yancey Spruill

 

 

 

 

Name:

Yancey Spruill

 

 

 

 

Title:

CFO/COO

 

 

 

PACWEST BANCORP

 

 

 

 

 

By:

/s/ Adam Glick

 

 

 

 

Name:

Adam Glick

 

 

 

 

Title:

SVP

 

[ Signature Page to Second Amended and Restated Warrant to Purchase Stack ]

 



 

APPENDIX I

 

NOTICE OF EXERCISE

 

1.              The undersigned hereby elects to purchase              shares of the              stock of SENDGRID, INC, pursuant to the terms of the attached warrant, and tenders herewith payment of the purchase price of such shares in full.

 

1.              The undersigned hereby elects to convert the attached warrant into shares in the manner specified in the warrant. This conversion is exercised with respect to              of the shares covered by the warrant.

 

[Strike paragraph that does not apply.]

 

2.              Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:

 

 

 

(Holder’s Name)

 

 

 

 

 

 

 

(Address)

 

 

3.              The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.

 

PACWEST BANCORP or Registered Assignee

 

 

 

(Signature)

 

 

 

(Date)

 

 




Exhibit 10.1

SENDGRID, INC.

 

Amended and Restated 2009 Equity Incentive Plan

 

Effective Date: April 19, 2010

 

Approved by the Board of Directors on April 19, 2010

 

Approved by the Stockholders on April 19, 2010

 



 

Table of Contents

 

 

 

Page

 

 

 

ARTICLE I

INTRODUCTION

1

 

 

1.1

Amendment of Plan

1

1.2

Establishment

1

1.3

Purpose

1

 

 

ARTICLE II

DEFINITIONS

1

 

 

2.1

Definitions

1

2.2

Gender and Number

5

 

 

ARTICLE III

PLAN ADMINISTRATION

5

 

 

3.1

General

5

3.2

Delegation by Committee

6

3.3

Contractual Limitations

6

 

 

ARTICLE IV

STOCK SUBJECT TO THE PLAN

6

 

 

4.1

Number of Shares

6

4.2

Limit on Options

7

4.3

Other Shares of Stock

7

4.4

Adjustments for Stock Split, Stock Dividend, Etc.

7

4.5

Other Distributions and Changes in the Stock

7

4.6

General Adjustment Rules

8

4.7

Determination by the Committee, Etc.

8

 

 

ARTICLE V

CORPORATE REORGANIZATION; CHANGE IN CONTROL

8

 

 

5.1

Default Provisions

8

5.2

Assumption or Substitution of Options

9

5.3

Provisions Applicable at the Discretion of the Committee

9

5.4

Company Actions

11

 

 

ARTICLE VI

PARTICIPATION

11

 

 

ARTICLE VII

OPTIONS

12

 

 

7.1

Grant of Options

12

7.2

Stock Option Agreements

12

7.3

Restrictions on Incentive Options

15

7.4

Transferability

15

 

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

7.5

Stockholder Privileges

16

 

 

ARTICLE VIII

RESTRICTED STOCK AWARDS

16

 

 

8.1

Grant of Restricted Stock Awards

16

8.2

Restrictions

16

8.3

Privileges of a Stockholder, Transferability

17

8.4

Enforcement of Restrictions

17

 

 

ARTICLE IX

OTHER GRANTS

17

 

 

ARTICLE X

RIGHTS OF PARTICIPANTS

17

 

 

10.1

Employment or Service

17

10.2

Nontransferability of Awards

17

10.3

No Plan Funding

18

 

 

ARTICLE XI

GENERAL RESTRICTIONS

18

 

 

11.1

Investment Representations

18

11.2

Compliance with Securities Laws

18

11.3

Changes in Accounting or Tax Rules

18

11.4

Stockholder Agreements

19

 

ARTICLE XII

PLAN AMENDMENT, MODIFICATION AND TERMINATION

19

 

 

ARTICLE XIII

WITHHOLDING

19

 

 

13.1

Withholding Requirement

19

13.2

Withholding With Stock

19

 

 

ARTICLE XIV

REQUIREMENTS OF LAW

20

 

 

14.1

Requirements of Law

20

14.2

Federal Securities Law Requirements

20

14.3

Section 409A

20

14.4

Governing Law

21

 

 

ARTICLE XV

DURATION OF THE PLAN

21

 

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SENDGRID, INC.

 

AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN

 

ARTICLE I
INTRODUCTION

 

1.1                                Amendment of Plan . This Amended and Restated 2009 Equity Incentive Plan amends and restates the 2009 Equity Incentive Plan originally adopted on November 12, 2009 by SendGrid, Inc., a Delaware corporation (the “ Company ”).

 

1.2                                Establishment . The Company adopts this Amended and Restated 2009 Equity Incentive Plan (the “ Plan ”) effective as of the Effective Date. The Plan is established for selected employees, consultants and advisors and non-employee directors of the Company and its Affiliates. The Plan permits the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, restricted stock awards, and other stock grants to selected employees, to consultants and advisors and non-employee directors of the Company and its Affiliates.

 

1.3                                Purpose . The purpose of the Plan is to provide financial incentives for selected employees, consultants and advisors, and non-employee directors of the Company and its Affiliates, thereby promoting the long-term growth and financial success of the Company by (a) attracting and retaining the most qualified officers, directors, key employees, and other persons, (b) strengthening the capability of the Company and its Affiliates to develop, maintain and direct a competent management team, (c) providing an effective means for selected employees, consultants and advisors and non-employee directors to acquire and maintain a direct proprietary interest in the operations and future success of the Company, (d) motivating employees to achieve long-range performance goals and objectives, and (e) providing incentive compensation opportunities competitive with those of other organizations.

 

ARTICLE II
DEFINITIONS

 

2.1                                Definitions . The following terms shall have the meanings set forth below:

 

(a)                                  Affiliate ” means, with respect to the Company, (i) any Subsidiary of the Company, and (ii) any other corporation or entity that is affiliated with the Company through stock ownership or otherwise and is designated as an “Affiliate” by the Board, provided, however, that for purposes of Incentive Options granted pursuant to the Plan, an “Affiliate” means any parent or subsidiary of the Company as defined in Section 424 of the Code.

 

(b)                                  Award ” means an Option, a Restricted Stock Award, grants of Stock pursuant to Article IX or other issuances of Stock hereunder.

 

(c)                                   Award Agreement ” means an Option Agreement, Restricted Stock Agreement or a written agreement evidencing any other Award under this Plan.

 

(d)                                  Board ” means the Board of Directors of the Company.

 

SIGNATURE PAGE TO SENDGRID, INC. AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN

 



 

(e)                                   Change in Control ” means the following:

 

(i)                                     Merger; Reorganization . Any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the voting power of the surviving or successor entity immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred, excluding (A) any consolidation or merger effected exclusively to change the domicile of the Company and (B) any transaction or series of transactions principally for bona fide equity financing purposes (including, but not limited to, the sale of securities pursuant to an effective registration statement filed with the Securities and Exchange Commission) in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof; or

 

(ii)                                 Other Transactions . A sale, lease or other disposition of all or substantially all of the assets of the Company.

 

(f)                                    Code ” means the Internal Revenue Code of 1986, as it may be amended from time to time.

 

(g)                                  Committee ” means the Board, or if so delegated by the Board, a committee consisting of not less than two members of the Board who are empowered hereunder to take actions in the administration of the Plan. If applicable, the Committee shall be so constituted at all times as to permit the Plan to comply with Rule 16b-3 or any successor rule promulgated under the Exchange Act. Except as provided in Section 3.2, the Committee shall select Participants from Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors of the Company and its Affiliates and shall determine the Awards to be made pursuant to the Plan and the terms and conditions thereof.

 

(h)                                  Disabled ” or “ Disability ” means total and permanent disability as defined in Section 22(e)(3) of the Code.

 

(i)                                     Domestic Relations Order ” means any judgment, decree, or order (including approval of a property settlement agreement) that is made pursuant to a state domestic relations law and that relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a Participant.

 

(j)                                     Effective Date ” means the effective date of the Plan, April 19, 2010.

 

(k)                                  Eligible Consultants ” means those consultants and advisors to the Company or an Affiliate who are determined, by the Committee, to be individuals (i) whose services are important to the Company or an Affiliate and who are eligible to receive Awards, other than Incentive Options, under the Plan, and (ii) who meet the conditions for eligibility under Rule 701 promulgated under the Securities Act or such other exemptions from registration under the Securities Act as may be applicable.

 

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(l)                                     Eligible Employees ” means those employees (including, without limitation, officers and directors who are also employees) of the Company or any Affiliate, upon whose judgment, initiative and efforts the Company is, or will become, largely dependent for the successful conduct of its business. For purposes of the Plan, an employee is any individual who provides services to the Company or any Affiliate as a common law employee and whose remuneration is subject to the withholding of federal income tax pursuant to Section 3401 of the Code. The term “Eligible Employee” shall not include any individual (A) who provides services to the Company or an Affiliate under an agreement, contract, or any other arrangement pursuant to which the individual is initially classified as an independent contractor or (B) whose remuneration for services has not been treated initially as subject to the withholding of federal income tax pursuant to Section 3401 of the Code even if the individual is subsequently reclassified as a common law employee as a result of a final decree of a court of competent jurisdiction or the settlement of an administrative or judicial proceeding. Leased employees shall not be treated as employees under this Plan.

 

(m)                              Eligible Non -Employee Director ” means any person serving on the Board who is not an employee of the Company or any Affiliate.

 

(n)                                  Exchange Act ” means the Securities Exchange Act of 1934, as it may be amended from time to time.

 

(o)                                  Fair Market Value ” means, as of a given date, (i) the closing price of a Share on the principal stock exchange on which the Stock is then trading, if any (or as reported on any composite index that includes such principal exchange) on such date, or if Shares were not traded on such date, then on the next preceding date on which a trade occurred; or (ii) if the Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, the mean between the closing representative bid and asked prices for the Stock on such date as reported by NASDAQ or such successor quotation system; or (iii) if the Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the Fair Market Value of a Share shall be determined by the Committee acting in good faith.

 

(p)                                  Forfeiture Restrictions ” shall have the meaning given to that term in Section 8.2 hereof.

 

(q)                                  Incentive Option ” means an Option designated as such and granted in accordance with Section 422 of the Code.

 

(r)                                   Involuntary Termination ” means, unless explicitly provided otherwise in an Award Agreement, the termination of the Service of any individual which occurs by reason of:

 

(i)                                     such individual’s involuntary dismissal or discharge by the Company or the Successor for reasons other than Misconduct, or (ii)                                        such individual’s voluntary resignation following (A) a change in his or her position with the Company or the Successor which materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) (1) a reduction of 10% or more of his or her base salary or (2) a material reduction in his or her level of compensation (including base salary,

 

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fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected without the individual’s consent.

 

(s)                                    Misconduct ” means the commission of any act of fraud, embezzlement or dishonesty by the Participant, any material unauthorized use or disclosure by such person of confidential information or trade secrets of the Company or the Successor, or any other intentional misconduct by such person adversely affecting the business or affairs of the Company (or the Successor) in a material manner. The foregoing definition shall not in any way preclude or restrict the right of the Company or any Affiliate (or its respective Successor) to discharge or dismiss the Participant from the Service of the Company or any Affiliate (or its respective Successor) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct.

 

(t)                                     Non-Qualified Option ” means any Option other than an Incentive Option.

 

(u)                                  Option ” means a right to purchase Stock at a stated or formula price for a specified period of time. Options granted under the Plan shall be either Incentive Options or Non-Qualified Options.

 

(v)                                  Option Agreement ” shall have the meaning given to that term in Section 7.2 hereof.

 

(w)                                Option Holder ” means a Participant who has been granted one or more Options under the Plan.

 

(x)                                  Option Period ” means the period of time, determined by the Committee, during which an Option may be exercised by the Option Holder.

 

(y)                                  Option Price ” shall have the meaning given to that term in Section 7.2(b) hereof.

 

(z)                                   Participant ” means an Eligible Employee, Eligible Consultant, or Eligible Non-Employee Director designated by the Committee from time to time during the term of the Plan to receive one or more of the Awards available under the Plan.

 

(aa)                           Repurchase Rights ” shall have the meaning given to that term in Section 7.2(c) hereof.

 

(bb)                           Restricted Stock Agreement ” shall have the meaning given to that term in Section 8.1 hereof.

 

(cc)                             Restricted Stock Award ” means an award of Stock granted to a Participant pursuant to ARTICLE VIII that is subject to certain restrictions imposed in accordance with the provisions of such Section.

 

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(dd)                           Section 16 ” shall have the meaning given to that term in Section 13.2(c) hereof.

 

(ee)                             Securities Act ” means the Securities Act of 1933, as it may be amended from time to time.

 

(ff)                               Service ” means service to the Company or an Affiliate as an employee, a non-employee director or a consultant or advisor, except to the extent otherwise specifically provided in an Award Agreement. The Committee determines which leaves of absence count toward Service, and when Service terminates for all purposes under the Plan. Further, unless otherwise determined by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in capacity in which the Participant provides Service to the Company or an Affiliate or a transfer between the Company and its Affiliates; provided there is no interruption or other termination of Service.

 

(gg)                           Share ” means one whole share of Stock.

 

(hh)                           Stock ” means the common stock of the Company.

 

(ii)                                 Subsidiary ” means any corporation more than 50% of the outstanding voting securities of which are owned by the Company or any other Subsidiary, directly or indirectly, or a partnership or limited liability company in which the Company or any Subsidiary is a general partner or manager or holds interests entitling it to receive more than 50% of the profits or losses of the partnership or limited liability company.

 

(jj)                                 Successor ” shall have the meaning given to that term in Section 5.1(a) hereof.

 

(kk)                           Tax Date ” shall have the meaning given to that term in Section 13.2 hereof.

 

2.2                                Gender and Number . Except when otherwise indicated by the context, the masculine gender shall also include the feminine gender, and the definition of any term herein in the singular shall also include the plural.

 

ARTICLE III
PLAN ADMINISTRATION

 

3.1                                General . The Plan shall be administered by the Committee. In accordance with the provisions of the Plan, the Committee shall, in its sole discretion, select the Participants from among the Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors, determine the Awards to be made pursuant to the Plan, or shares of Stock to be issued thereunder and the time at which such Awards are to be made, fix the Option Price, period and manner in which an Option becomes exercisable, establish the duration and nature of Restricted Stock Award restrictions, establish the terms and conditions applicable to, and establish such other terms and requirements of the various compensation incentives under the Plan as the Committee may deem necessary or desirable, and consistent with the terms of the Plan. The Committee shall determine the form or forms of the agreements with Participants that shall evidence the particular

 

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provisions, terms, conditions, rights and duties of the Company and the Participants with respect to Awards granted pursuant to the Plan, which provisions need not be identical except as may be provided herein; provided, however, that Eligible Consultants and Eligible Non-Employee Directors shall not be eligible to receive Incentive Options. The Committee may from time to time adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of the Company. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement entered into hereunder in the manner and to the extent it shall deem expedient and it shall be the sole and final judge of such expediency. The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or employee of the Company or its Affiliates or the Company’s auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Company or its Affiliates acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. The determinations, interpretations and other actions of the Committee pursuant to the provisions of the Plan shall be binding and conclusive for all purposes and on all persons.

 

3.2                                Delegation by Committee . The Committee may, from time to time, delegate, to specified officers of the Company, the power and authority to grant Awards under the Plan to specified groups of Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors, subject to such restrictions and conditions as the Committee, in its sole discretion, may impose. The delegation shall be as broad or as narrow as the Committee shall determine. To the extent that the Committee has delegated the authority to determine certain terms and conditions of an Award, all references in the Plan to the Committee’s exercise of authority in determining such terms and conditions shall be construed to include the officer or officers to whom the Committee has delegated the power and authority to make such determination. The power and authority to grant Awards to any Eligible Employee, Eligible Consultant or Eligible Non-Employee Director who is covered by Section 16(b) of the Exchange Act shall not be delegated by the Committee.

 

3.3                                Contractual Limitations . The Committee shall in exercising its discretion under the Plan comply with all contractual obligations of the Company in effect from time to time, whether contained in the Company’s Certificate of Incorporation, By-laws or other binding contract.

 

ARTICLE IV
STOCK SUBJECT TO THE PLAN

 

4.1                                Number of Shares . The maximum aggregate number of Shares that may be issued under the Plan pursuant to Awards is Nine Hundred Thirty One Thousand Eight Hundred Twenty Five (931,825) Shares. Upon exercise of an option (whether granted under this Plan or otherwise), the Shares issued upon exercise of such option shall no longer be considered to be subject to an outstanding Award or option for purposes of the immediately preceding sentence.

 

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Notwithstanding anything to the contrary contained herein, no Award granted hereunder shall become void or otherwise be adversely affected solely because of a change in the number of Shares of the Company that are issued and outstanding from time to time, provided that changes to the issued and outstanding Shares may result in adjustments to outstanding Awards in accordance with the provisions of this ARTICLE IV. The maximum number of Shares that may be issued under Incentive Options is Nine Hundred Thirty One Thousand Eight Hundred Twenty Five (931,825) Shares. The Shares may be either authorized and unissued Shares or previously issued Shares acquired by the Company. The maximum numbers may be increased from time to time by approval of the Board and by the stockholders of the Company if, in the opinion of counsel for the Company, stockholder approval is required. The Company shall at all times during the term of the Plan and while any Options are outstanding retain as authorized and unissued Stock at least the number of Shares from time to time required under the provisions of the Plan, or otherwise assure itself of its ability to perform its obligations hereunder.

 

4.2                                Limit on Options . The maximum number of Shares with respect to which a Participant may receive Options under the Plan during the terms of the Plan is Nine Hundred Thirty One Thousand Eight Hundred Twenty Five (931,825) Shares. The maximum number may be increased from time to time by approval of the Board and by the stockholders of the Company if, in the opinion of counsel for the Company, stockholder approval is required. Stockholder approval shall not be required for increases solely pursuant to Section 4.4 below.

 

4.3                                Other Shares of Stock . Any Shares that are subject to an Option that expires or for any reason is terminated unexercised, any Shares that are subject to an Award (other than an Option) and that are forfeited, and any Shares withheld for the payment of taxes or received by the Company as payment of the exercise price of an Option shall automatically become available for use under the Plan.

 

4.4                                Adjustments for Stock Split, Stock Dividend, Etc . If the Company shall at any time increase or decrease the number of its outstanding Shares or change in any way the rights and privileges of such Shares by means of the payment of a stock dividend or any other distribution upon such Shares payable in Stock, or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization involving the Stock, then in relation to the Stock that is affected by one or more of the above events, the numbers, exercise price, rights and privileges of the following shall be increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (i) the Shares as to which Awards may be granted under the Plan, (ii) the Shares then included in each outstanding Award granted hereunder, (iii) the maximum number of Shares available for grant to any one person pursuant to Section 4.2, (iv) the maximum number of Shares available for grant pursuant to Incentive Options, and (v) the number of Shares subject to a delegation of authority under Section 3.2 of this Plan.

 

4.5                                Other Distributions and Changes in the Stock .

 

(a)                                  If the Company shall at any time distribute with respect to the Stock assets or securities of persons other than the Company (excluding (i) cash or (ii) distributions referred to in Section 4.4), or

 

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(b)                                  if the Company shall at any time grant to the holders of its Stock rights to subscribe pro rata for additional shares thereof or for any other securities of the Company, or

 

(c)                                   if there shall be any other change (except as described in Section 4.4) in the number or kind of outstanding Shares or of any stock or other securities into which the Stock shall be changed or for which it shall have been exchanged; and if the Committee shall in its discretion determine that the event described in subsection (a) or (b) above equitably requires an adjustment in the number or kind of Shares subject to an Option or other Award, an adjustment in the Option Price or the taking of any other action by the Committee, including without limitation, the setting aside of any property for delivery to the Participant upon the exercise of an Option or the full vesting of an Award, then such adjustments shall be made, or other action shall be taken, by the Committee and shall be effective for all purposes of the Plan and on each outstanding Option or Award that involves the particular type of stock for which a change was effected. Notwithstanding the foregoing provisions of this Section 4.5, pursuant to Section 8.3 below, a Participant holding Stock received as a Restricted Stock Award shall have the right to receive all amounts, including cash and property of any kind, distributed with respect to the Stock after such Restricted Stock Award was granted upon the Participant’s becoming a holder of record of the Stock.

 

4.6                                General Adjustment Rules . No adjustment or substitution provided for in this ARTICLE IV shall require the Company to sell a fractional Share under any Option, or otherwise issue a fractional Share, and the total substitution or adjustment with respect to each Option and other Award shall be limited by deleting any fractional Share. In the case of any such substitution or adjustment, the aggregate Option Price for the total number of Shares then subject to an Option shall remain unchanged but the Option Price per Share under each such Option shall be equitably adjusted by the Committee to reflect the greater or lesser number of Shares or other securities into which the Stock subject to the Option may have been changed, and appropriate adjustments shall be made to other Awards to reflect any such substitution or adjustment.

 

4.7                                Determination by the Committee, Etc . Adjustments under this ARTICLE IV shall be made by the Committee, whose determinations with regard thereto shall be final and binding upon all parties thereto.

 

ARTICLE V
CORPORATE REORGANIZATION; CHANGE IN CONTROL

 

5.1                                Default Provisions . Unless explicitly provided otherwise in an Award Agreement and subject to Section 5.3 below:

 

(a)                                  The Shares subject to each Option outstanding under the Plan at the time of a Change in Control shall automatically vest in full so that each such Option shall, immediately prior to the Change in Control, become exercisable for all of the Shares at the time subject to that Option and may be exercised for any or all of those Shares as fully-vested Shares of Stock. However, the Shares subject to an outstanding Option shall not vest in full on such an accelerated basis if and to the extent: (i) such Option is assumed by the successor corporation or other successor entity (or a parent thereof) (the “ Successor ”) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction and any repurchase rights

 

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of the Company with respect to the unvested Shares subject to such Option are concurrently assigned to such Successor or otherwise continued in effect, or (ii) such Option is to be replaced with a cash incentive program of the Company or any Successor which preserves the spread between the Option Price and the Fair Market Value of the unvested Shares subject to such Option at the time of the Change in Control and provides for subsequent payout of that spread in accordance with the vesting schedule applicable to those unvested Shares, or (iii) the acceleration of such Option is subject to other limitations imposed by the Committee at the time of the Option grant.

 

(b)                                  All outstanding Repurchase Rights with respect to unvested Shares purchased pursuant to any Option shall also automatically terminate, and the Shares subject to those terminated rights shall immediately vest in full, immediately prior to the Change in Control, except to the extent: (i) any of the Repurchase Rights are assigned to the Successor or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Committee at the time the Repurchase Right is issued.

 

(c)                                   All outstanding Forfeiture Restrictions with respect to Restricted Stock Awards shall also automatically terminate, and the Shares of Stock subject to those terminated Forfeiture Restrictions shall immediately vest in full, immediately prior to the Change in Control, except to the extent: (i) the Forfeiture Restrictions are maintained by the Successor and continued in full force and effect pursuant to the terms of the Change in Control transaction, or (ii) such accelerated vesting is precluded by other limitations imposed by the Committee at the time the Restricted Stock Award is issued.

 

(d)                                  Unless explicitly provided otherwise in an Option Agreement and subject to Section 5.1 and Section 5.3, upon the consummation of a Change in Control, all outstanding unvested Options (and to the extent not exercised prior to or in connection with such Change in Control, all outstanding vested Options) that are not assumed by the Successor or otherwise continued in effect pursuant to the terms of the Change in Control transaction shall automatically be forfeited and cease to be outstanding.

 

5.2                                Assumption or Substitution of Options . To the extent any Option is assumed in connection with a Change in Control or otherwise continued in effect, such Option shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Option Holder in consummation of such Change in Control, had the Option been exercised immediately prior to such Change in Control. Appropriate adjustments shall also be made to (i) the number and class of securities available for issuance under the Option following the consummation of such Change in Control and (ii) the exercise price payable per Share under each outstanding Option, provided the aggregate exercise price payable for such securities shall remain the same. To the extent the actual holders of the Company’s outstanding Stock receive cash consideration for their Stock in consummation of the Change in Control, the Successor may, in connection with the assumption of the outstanding Options under this Plan, substitute one or more shares of its own common stock with a Fair Market Value equivalent to the cash consideration paid per Share of Stock in such Change in Control.

 

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5.3                                Provisions Applicable at the Discretion of the Committee .

 

(a)                                  The Committee shall have the discretion, exercisable either at the time an Award is granted or issued or at any time while the Award remains outstanding, to structure the Award so that it shall automatically accelerate and vest in full or in part upon the occurrence of a Change in Control (and any Forfeiture Restrictions or Repurchase Rights of the Company with respect to unvested Shares received pursuant to the Award shall immediately terminate), whether or not the Award is to be assumed in the Change in Control or the Forfeiture Restrictions or Repurchase Rights of the Company would otherwise continue in effect pursuant to the Change in Control.

 

(b)                                  The Committee shall also have full power and authority, exercisable either at the time an Option is granted or at any time while the Option remains outstanding, to structure such Option so that all or a portion of the Shares subject to such Option will automatically vest on an accelerated basis should the Option Holder’s Service terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following any Change in Control in which the Option is assumed or otherwise continued in effect and the Repurchase Rights applicable to the Shares subject to such Option do not otherwise terminate. Any Option so accelerated shall remain exercisable for the fully-vested Shares subject to such Option until the expiration or sooner termination of the Option Period. In addition, the Committee may provide that one or more of the Company’s outstanding Repurchase Rights with respect to Shares held by the Option Holder at the time of such Involuntary Termination shall immediately terminate on an accelerated basis, and the Shares subject to those terminated rights shall accordingly vest at that time.

 

(c)                                   The Committee shall also have full power and authority, exercisable either at the time the Restricted Stock Award is issued or at any time while the Restricted Stock Award remains outstanding, to provide that all or a portion of the Forfeiture Restrictions with respect to such Restricted Stock Award shall automatically terminate on an accelerated basis, and the Shares subject to those terminated Forfeiture Restrictions shall immediately vest, in the event the Participant’s Service should terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following any Change in Control in which those Forfeiture Restrictions are assigned to the Successor or otherwise continued in full force and effect.

 

(d)                                  The Committee shall also have full power and authority, exercisable at the time an Option is granted or at any time while an Option remains outstanding, to provide that the Option shall be deemed automatically exercised on a net basis immediately prior to a Change in Control if (i) the Option Price is less than the then-current Fair Market Value per Share, and (ii) the Shares subject to the Option are vested (including vesting by reason of the Change in Control). Upon such net exercise, the Option Holder shall be entitled to a number of Shares computed using the following formula:

 

X =

Y (A–B)

 

A

 

 

Where:                                  X =                        the number of Shares to be issued to the Option Holder;

 

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Y =                        the number of Shares purchasable under the Option immediately prior to the Change in Control;

 

A =                        the then-current Fair Market Value of one Share of Stock; and

 

B =                        the per-Share Option Price of the Option.

 

In no event shall the Committee be required to issue any fractional Shares.

 

(e)                                   The Committee shall also have full power and authority, exercisable at the time an Option is granted or at any time while an Option remains outstanding, to provide that the Option, if outstanding immediately prior to a Change in Control and then having an Option Price less than the current Fair Market Value per Share, shall be automatically cancelled at such time in exchange for a cash payment equal to the product of (i) the number of vested Shares then subject to the Option (including Shares that become vested as a result of the Change in Control) multiplied by (ii) the excess of the (x) Fair Market Value of a Share on the date of the Change in Control over (y) the Option Price.

 

(f)                                    Notwithstanding any other provision in this ARTICLE V, the Committee shall have full power and authority, exercisable at the time an Award is granted or at any time while the Award remains outstanding, to provide for or take any other Change in Control related action with respect to an Award as the Committee deems appropriate. The Committee need not take the same action with respect to all outstanding Awards or to all outstanding Awards of the same type.

 

5.4                                Company Actions . The grant of Awards under the Plan shall in no way affect the right of the Company or any Affiliate to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

ARTICLE VI
PARTICIPATION

 

Participants in the Plan shall be those Eligible Employees who, in the judgment of the Committee, are performing, or during the term of their incentive arrangement will perform, vital services in the management, operation and development of the Company and its Affiliates, and significantly contribute, or are expected to significantly contribute, to the achievement of long-term economic objectives. Eligible Consultants shall be selected from those non-employee consultants and advisors to the Company and its Affiliates who have performed or are performing services important to the operation and growth of the Company and its Affiliates. All Eligible Non-Employee Directors selected by the Board may participate in the Plan. Participants may be granted from time to time one or more Awards; provided, however, that the grant of each such Award shall be separately approved by the Committee and receipt of one such Award shall not result in automatic receipt of any other Award. Upon determination by the Committee that an Award is to be granted to a Participant, written notice shall be given to such person, specifying the terms, conditions, rights and duties related thereto. Each Participant shall, if required by the Committee, enter into an agreement with the Company, in such form as the Committee shall determine and which is consistent with the provisions of the Plan, specifying such terms,

 

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conditions, rights and duties. Awards shall be deemed to be granted as of the date specified in the grant resolution of the Committee, which date shall be the date of any related agreement with the Participant. In the event of any inconsistency between the provisions of the Plan and any such agreement entered into hereunder, the provisions of the Plan shall govern.

 

ARTICLE VII
OPTIONS

 

7.1                                Grant of Options . Coincident with or following designation for participation in the Plan, a Participant may be granted one or more Options. The Committee in its sole discretion shall designate whether an Option is an Incentive Option or a Non-Qualified Option; provided, however, that only Non-Qualified Options may be granted to Eligible Consultants and Eligible Non-Employee Directors. The Committee may grant both an Incentive Option and a Non-Qualified Option to an Eligible Employee at the same time or at different times. Incentive Options and Non-Qualified Options, whether granted at the same time or at different times, shall be deemed to have been awarded in separate grants and shall be clearly identified, and in no event shall the exercise of one Option affect the right to exercise any other Option or affect the number of Shares for which any other Option may be exercised. An Option shall be considered as having been granted on the date specified in the grant resolution of the Committee.

 

7.2                                Stock Option Agreements . Each Option granted under the Plan shall be evidenced by a written stock option agreement (an “ Option Agreement ”). An Option Agreement shall be issued by the Company in the name of the Participant to whom the Option is granted (the “ Option Holder ”) and in such form as may be approved by the Committee. The Option Agreement shall incorporate and conform to the conditions set forth in this Section 7.2 as well as such other terms and conditions that are not inconsistent as the Committee may consider appropriate in each case.

 

(a)                                  Number of Shares . Each Option Agreement shall state that it covers a specified number of Shares, as determined by the Committee.

 

(b)                                  Price . The price at which each Share covered by an Option may be purchased (the “ Option Price ”) shall be determined in each case by the Committee and set forth in the Option Agreement, but in no event shall the price be less than 100 percent of the Fair Market Value of one Share of Stock on the date the Option is granted.

 

(c)                                   Duration of Options; Vesting . Each Option Agreement shall state the Option Period applicable to the Option, which must end, in all cases, not more than ten years from the date the Option is granted. Each Option Holder shall become vested in the Shares underlying the Option in such installments and over such period or periods of time, if any, or upon such events, as are determined by the Committee in its discretion and set forth in the Option Agreement.

 

The Option shall generally become exercisable, in whole or in part, at the same time or times as the Shares underlying the Option vest; provided, however, that the Committee may grant Options that are immediately exercisable in whole or in part. Any unvested Shares

 

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received by the Option Holder upon early exercise of the Option in accordance with the preceding sentence shall be subject to the Company’s right of repurchase, as follows.

 

Should the Option Holder cease Service while holding unvested Shares, the Company shall have such right to repurchase any or all of those unvested Shares at a price per share equal to the Option Price (the “ Repurchase Rights ”). The Company shall be entitled to exercise its right to repurchase such unvested Shares by written notice to the Option Holder sent within ninety (90) days after the time of Option Holder’s cessation of Service, or (if later) during the ninety (90)-day period following the execution date of any written stock purchase agreement executed by the Company and the Option Holder. The notice shall indicate the number of unvested Shares to be repurchased, the repurchase price to be paid per share (which shall be a price per share equal to the Option Price) and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of such notice.

 

(d)                                  Termination of Services, Death, Disability, Etc . The Committee may specify the period, if any, during which an Option may be exercised following termination of the Option Holder’s Service. The effect of this subsection 7.2(d) shall be limited to determining the consequences of a termination and nothing in this subsection 7.2(d) shall restrict or otherwise interfere with the Company’s discretion with respect to the termination of any individual’s Service. If the Committee does not otherwise specify, the following shall apply:

 

(i)                                     If the Service of the Option Holder is terminated within the Option Period for Misconduct, the Option shall thereafter be void for all purposes.

 

(ii)                                 If the Option Holder becomes Disabled while still in Service of the Company or an Affiliate, the Option may be exercised by the Option Holder within one year following the Option Holder’s termination of Service on account of Disability (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Shares that had become vested on or before the date of the Option Holder’s termination of Service because of Disability.

 

(iii)                             If the Option Holder dies during the Option Period while still in Service of the Company or an Affiliate or within the one year period referred to in (ii) above or the three-month period referred to in (iv) below, the Option may be exercised by those entitled to do so under the Option Holder’s will or by the laws of descent and distribution within one year following the Option Holder’s death (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Shares that had become vested on or before the date of the Option Holder’s death.

 

(iv)                              If the Service of the Option Holder is terminated within the Option Period for any reason other than Misconduct, Disability, or death, the Option may be exercised by the Option Holder within three (3) months following the date of such termination (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Shares that had become vested on or before the date of termination of Service.

 

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(e)                                   No Employment Right . Nothing in this paragraph shall limit or impair the right of the Company or any Affiliate to terminate the employment of any employee or to terminate the consulting or advisory services of any consultant or advisor.

 

(f)                                    Exercise, Payments, Etc .

 

(i)                                     Manner of Exercise . The method for exercising each Option granted hereunder shall be by delivery to the Company of written notice on any business day specifying the number of Shares with respect to which such Option is exercised. The purchase of such Shares shall take place at the principal offices of the Company within thirty (30) days following delivery of such notice, at which time the Option Price of the Shares shall be paid in full by any of the methods set forth below or a combination thereof. The Option shall be exercised when the Option Price for the number of Shares as to which the Option is exercised is paid to the Company in full. A properly executed certificate or certificates representing the Shares shall be delivered to or at the direction of the Option Holder upon payment therefor. If Options on less than all Shares evidenced by an Option Agreement are exercised, the Company shall deliver a new Option Agreement evidencing the Option on the remaining Shares upon delivery of the Option Agreement for the Option being exercised.

 

(ii)                                 The exercise price shall be paid by any of the following methods or any combination of the following methods at the election of the Option Holder, or by any other method approved by the Committee:

 

(1)                                  in cash;

 

(2)                                  by certified check, cashier’s check or other check acceptable to the Company, payable to the order of the Company;

 

(3)                                  if expressly permitted by a resolution of the Committee applicable to the Option at the time of exercise (whether such resolution is applicable solely to the Option being exercised or is generally applicable to some or all Options outstanding under the Plan), by delivery to the Company of certificates representing the number of Shares then owned by the Option Holder, the Fair Market Value of which equals the purchase price of the Shares purchased pursuant to the Option, properly endorsed for transfer to the Company; provided however, that no Option may be exercised by delivery to the Company of certificates representing Shares, unless such Shares have been held by the Option Holder for more than six (6) months (or such other period of time as the Committee determines is necessary to avoid adverse financial accounting treatment); for purposes of this Plan, the Fair Market Value of any Shares delivered in payment of the purchase price upon exercise of the Option shall be the Fair Market Value as of the exercise date, and the exercise date shall be the day of delivery of the certificates for the Shares used as payment of the Option Price.

 

(g)                                  Date of Grant . An Option shall be considered as having been granted on the date specified in the grant resolution of the Committee.

 

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(h)                                  Withholding .

 

(i)                                     Non-Qualified Options . Upon exercise of an Option, the Option Holder shall make appropriate arrangements with the Company to provide for the amount of additional withholding required by Sections 3102 and 3402 of the Code and applicable state income tax laws, including payment of such taxes through delivery of Shares of Stock or by withholding Shares to be issued under the Option, as provided in ARTICLE XIII.

 

(ii)                                 Incentive Options . If an Option Holder makes a disposition (as defined in Section 424(c) of the Code) of any Shares acquired pursuant to the exercise of an Incentive Option prior to the expiration of two years from the date on which the Incentive Option was granted or prior to the expiration of one year from the date on which the Option was exercised, the Option Holder shall send written notice to the Company at the Company’s principal place of business of the date of such disposition, the number of Shares disposed of, the amount of proceeds received from such disposition and any other information relating to such disposition as the Company may reasonably request. The Option Holder shall, in the event of such a disposition, make appropriate arrangements with the Company to provide for the amount of additional withholding, if any, required by Sections 3102 and 3402 of the Code and applicable state income tax laws.

 

(iii)                             Lock-Up Period . The Award Agreement may, as determined by the Committee in its sole discretion, include a provision requiring that, if requested by the Company or any Affiliate or the representative of the underwriters of Stock (or other securities) of the Company or any Affiliate, the Participant shall not directly or indirectly sell, offer to sell, contract to sell, pledge, transfer or otherwise dispose of, make any short sale of, grant any option for the purchase or sale of, or enter into any hedging or similar transaction with the same economic effect as a sale of, any Stock (or other securities) of the Company or any Affiliate held by such Participant (other than those included for sale in the registration) for a period specified by the representative of the underwriters of Stock (or other securities) of the Company or any such Affiliate not to exceed one hundred eighty (180) days following the effective date of a registration statement of the Company or any Affiliate filed under the Securities Act. If requested by the Company or any Affiliate or the representative of the underwriters of Stock (or other securities) of the Company or any Affiliate, the Participant would be required to enter into an agreement regarding his or her compliance with this requirement that will survive the term of the Award Agreement.

 

7.3                                Restrictions on Incentive Options .

 

(a)                                  $100,000 Per Year Limitation . The aggregate Fair Market Value of the Shares with respect to which Incentive Options are exercisable for the first time by an Option Holder in any calendar year, under the Plan or otherwise, shall not exceed $100,000 (or such higher amount as may at the time of grant be applicable under Section 422(d) (or any successor provision) of the Code). For this purpose, the Fair Market Value of the Shares shall be determined as of the date of grant of the Option and Incentive Options shall be taken into account in the order granted. The portion of any Incentive Option accelerated in connection with a Change in Control shall remain exercisable as an Incentive Option only to the extent the above

 

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limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such Incentive Option shall thereafter be exercisable as a Non-Qualified Option.

 

(b)                                  Ten Percent Stockholders . Incentive Options granted to an Option Holder who is the holder of record of 10% or more of the outstanding stock of the Company shall have an Option Price equal to 110% of the Fair Market Value of the Shares on the date of grant of the Option and the Option Period for any such Option shall not exceed five years.

 

7.4                                Transferability .

 

(a)                                  General Rule: No Lifetime Transfers . An Option shall not be transferable by the Option Holder except (i) by will or pursuant to the laws of descent and distribution or (ii) or to the Option Holder’s former spouse, to the extent such assignment is pursuant to a Domestic Relations Order (provided that if the Option being assigned pursuant to a Domestic Relations Order is an Incentive Option, such Incentive Option shall cease being an Incentive Option, and shall automatically convert to a Non-Qualified Option, upon such assignment). Except as otherwise provided by the terms of a Domestic Relations Order, an Option shall be exercisable during the Option Holder’s lifetime only by him or her, or in the event of Disability or incapacity, by his or her guardian or legal representative. The Option Holder’s guardian or legal representative shall have all of the rights of the Option Holder under this Plan.

 

(b)                                  No Assignment . No right or interest of any Option Holder in an Option granted pursuant to the Plan shall be assignable or transferable during the lifetime of the Option Holder, either voluntarily or involuntarily, or be subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy, except as set forth above. In the event the Option is assigned or transferred in any manner contrary to terms of this Plan, then all Options transferred or assigned shall immediately terminate.

 

7.5                                Stockholder Privileges . No Option Holder shall have any rights as a stockholder with respect to any Shares covered by an Option until the Option Holder becomes the holder of record of such Shares, and no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date such Option Holder becomes the holder of record of such Shares, except as provided in ARTICLE IV.

 

ARTICLE VIII
RESTRICTED STOCK AWARDS

 

8.1                                Grant of Restricted Stock Awards . Coincident with or following designation for participation in the Plan, the Committee may grant a Participant one or more Restricted Stock Awards consisting of Shares of Stock. The number of Shares granted as a Restricted Stock Award shall be determined by the Committee. Each Restricted Stock Award granted under the Plan shall be evidenced by a written restricted stock agreement (a “ Restricted Stock Agreement ”). The Restricted Stock Agreement shall incorporate and conform to the conditions set forth in this ARTICLE VIII as well as such other terms and conditions that are not inconsistent as the Committee may consider appropriate in each case.

 

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8.2                                Restrictions . A Participant’s right to retain a Restricted Stock Award granted to him or her under Section 8.1 shall be subject to such restrictions, including but not limited to his or her continuous Service for the Company or an Affiliate for a restriction period specified by the Committee or the attainment of specified performance goals and objectives, as may be established by the Committee with respect to such Award (such restrictions as established by the Committee shall be known as the “ Forfeiture Restrictions ”). The Committee may in its sole discretion provide for different Forfeiture Restrictions or no Forfeiture Restrictions with respect to different Participants, to different Restricted Stock Awards or to separate, designated portions of the Shares constituting a Restricted Stock Award. The Committee may in its sole discretion provide for the earlier lapse of any Forfeiture Restrictions in the event of a Change in Control in accordance with Article V of this Plan. Unless explicitly provided for otherwise in an Award Agreement, if a Participant’s Service terminates for any reason, any Shares as to which the Forfeiture Restrictions have not been satisfied (or waived or accelerated as provided herein) shall be forfeited, and all Shares related thereto shall be immediately returned to the Company.

 

8.3                                Privileges of a Stockholder, Transferability . A Participant shall have all voting, dividend, liquidation and other rights with respect to Stock in accordance with its terms received by him or her as a Restricted Stock Award under this ARTICLE VIII upon his or her becoming the holder of record of such Stock; provided, however, that the Participant’s right to sell, encumber, or otherwise transfer such Stock shall be subject to the limitations of Sections 10.2 and 12.1 and ARTICLE XI.

 

8.4                                Enforcement of Restrictions . The Committee shall cause a legend to be placed on the Stock certificates issued pursuant to each Restricted Stock Award referring to the restrictions provided by Sections 8.2 and 8.3 and, in addition, may in its sole discretion require one or more of the following methods of enforcing the restrictions referred to in Sections 8.2 and 8.3:

 

(a)                                  Requiring the Participant to keep the Stock certificates, duly endorsed, in the custody of the Company while the restrictions remain in effect; or

 

(b)                                  Requiring that the Stock certificates, duly endorsed, be held in the custody of a third party while the restrictions remain in effect.

 

ARTICLE IX
OTHER GRANTS

 

From time to time during the duration of this Plan, the Board may, in its sole discretion, adopt one or more incentive compensation arrangements for Participants pursuant to which the Participants may acquire Shares, whether by purchase, outright grant, or otherwise. Any arrangement shall be subject to the general provisions of this Plan and all Shares issued pursuant to such arrangements shall be issued under this Plan.

 

ARTICLE X
RIGHTS OF PARTICIPANTS

 

10.1                         Employment or Service . Nothing contained in the Plan or in any Option, or other Award granted under the Plan shall confer upon any Participant any right with respect to the

 

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continuation of his employment by, or consulting relationship with, or Service with the Company or any Affiliate, or interfere in any way with the right of the Company or any Affiliate, subject to the terms of any separate employment agreement or other contract to the contrary, at any time to terminate such employment, consulting relationship or Service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Award. Whether an authorized leave of absence, or absence in military or government service, shall constitute a termination of Service shall be determined by the Committee at that time.

 

10.2         Nontransferability of Awards . Except as provided otherwise at the time of grant or thereafter, or except as otherwise provided in a Domestic Relations Order, no right or interest of any Participant in a Restricted Stock Award (prior to the completion of the restriction period applicable thereto), or other Award (excluding Options) granted pursuant to the Plan, shall be assignable or transferable during the lifetime of the Participant, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge or bankruptcy. In the event of a Participant’s death, a Participant’s rights and interests in Options, Restricted Stock Awards, and other Awards, shall, to the extent provided in ARTICLE VII, ARTICLE VIII, and ARTICLE IX be transferable by will or the laws of descent and distribution, and payment of any amounts due under the Plan shall be made to, and exercise of any Options may be made by, the Participant’s legal representatives, heirs or legatees. However, a Participant’s rights and interests in Options, Restricted Stock Awards, and other Awards shall be transferable to an Option Holder’s former spouse, to the extent such assignment is pursuant to a Domestic Relations Order (provided that if the Option being assigned pursuant to a Domestic Relations Order is an Incentive Option, such Incentive Option shall cease being an Incentive Option, and shall automatically convert to a Non-Qualified Option, upon such assignment). If in the opinion of the Committee a person entitled to payments or to exercise rights with respect to the Plan is disabled from caring for his affairs because of mental condition, physical condition or age, payment due such person may be made to, and such rights shall be exercised by, such person’s guardian, conservator or other legal personal representative upon furnishing the Committee with evidence satisfactory to the Committee of such status.

 

10.3         No Plan Funding . Obligations to Participants under the Plan will not be funded, trusted, insured or secured in any manner. The Participants under the Plan shall have no security interest in any assets of the Company or any Affiliate, and shall be only general creditors of the Company.

 

ARTICLE XI
GENERAL RESTRICTIONS

 

11.1         Investment Representations . The Company may require any person to whom an Option, Restricted Stock Award, or other Award, is granted, as a condition of exercising such Option, receiving such Restricted Stock Award, or such other Award to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that such person is acquiring the Stock for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company or its counsel deems necessary or appropriate in order to comply with Federal and applicable state securities laws. Legends evidencing such restrictions may be placed on the Stock certificates.

 

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11.2         Compliance with Securities Laws . Each Option, Restricted Stock Award grant, or other Award shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such Option, Restricted Stock Award, or other Award grant upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such Option, Restricted Stock Award or other Award may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification.

 

11.3         Changes in Accounting or Tax Rules . Except as provided otherwise at the time an Award is granted, notwithstanding any other provision of the Plan to the contrary, if, during the term of the Plan, any changes in the financial or tax accounting rules applicable to Options, Restricted Stock Awards, or other Awards shall occur which, in the sole judgment of the Committee, may have a material adverse effect on the reported earnings, assets or liabilities of the Company, the Committee shall have the right and power to modify as necessary, any then outstanding and unexercised Options, outstanding Restricted Stock Awards and other outstanding Awards as to which the applicable services or other restrictions have not been satisfied.

 

11.4         Stockholder Agreements . If the Company has one or more stockholder agreements in effect at the time of grant or exercise of an Award under the Plan, then the Committee shall, if the Company is contractually obligated to, and may, in its discretion, condition the grant or exercise (as applicable) of any such Award upon execution by the Participant of such stockholder agreement(s), such that the Participant shall become a party to such stockholder agreements(s) concurrently with such grant or exercise (as applicable) of any such Award.

 

ARTICLE XII
PLAN AMENDMENT, MODIFICATION AND TERMINATION

 

The Board may at any time or from time to time, with or without prior notice, amend, modify, suspend or terminate the Plan provided, however, that no amendment or modification may become effective without approval of the amendment or modification by the stockholders if stockholder approval is required to enable the Plan to satisfy any applicable statutory or regulatory requirements, or if the Company, on the advice of counsel, determines that stockholder approval is otherwise necessary or desirable. No amendment, modification or termination of the Plan shall in any manner adversely affect any Options, Restricted Stock Awards, or other Award theretofore granted under the Plan, without the consent of the Participant holding such Options, Restricted Stock Awards, or other Awards. Notwithstanding the foregoing or anything to the contrary in this Plan, the Board may amend or modify the terms of the Plan or an Award Agreement, retroactively or prospectively, as permitted under Section 11.3 (Changes in Accounting or Tax Rules) or Section 14.3 (Section 409A) hereof with or without the consent of the Participant.

 

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ARTICLE XIII
WITHHOLDING

 

13.1         Withholding Requirement . The Company or any Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Participant, or to condition the Company’s obligations to deliver Shares upon the exercise of any Option, the vesting of any Restricted Stock Award or lapse of Forfeiture Restrictions or Repurchase Rights, or the grant of Stock upon the payment by the Participant of, any federal, state, local or foreign taxes of any kind required by law with respect to the grant or issuance of, or the vesting of or other lapse of restrictions applicable to, the applicable Award or the Shares subject to, or issuable upon exercise of, such Award. At the time of such grant, issuance, vesting or lapse, the Participant shall pay to the Company or Affiliate, as the case may be, any amount that the Company or Affiliate may reasonably determine to be necessary to satisfy such withholding obligation.

 

13.2         Withholding With Stock . At the time the Committee grants an Option, Restricted Stock Award, other Award, or Stock or at any time thereafter, it may, in its sole discretion, grant the Participant an election to pay all such amounts of tax withholding, or any part thereof, by electing (a) to have the Company withhold from shares otherwise issuable to the Participant, shares of Stock having a value equal to the amount required to be withheld or such lesser amount as may be elected by the Participant; provided however , that the amount of Stock so withheld shall not exceed the minimum amount required to be withheld under the method of withholding that results in the smallest amount of withholding, or (b) to transfer to the Company a number of shares of Stock that were acquired by the Participant more than six months prior to the transfer to the Company and that have a value equal to the amount required to be withheld or such lesser amount as may be elected by the Participant. All elections shall be subject to the approval or disapproval of the Committee. The value of shares of Stock to be withheld shall be based on the Fair Market Value of the Stock on the date that the amount of tax to be withheld is to be determined (the “ Tax Date ”). Any such elections by Participants to have shares of Stock withheld for this purpose will be subject to the following restrictions:

 

(a)            All elections must be made prior to the Tax Date.

 

(b)            All elections shall be irrevocable.

 

(c)            If the Participant is an officer or director of the Company within the meaning of Section 16 of the Exchange Act (“ Section 16 ”), the Participant must satisfy the requirements of such Section 16 and any applicable Rules thereunder with respect to the use of Stock to satisfy such tax withholding obligation.

 

ARTICLE XIV
REQUIREMENTS OF LAW

 

14.1         Requirements of Law . The issuance of Stock and the payment of cash pursuant to the Plan shall be subject to all applicable laws, rules and regulations.

 

14.2         Federal Securities Law Requirements . If a Participant is an officer or director of the Company within the meaning of Section 16 of the Exchange Act, Awards granted

 

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hereunder shall be subject to all conditions required under Rule 16b-3, or any successor rule promulgated under the Exchange Act, to qualify the Award for any exception from the provisions of Section 16(b) of the Exchange Act available under that Rule. Such conditions shall be set forth in the agreement with the Participant which describes the Award or other document evidencing or accompanying the Award.

 

14.3         Section 409A . Notwithstanding anything in this Plan to the contrary, the Plan and Awards made under the Plan are intended to comply with the requirements imposed by Section 409A of the Code. If any Plan provision or Award would result in the imposition of an additional tax under Section 409A of the Code, the Company and the Participant intend that the Plan provision or Award will be reformed to avoid imposition, to the extent possible, of the applicable tax and no action taken to comply with Section 409A of the Code shall be deemed to adversely affect the Participant’s rights to an Award. The Participant further agrees that the Committee, in the exercise of its sole discretion and without the consent of the Participant, may amend or modify an Award in any manner and delay the payment of any amounts payable pursuant to an Award to the minimum extent necessary to meet the requirements of Section 409A of the Code as the Committee deems appropriate or desirable.

 

14.4         Governing Law . The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Delaware excluding its conflict of laws rules.

 

ARTICLE XV
DURATION OF THE PLAN

 

Unless sooner terminated by the Board, the Plan shall terminate at the close of business on the day immediately following the tenth anniversary of the Effective Date and no Option, Restricted Stock Award, other Award or Stock shall be granted, or offer to purchase Stock made, after such termination. Options, Restricted Stock Awards, and other Awards outstanding at the time of the Plan termination may continue to vest, be exercised, or otherwise become free of restrictions, or be paid, in accordance with their terms.

 

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Exhibit 10.1.1

 

FORM

 

SENDGRID, INC.

 

STOCK OPTION AGREEMENT

 

This STOCK OPTION AGREEMENT is made this     day of            ,      by and between SendGrid, Inc., a Delaware corporation (the “ Company ”), and                      , the Option Holder under the SendGrid, Inc. 2009 Amended and Restated Equity Incentive Plan (the “ Plan ”).

 

RECITALS

 

A.            All capitalized terms in this Agreement shall have the meaning assigned to them in this Agreement, or if not defined herein, in the Plan.

 

B.            The Board has adopted the Plan for the purpose of retaining the services of selected employees, non-employee members of the Board and consultants and other independent advisors in the service of the Company.

 

C.            Option Holder is to render valuable services to the Company, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company’s grant of an option to Option Holder.

 

NOW, THEREFORE , it is hereby agreed as follows:

 

AGREEMENT

 

1.              DEFINITIONS.

 

The following definitions shall be in effect under this Agreement:

 

(a)            “ Affiliate ” means, with respect to the Company, (i) any Subsidiary of the Company, and (ii) any other corporation or entity that is affiliated with the Company through stock ownership or otherwise and is designated as an “Affiliate” by the Board, provided, however, that for purposes of Incentive Options granted pursuant to the Plan, an “Affiliate” means any parent or subsidiary of the Company as defined in Section 424 of the Code.

 

(b)            “ Board ” means the Board of Directors of the Company.

 

(c)            “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

 

(d)            “ Committee ” means the Board, or if so delegated by the Board, a committee consisting of not less than two members of the Board who are empowered hereunder to take actions in the administration of the Plan. If applicable, the Committee shall be so constituted at all times as to permit the Plan to comply with Rule 16b-3 or any successor rule promulgated under the Exchange Act. The Committee shall select Participants from Eligible Employees, Eligible Consultants and Eligible Non-Employee Directors of the Company and its

 



 

Affiliates and shall determine the Awards to be made pursuant to the Plan and the terms and conditions thereof.

 

(e)            “ Disabled ” or “ Disability ” means total and permanent disability as defined in Section 22(e)(3) of the Code.

 

(f)             “ Exchange Act ” means the Securities Exchange Act of 1934, as it may be amended from time to time.

 

(g)            “ Exercise Date ” means the date on which the Option shall have been exercised in accordance with Section 8 of this Agreement.

 

(h)            “ Expiration Date ” means the date on which the Option expires as specified in the Grant Notice.

 

(i)             “ Fair Market Value ” means, as of a given date, (i) the closing price of a Share on the principal stock exchange on which the Stock is then trading, if any (or as reported on any composite index that includes such principal exchange) on such date, or if Shares were not traded on such date, then on the next preceding date on which a trade occurred; or (ii) if the Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, the mean between the closing representative bid and asked prices for the Stock on such date as reported by NASDAQ or such successor quotation system; or (iii) if the Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the Fair Market Value of a Share shall be determined by the Committee acting in good faith.

 

(j)             “ Grant Date ” means the date of grant of the Option as specified in the Grant Notice.

 

(k)            “ Grant Notice ” means the Notice of Stock Option Grant accompanying this Agreement pursuant to which Option Holder has been informed of the basic terms of the Option evidenced by this Agreement.

 

(l)             “ Incentive Option ” means an Option designated as such and granted in accordance with Section 422 of the Code.

 

(m)           “ Misconduct ” means the commission of any act of fraud, embezzlement or dishonesty by the Option Holder, any material unauthorized use or disclosure by such person of confidential information or trade secrets of the Company or the Successor, or any other intentional misconduct by such person adversely affecting the business or affairs of the Company (or the Successor) in a material manner. The foregoing definition shall not in any way preclude or restrict the right of the Company or any Affiliate (or its respective Successor) to discharge or dismiss the Option Holder from the Service of the Company or any Affiliate (or its respective Successor) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct.

 

(n)            “ Option ” has the meaning given to that term in Section 2 of this Agreement.

 

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(o)            “ Option Period ” has the meaning given to that term in Section 3 of this Agreement.

 

(p)            “ Option Price ” means the exercise price payable per Option Share as specified in the Grant Notice.

 

(q)            “ Option Shares ” means the number of Shares of Stock subject to the Option as specified in the Grant Notice.

 

(r)            “ Purchase Agreement ” means the Stock Purchase Agreement in substantially the form attached to the Grant Notice.

 

(s)             “ Service ” means service to the Company or an Affiliate as an employee, a non-employee director or a consultant or advisor, except to the extent otherwise specifically provided in an Award Agreement. The Committee determines which leaves of absence count toward Service, and when Service terminates for all purposes under the Plan. Further, unless otherwise determined by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in capacity in which the Participant provides Service to the Company or an Affiliate or a transfer between the Company and its Affiliates; provided there is no interruption or other termination of Service.

 

(t)             “ Share ” means one whole share of Stock.

 

(u)            “ Stock ” means the common stock of the Company.

 

(v)            “ Successor ” means a successor in interest to the Company upon a Change in Control.

 

2.              GRANT OF OPTION . The Company hereby grants to Option Holder, as of the Grant Date, an option (this “ Option ”) to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the Option Period at the Option Price.

 

3.              OPTION PERIOD . The Option shall have a term of ten (10) years measured from the Grant Date and shall expire at the close of business on the Expiration Date as specified in the Grant Notice, unless sooner terminated in accordance with Section 5 or 6 or upon a Change in Control as set forth in Section 5 of the Plan (the “ Option Period ”).

 

4.              DATES OF EXERCISE . The Option shall become exercisable for the Option Shares in one or more installments as specified in the Grant Notice. As the Option becomes exercisable for such installments, those installments shall accumulate, and the Option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Section 5 or 6 or upon a Change in Control as set forth in Section 5 of the Plan.

 

5.              CESSATION OF SERVICE . The Option Period shall terminate (and the Option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:

 

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(a)            If the Service of the Option Holder is terminated within the Option Period for Misconduct, the Option shall thereafter be void for all purposes.

 

(b)            If the Option Holder becomes Disabled, the Option may be exercised by the Option Holder within one year following the Option Holder’s termination of Service on account of Disability (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Option Shares that had become vested on or before the date of the Option Holder’s termination of Service because of Disability.

 

(c)            If the Option Holder dies during the Option Period while still in Service of the Company or within the one year period referred to in (b) above or the three-month period referred to in (d) below, the Option may be exercised by those entitled to do so under the Option Holder’s will or by the laws of descent and distribution within one year following the Option Holder’s death (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Option Shares that had become vested on or before the date of the Option Holder’s death.

 

(d)            If the Service of the Option Holder is terminated within the Option Period for any reason other than Misconduct, Disability, or death, the Option may be exercised by the Option Holder within three (3) months following the date of such termination (provided that such exercise must occur within the Option Period), but not thereafter. In any such case, the Option may be exercised only as to the Option Shares that had become vested on or before the date of termination of Service.

 

6.              CHANGE IN CONTROL TRANSACTION . Upon a Change in Control, the Options shall be subject to the provisions of the Plan regarding Change in Control.

 

7.              STOCKHOLDER PRIVILEGES . The Option Holder shall not have any rights as a stockholder with respect to the Option Shares until the Option Holder becomes the holder of record of such Shares, and no adjustments shall be made for dividends or other distributions or other rights as to which there is a record date preceding the date such Option Holder becomes the holder of record of such Shares, except as provided pursuant to the Change in Control provisions referenced in Section 6.

 

8.              MANNER OF EXERCISING OPTION.

 

(a)            To exercise an Option, the Option Holder shall deliver written notice to the Company specifying the number of Option Shares for which the Option is exercised. The purchase of such Option Shares shall take place at the principal offices of the Company within thirty (30) days following delivery of such notice, at which time the Option Price of the Shares shall be paid in full by one or any combination of the methods set forth below and the other conditions to exercise set forth in Section 8(b) shall be satisfied or otherwise waived by the Company.

 

(b)            To exercise the Option, Option Holder (or any other person or persons exercising the Option) must:

 

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(i)             Execute and deliver to the Company the Purchase Agreement.

 

(ii)            Pay the aggregate Option Price for the purchased Option Shares in one or more of the following forms (or by any other method approved by the Committee upon the request of the Option Holder):

 

(A)           in cash;

 

(B)           by certified check, cashier’s check or other check acceptable to the Company, payable to the order of the Company;

 

(C)           if expressly permitted by a resolution of the Committee applicable to this Option at the time of exercise (whether such resolution is applicable solely to this Option or is generally applicable to some or all Options outstanding under the Plan), to the extent such Option Price is in excess of the par value of those Shares, by delivering a full-recourse promissory note bearing interest at a market rate and secured by those Option Shares, and the payment schedule in effect for any such promissory note shall be established by the Committee in its sole discretion; or

 

(D)           if expressly permitted by a resolution of the Committee applicable to this Option at the time of exercise (whether such resolution is applicable solely to this Option or is generally applicable to some or all Options outstanding under the Plan), by delivery to the Company of certificates representing the number of Shares then owned by the Option Holder, the Fair Market Value of which equals the purchase price of the Shares purchased pursuant to the Option, properly endorsed for transfer to the Company; provided however, that the Option may not be exercised by delivery to the Company of certificates representing Shares, unless such Shares have been held by the Option Holder for more than six (6) months (or such other period of time as the Committee determines is necessary to avoid adverse financial accounting treatment to the Company). For purposes of this Plan, the Fair Market Value of any Shares delivered in payment of the purchase price upon exercise of the Option shall be the Fair Market Value as of the Exercise Date.

 

(iii)          Furnish to the Company appropriate documentation that the person or persons exercising the Option (if other than Option Holder) have the right to exercise the Option.

 

(iv)           Execute and deliver to the Company such written representations as may be requested by the Company in order for it to comply with the applicable requirements of applicable securities laws.

 

(v)            Make appropriate arrangements with the Company for the satisfaction of all applicable income and employment tax withholding requirements applicable to the option exercise.

 

(c)            As soon as practical after the Exercise Date, a properly executed certificate or certificates representing the purchased Option Shares shall be delivered to or at the direction of the Option Holder. If Options on less than all Option Shares evidenced by this Agreement are exercised, the Company shall deliver a new stock option agreement evidencing

 

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the Option on the remaining Option Shares upon delivery of this Agreement for the Option being exercised.

 

(d)            In no event may the Option be exercised for any fractional shares.

 

9.              TRANSFER RESTRICTIONS AND REPURCHASE RIGHTS . Option Holder hereby acknowledges and agrees that (a) the Option is subject to certain limitations on transferability as set forth in the Plan, and (b) all Option Shares shall be subject to certain repurchase rights and rights of first refusal in favor of the Corporation and its assigns, as set forth in the Purchase Agreement and the Plan.

 

10.           COMPLIANCE WITH LAWS AND REGULATIONS . The exercise of the Option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Company and the Option Holder with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or the NASDAQ National Market, if applicable) on which the Stock may be listed for trading at the time of such exercise and issuance. The Option is subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration or qualification of the Option Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, the Option may not be accepted or exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification.

 

11.           SUCCESSORS AND ASSIGNS . Except to the extent otherwise provided in this Agreement or the Plan, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Option Holder, Option Holder’s assigns and the legal representatives, heirs and legatees of Option Holder’s estate.

 

12.           NOTICES . Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Option Holder shall be in writing and addressed to Option Holder at the address indicated below the Option Holder’s signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or as of the second day after deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

 

13.           GRANT SUBJECT TO PLAN . This Agreement and the Option are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between this Agreement and the Plan, the provisions of the Plan will control. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Option.

 

14.           CONSTRUCTION; SEVERABILITY . The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this

 

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Agreement. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

 

15.           GOVERNING LAW . The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without resort to Delaware’s conflict-of-laws rules.

 

16.           STOCKHOLDER APPROVAL . If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of Shares of Stock which may be issued under the Plan as last approved by the Company’s stockholders, then the Option shall be void with respect to such excess Shares, unless stockholder approval of an amendment sufficiently increasing the number of Shares of Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.

 

17.           AMENDMENT . No amendment or modification of this Option may in any manner adversely affect the Option Holder’s rights hereunder without the Option Holder’s written consent.

 

18.           WAIVER . Any provision contained in this Agreement may be waived, either generally or in any particular instance, by the Committee, but only to the extent permitted under the Plan.

 

19.           AT WILL EMPLOYMENT . Nothing in this Agreement, the Grant Notice or the Plan shall confer upon Option Holder any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing or retaining Option Holder) or of Option Holder, which rights are hereby expressly reserved by each, to terminate Option Holder’s Service at any time for any reason, with or without cause. This Agreement is limited solely to governing the rights and obligations of the Option Holder with respect to the Option Shares and the Option.

 

20.           ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION.

 

(a)            In the event the Option is initially designated as an Incentive Option in the Grant Notice, the Option shall cease to qualify for favorable tax treatment as an Incentive Option if (and to the extent) the Option is exercised for one or more Option Shares: (i) more than three (3) months after the date Option Holder ceases to be an Employee for any reason other than death or Permanent Disability or (ii) more than twelve (12) months after the date Option Holder ceases to be an Employee by reason of Permanent Disability. Nothing in this Section shall require that the Option Holder be allowed to exercise this Option, in whole or in part, after the expiration of the time periods specified in Section 5 hereof.

 

(b)            If Option Holder makes a disposition (as defined in Section 424(c) of the Code) of any Shares acquired pursuant to the exercise of an Incentive Option prior to the expiration of two years from the date on which the Incentive Option was granted or prior to the expiration of one year from the date on which the Option was exercised, the Option Holder shall send written notice to the Company at the Company’s principal place of business of the date of such disposition, the number of Shares disposed of, the amount of proceeds received from such

 

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disposition and any other information relating to such disposition as the Company may reasonably request.

 

21.           WITHHOLDING . The Company’s obligations to deliver shares of Stock upon the exercise of the Option shall be subject to the Option Holder’s satisfaction of all applicable federal, state and local income and other tax withholding requirements. Upon exercise of the Option, the Option Holder shall make appropriate arrangements with the Company to provide for the amount of additional withholding required by Sections 3102 and 3402 of the Code and applicable state income tax laws. If expressly permitted by a resolution of the Committee applicable to this Option at the time of exercise (whether such resolution is applicable solely to this Option or is generally applicable to some or all Options outstanding under the Plan) payment of such taxes may be made through delivery of Shares of Stock or by withholding Shares to be issued under the Option, as provided in Section 13.2 of the Plan.

 

(Signatures on Following Page)

 

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IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement as of the day and year first above written.

 

 

SendGrid, Inc., a Delaware corporation

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

OPTION HOLDER

 

 

 

Print Name:

 

 

Signature Page to SendGrid, Inc. Stock Option Agreement

 




Exhibit 10.2

 

SENDGRID, INC.

 

2012 EQUITY INCENTIVE PLAN

 

ADOPTED BY THE BOARD OF DIRECTORS: MARCH 5, 2012
APPROVED BY THE STOCKHOLDERS: DECEMBER 10, 2012

 

AMENDED BY THE BOARD OF DIRECTORS: SEPTEMBER 11, 2012
AMENDED BY THE STOCKHOLDERS: DECEMBER 10, 2012

 

AMENDED BY THE BOARD OF DIRECTORS: DECEMBER 16, 2013
AMENDED BY THE STOCKHOLDERS: DECEMBER 16, 2013

 

AMENDED BY THE BOARD OF DIRECTORS: OCTOBER 13, 2014
AMENDED BY THE STOCKHOLDERS: OCTOBER 13, 2014

 

AMENDED BY THE BOARD OF DIRECTORS: OCTOBER 14, 2015
AMENDED BY THE STOCKHOLDERS: OCTOBER 19, 2015

 

TERMINATION DATE: MARCH 4, 2022

 

1.              GENERAL.

 

(a)            Successor to and Continuation of Prior Plans. The Plan is intended as the successor to and continuation of the Company’s Amended and Restated 2009 Equity Incentive Plan (the “ Prior Plan ”). Following the Effective Date, no additional stock awards shall be granted under the Prior Plan. Any shares remaining available for issuance pursuant to the exercise of options or settlement of stock awards under the Prior Plan as of the Effective Date (the “ Prior Plan’s Available Reserve ”) shall become available for issuance pursuant to Stock Awards granted hereunder. From and after the Effective Date, all outstanding stock awards granted under the Prior Plan shall remain subject to the terms of the Prior Plan; provided, however , any shares subject to outstanding stock awards granted under the Prior Plan that expire or terminate for any reason prior to exercise or settlement (the “ Returning Shares ”) shall become available for issuance pursuant to Stock Awards granted hereunder. All Stock Awards granted on or after the Effective Date of this Plan shall be subject to the terms of this Plan.

 

(b)            Eligible Stock Award Recipients. Employees, Directors and Consultants are eligible to receive Stock Awards.

 

(c)            Available Stock Awards. The Plan provides for the grant of the following types of Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards and (vi) Other Stock Awards.

 

(d)            Purpose. The Plan, through the granting of Stock Awards, is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and provide

 

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a means by which the eligible recipients may benefit from increases in value of the Common Stock.

 

2.              ADMINISTRATION .

 

(a)            Administration by Board. The Board will administer the Plan. The Board may delegate administration of the Plan to a Committee or Committees, as provided in Section 2(c).

 

(b)            Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:

 

(i)             To determine (A) who will be granted Stock Awards; (B) when and how each Stock Award will be granted; (C) what type of Stock Award will be granted; (D) the provisions of each Stock Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Stock Award; (E) the number of shares of Common Stock subject to a Stock Award; and (F) the Fair Market Value applicable to a Stock Award.

 

(ii)            To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Stock Awards. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it will deem necessary or expedient to make the Plan or Stock Award fully effective.

 

(iii)          To settle all controversies regarding the Plan and Stock Awards granted under it.

 

(iv)           To accelerate, in whole or in part, the time at which a Stock Award may be exercised or vest (or at which cash or shares of Common Stock may be issued).

 

(v)            To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or a Stock Award Agreement, suspension or termination of the Plan will not impair a Participant’s rights under his or her then-outstanding Stock Award without his or her written consent except as provided in subsection (viii) below.

 

(vi)           To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to make the Plan or Stock Awards granted under the Plan exempt from or compliant with the requirements for Incentive Stock Options or nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law. However, if required by applicable law, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek stockholder approval of any amendment of the Plan that (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Stock Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially expands the types of Stock Awards available for

 

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issuance under the Plan. Except as provided in the Plan (including subsection (viii) below) or a Stock Award Agreement, no amendment of the Plan will impair a Participant’s rights under an outstanding Stock Award without his or her written consent.

 

(vii)         To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 422 of the Code regarding Incentive Stock Options.

 

(viii)        To approve forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that a Participant’s rights under any Stock Award will not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing. Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (2) subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Stock Awards without the affected Participant’s consent (A) to maintain the qualified status of the Stock Award as an Incentive Stock Option under Section 422 of the Code; (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Award solely because it impairs the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (C) to clarify the manner of exemption from, or to bring the Stock Award into compliance with, Section 409A of the Code; or (D) to comply with other applicable laws.

 

(ix)           Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Stock Awards.

 

(x)            To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Stock Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).

 

(xi)           To effect, with the consent of any adversely affected Participant, (A) the reduction of the exercise, purchase or strike price of any outstanding Stock Award; (B) the cancellation of any outstanding Stock Award and the grant in substitution therefor of a new (1) Option or SAR, (2) Restricted Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock Award, (5) cash and/or (6) other valuable consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock Award and (y) granted under the Plan or another equity or compensatory plan of the Company; or (C) any other action that is treated as a repricing under generally accepted accounting principles.

 

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(c)            Delegation to Committee. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Committee may, at any time, abolish the subcommittee and/or revest in the Committee any powers delegated to the subcommittee. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

 

(d)            Delegation to an Officer. The Board may delegate to one or more Officers the authority to do one or both of the following (i) designate Employees who are not Officers to be recipients of Options and SARs (and, to the extent permitted by applicable law, other Stock Awards) and, to the extent permitted by applicable law, the terms of such rights and options, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Employees; provided, however, that the Board resolutions regarding such delegation will specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself. Any such Stock Awards will be granted on the form of Stock Award Agreement most recently approved for use by the Committee or the Board, unless otherwise provided in the resolutions approving the delegation authority. The Board may not delegate authority to an Officer who is acting solely in the capacity of an Officer (and not also as a Director) to determine the Fair Market Value pursuant to Section 13(t) below.

 

(e)            Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.

 

3.              SHARES SUBJECT TO THE PLAN .

 

(a)            Share Reserve . Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards from and after the Effective Date shall not exceed 12,793,718 shares (the “ Share Reserve ”), which number is the sum of (i) 1,265,267 shares subject to the Prior Plan’s Available Reserve, plus (ii) an additional number of shares in an amount not to exceed 11,528,451 shares (which number includes in part the Returning Shares, if any, as such shares become available from time to time).

 

(b)            Reversion of Shares to the Share Reserve . If a Stock Award or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Stock Award having been issued, or (ii) is settled in cash ( i.e. , the Participant receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan. If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to or repurchased by the

 

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Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Plan. Any shares reacquired by the Company in satisfaction of tax withholding obligations on a Stock Award or as consideration for the exercise or purchase price of a Stock Award will again become available for issuance under the Plan.

 

(c)            Incentive Stock Option Limit. Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options will be 12,793,718 shares of Common Stock.

 

(d)            Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise.

 

4.              ELIGIBILITY.

 

(a)            Eligibility for Specific Stock Awards . Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants; provided, however , that Stock Awards may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405, unless (i) the stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code (for example, because the Stock Awards are granted pursuant to a corporate transaction such as a spin off transaction), or (ii) the Company, in consultation with its legal counsel, has determined that such Stock Awards are otherwise exempt from or alternatively comply with the distribution requirements of Section 409A of the Code.

 

(b)            Ten Percent Stockholders . A Ten Percent Stockholder will not be granted an Incentive Stock Option unless the exercise price of such Option is at least 110% of the Fair Market Value on the date of grant and the Option is not exercisable after the expiration of five years from the date of grant.

 

(c)            Consultants. A Consultant will not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or sale of the Company’s securities to such Consultant is not exempt under Rule 701 because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of any other provision of Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701 and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions .

 

5.              PROVISIONS RELATING TO OPTIONS AND STOCK APPRECIATION RIGHTS .

 

Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive

 

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Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical; provided, however , that each Stock Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Stock Award Agreement or otherwise) the substance of each of the following provisions:

 

(a)            Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisable after the expiration of 10 years from the date of its grant or such shorter period specified in the Stock Award Agreement.

 

(b)            Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise or strike price of each Option or SAR will be not less than 100% of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value of the Common Stock subject to the Award if such Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A of the Code and, if applicable, Section 424(a) of the Code. Each SAR will be denominated in shares of Common Stock equivalents.

 

(c)            Purchase Price for Options. The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment. The permitted methods of payment are as follows:

 

(i)             by cash, check, bank draft or money order payable to the Company;

 

(ii)            pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

 

(iii)          by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

 

(iv)           if an Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company will accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued. Shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to

 

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the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations;

 

(v)            according to a deferred payment or similar arrangement with the Optionholder; provided, however , that interest will compound at least annually and will be charged at the minimum rate of interest necessary to avoid (A) the imputation of interest income to the Company and compensation income to the Optionholder under any applicable provisions of the Code, and (B) the classification of the Option as a liability for financial accounting purposes; or

 

(vi)           in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Stock Award Agreement.

 

(d)            Exercise and Payment of a SAR. To exercise any outstanding SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such SAR. The appreciation distribution payable on the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested under such SAR, and with respect to which the Participant is exercising the SAR on such date, over (B) the strike price. The appreciation distribution may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Stock Award Agreement evidencing such SAR.

 

(e)            Transferability of Options and SARs. The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board will determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply:

 

(i)             Restrictions on Transfer . An Option or SAR will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant. The Board may permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided herein, neither an Option nor a SAR may be transferred for consideration.

 

(ii)            Domestic Relations Orders . Subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2). If an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

 

(iii)          Beneficiary Designation . Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death

 

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of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, the executor or administrator of the Participant’s estate will be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.

 

(f)             Vesting Generally. The total number of shares of Common Stock subject to an Option or SAR may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary. The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option or SAR may be exercised.

 

(g)            Termination of Continuous Service. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Stock Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date three months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Stock Award Agreement, which period will not be less than 30 days if necessary to comply with applicable laws unless such termination is for Cause) and (ii) the expiration of the term of the Option or SAR as set forth in the Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR will terminate.

 

(h)            Extension of Termination Date. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the expiration of a total period of three months (that need not be consecutive) after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Stock Award Agreement. In addition, unless otherwise provided in a Participant’s Stock Award Agreement, if the sale of any Common Stock received upon exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or SAR will terminate on the earlier of (i) the expiration of a period of months (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the sale of the Common Stock received upon exercise of the Option or SAR would not be in violation of the Company’s insider

 

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trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Stock Award Agreement.

 

(i)             Disability of Participant. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date 12 months following such termination of Continuous Service (or such longer or shorter period specified in the Stock Award Agreement, which period will not be less than six months if necessary to comply with applicable laws), and (ii) the expiration of the term of the Option or SAR as set forth in the Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.

 

(j)             Death of Participant. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Stock Award Agreement for exercisability after the termination of the Participant’s Continuous Service (for a reason other than death), then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date 18 months following the date of death (or such longer or shorter period specified in the Stock Award Agreement, which period will not be less than six months if necessary to comply with applicable laws), and (ii) the expiration of the term of such Option or SAR as set forth in the Stock Award Agreement. If, after the Participant’s death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR will terminate.

 

(k)            Termination for Cause. Except as explicitly provided otherwise in a Participant’s Stock Award Agreement or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will terminate immediately upon such Participant’s termination of Continuous Service, and the Participant will be prohibited from exercising his or her Option or SAR from and after the time of such termination of Continuous Service .

 

(l)             Non-Exempt Employees . If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option or SAR (although the Stock Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the

 

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Participant’s Stock Award Agreement in another agreement between the Participant and the Company, or, if no such definition, in accordance with the Company’s then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Stock Award will be exempt from the employee’s regular rate of pay, the provisions of this Section 5(l) will apply to all Stock Awards and are hereby incorporated by reference into such Stock Award Agreements.

 

(m)           Early Exercise of Options. An Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Subject to the “Repurchase Limitation” in Section 8(m), any unvested shares of Common Stock so purchased may be subject to a repurchase right in favor of the Company or to any other restriction the Board determines to be appropriate. Provided that the “Repurchase Limitation” in Section 8(m) is not violated, the Company will not be required to exercise its repurchase right until at least six months (or such longer or shorter period of time required to avoid classification of the Option as a liability for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option Agreement.

 

(n)            Right of Repurchase . Subject to the “Repurchase Limitation” in Section 8(m), the Option or SAR may include a provision whereby the Company may elect to repurchase all or any part of the vested shares of Common Stock acquired by the Participant pursuant to the exercise of the Option or SAR.

 

(o)            Right of First Refusal . The Option or SAR may include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Participant of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option or SAR. Such right of first refusal will be subject to the “Repurchase Limitation” in Section 8(m). Except as expressly provided in this Section 5(o) or in the Stock Award Agreement, such right of first refusal will otherwise comply with any applicable provisions of the bylaws of the Company.

 

6.              PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS AND SARS.

 

(a)            Restricted Stock Awards. Each Restricted Stock Award Agreement will be in such form and will contain such terms and conditions as the Board deems appropriate. To the extent consistent with the Company’s bylaws, at the Board’s election, shares of Common Stock may be (i) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (ii) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board. The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical. Each Restricted Stock

 

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Award Agreement will conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

 

(i)             Consideration . A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.

 

(ii)            Vesting . Subject to the “Repurchase Limitation” in Section 8(m), shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.

 

(iii)          Termination of Participant’s Continuous Service . If a Participant’s Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.

 

(iv)           Transferability . Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board will determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.

 

(v)            Dividends. A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.

 

(b)            Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement will be in such form and will contain such terms and conditions as the Board deems appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical. Each Restricted Stock Unit Award Agreement will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

 

(i)             Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board in its sole discretion and permissible under applicable law.

 

(ii)            Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

 

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(iii)          Payment . A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

 

(iv)           Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

 

(v)            Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

 

(vi)           Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

 

(vii)         Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Restricted Stock Unit Award will comply with the requirements of Section 409A of the Code. Such restrictions, if any, shall be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award. For example, such restrictions may include, without limitation, a requirement that any Common Stock that is to be issued in a year following the year in which the Restricted Stock Unit Award vests must be issued in accordance with a fixed pre-determined schedule.

 

(c)            Other Stock Awards . Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less than 100% of the Fair Market Value of the Common Stock at the time of grant) may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board will have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.

 

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7.              COVENANTS OF THE COMPANY.

 

(a)            Availability of Shares. The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Stock Awards.

 

(b)            Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of a Stock Award or the subsequent issuance of cash or Common Stock pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities law.

 

(c)            No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.

 

8.              MISCELLANEOUS.

 

(a)            Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards will constitute general funds of the Company.

 

(b)            Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of a Stock Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Stock Award Agreement as a result of a clerical error in the papering of the Stock Award Agreement, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Stock Award Agreement.

 

(c)            Stockholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to a Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares of Common Stock under, the Stock Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to the Stock Award has been entered into the books and records of the Company.

 

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(d)            No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or any other instrument executed thereunder or in connection with any Stock Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

 

(e)            Change in Time Commitment . In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee) after the date of grant of any Stock Award to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares subject to any portion of such Stock Award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Stock Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Stock Award that is so reduced or extended.

 

(f)             Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).

 

(g)            Investment Assurances; Execution of Shareholders Agreement. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock, and (iii) to execute the Shareholders Agreement or any similar or successor agreement among the Company’s stockholders. The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently

 

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effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

 

(h)            Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however , that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from a Stock Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Stock Award Agreement.

 

(i)             Electronic Delivery . Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).

 

(j)             Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

 

(k)            Compliance with Section 409A. To the extent that the Board determines that any Stock Award granted hereunder is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code.

 

(l)             Compliance with Exemption Provided by Rule 12h-1(f) . If at the end of the Company’s most recently completed fiscal year: (i) the aggregate of the number of persons who hold outstanding compensatory employee stock options to purchase shares of Common Stock

 

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granted pursuant to the Plan or otherwise (such persons, “ Holders of Options ”) equals or exceeds 500, and (ii) the Company’s assets exceed $10 million, then the following restrictions will apply during any period during which the Company does not have a class of its securities registered under Section 12 of the Exchange Act and is not required to file reports under Section 15(d) of the Exchange Act: (A) the Options and, prior to exercise, the shares of Common Stock to be issued on exercise of the Options may not be transferred until the Company is no longer relying on the exemption provided by Rule 12h-1(f) promulgated under the Exchange Act (“ Rule 12h-1(f) ”), except: (1) as permitted by Rule 701(c) promulgated under the Securities Act, (2) to a guardian upon the disability of the Holder of Options, or (3) to an executor upon the death of the Holder of Options (collectively, the “ Permitted Transferees ”); provided, however, the following transfers are permitted: (i) transfers by Holders of Options to the Company, and (ii) transfers in connection with a change of control or other acquisition involving the Company, if following such transaction, the Options no longer remain outstanding and the Company is no longer relying on the exemption provided by Rule 12h-1(f); provided further, that any Permitted Transferees may not further transfer the Options; (B) except as otherwise provided in (A) above, the Options and shares of Common Stock issuable on exercise of the Options are restricted as to any pledge, hypothecation, or other transfer, including any short position, any “put equivalent position” as defined by Rule 16a-1(h) promulgated under the Exchange Act, or any “call equivalent position” as defined by Rule 16a-1(b) promulgated under the Exchange Act by Holders of Options prior to exercise of an Option until the Company is no longer relying on the exemption provided by Rule 12h-1(f); and (C) at any time that the Company is relying on the exemption provided by Rule 12h-1(f), the Company will deliver to Holders of Options (whether by physical or electronic delivery or written notice of the availability of the information on an internet site) the information required by Rule 701(e)(3), (4), and (5) promulgated under the Securities Act every six months, including financial statements that are not more than 180 days old; provided, however, that the Company may condition the delivery of such information upon the Holder of Options’ agreement to maintain its confidentiality.

 

(m)           Repurchase Limitation . The terms of any repurchase right will be specified in the Stock Award Agreement. The repurchase price for vested shares of Common Stock will be the Fair Market Value of the shares of Common Stock on the date of repurchase. The repurchase price for unvested shares of Common Stock will be the lower of (i) the Fair Market Value of the shares of Common Stock on the date of repurchase or (ii) their original purchase price. However, the Company will not exercise its repurchase right until at least six months (or such longer or shorter period of time necessary to avoid classification of the Stock Award as a liability for financial accounting purposes) have elapsed following delivery of shares of Common Stock subject to the Stock Award, unless otherwise specifically provided by the Board.

 

9.              ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

 

(a)            Capitalization Adjustments . In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c), and (iii) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board will make such adjustments, and its determination will be final, binding and conclusive.

 

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(b)            Dissolution or Liquidation . Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

 

(c)            Corporate Transaction. The following provisions will apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board may take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:

 

(i)             arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), provided, however, that with regard to Options, any right to early- exercise an Option may be removed from such Option so that after the Corporate Transaction the Option may only be exercised for vested shares;

 

(ii)            arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

 

(iii)          accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised, even if the vesting is not accelerated) to a date prior to the effective time of such Corporate Transaction as the Board determines (or, if the Board does not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction; provided, however, that the Board may require Participants to complete and deliver to the Company a notice of exercise before the effective date of a Corporate Transaction, which exercise is contingent upon the effectiveness of such Corporate Transaction;

 

(iv)           arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;

 

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(v)            cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised (even if vested) prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate, which cash consideration, if any, may be subject, in the discretion of the Board, to the same conditions (including but not limited to any escrow arrangement, holdback, indemnity obligation, or earn-out) on payment to the same extent and in the same manner as such conditions apply to all other holders of Company Common Stock; and

 

(vi)           make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise. For clarity, this payment may be $0 if the value of the property is equal to or less than the exercise price. Payments under this provision may be delayed to the same extent that payment of consideration to the holders of the Company’s Common Stock in connection with the Corporate Transaction is delayed as a result of escrows, earn outs, holdbacks or any other contingencies.

 

The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of a Stock Award.

 

(d)            Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.

 

10.           PLAN TERM; EARLIER TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)            Plan Term. The Board may suspend or terminate the Plan at any time. Unless terminated sooner by the Board, the Plan will automatically terminate on the day before the 10 th  anniversary of the earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the stockholders of the Company. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

 

(b)            No Impairment of Rights. Suspension or termination of the Plan will not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant or as otherwise permitted in the Plan.

 

11.           EFFECTIVE DATE OF PLAN.

 

This Plan will become effective on the Effective Date.

 

12.           CHOICE OF LAW.

 

The law of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

 

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13.           DEFINITIONS. As used in the Plan, the following definitions will apply to the capitalized terms indicated below:

 

(a)            “ Affiliate ” means, at the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405. The Board will have the authority to determine the time or times at which “parent” or “majority-owned subsidiary” status is determined within the foregoing definition.

 

(b)            “ Board ” means the Board of Directors of the Company.

 

(c)            “ Capitalization Adjustment ” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.

 

(d)            “ Cause ” will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause will be made by the Company, in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Stock Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

 

(e)            “ Change in Control ” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)             any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction

 

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or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (C) solely because the level of Ownership held by any Exchange Act Person (the “ Subject Person ”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;

 

(ii)            there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

 

(iii)          there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or

 

(iv)           individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.

 

Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.

 

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(f)             “ Code ” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.

 

(g)            “ Committee ” means a committee of one or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).

 

(h)            “ Common Stock ” means the common stock of the Company.

 

(i)             “ Company ” means SendGrid, Inc., a Delaware corporation.

 

(j)             “ Consultant ” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan.

 

(k)            “ Continuous Service ” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service; provided, however , that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or to a Director will not constitute an interruption of Continuous Service. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

 

(l)             “ Corporate Transaction ” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:

 

(i)             a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

 

(ii)            a sale or other disposition of at least 90% of the outstanding securities of the Company;

 

(iii)          a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

 

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(iv)           a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

 

(m)           “ Director ” means a member of the Board.

 

(n)            “ Disability ” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any 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 not less than 12 months as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

 

(o)            “ Effective Date ” means the effective date of this Plan, which is the earlier of (i) the date that this Plan is first approved by the Company’s stockholders, and (ii) the date this Plan is adopted by the Board.

 

(p)            “ Employee ” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.

 

(q)            “ Entity ” means a corporation, partnership, limited liability company or other entity.

 

(r)            “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

(s)             “ Exchange Act Person ” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities.

 

(t)             “ Fair Market Value ” means, as of any date, the value of the Common Stock determined by the Board in compliance with Section 409A of the Code or, in the case of an Incentive Stock Option, in compliance with Section 422 of the Code.

 

(u)            “ Incentive Stock Option ” means an option granted pursuant to Section 5 of the Plan that is intended to be, and that qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.

 

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(v)            “ Nonstatutory Stock Option ” means any option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Stock Option.

 

(w)           “ Officer ” means any person designated by the Company as an officer.

 

(x)            “ Option ” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.

 

(y)            “ Option Agreement ” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan.

 

(z)            “ Optionholder ” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

 

(aa)          “ Oth e r Stock Award ” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(c).

 

(bb)          “ Other Stock Award Agreement ” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan.

 

(cc)          “ Own , ” “ Owned , ” “ Owner , ” “ Ownership ” A person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

 

(dd)          “ Participant ” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

 

(ee)          “ Plan ” means this SendGrid, Inc. 2012 Equity Incentive Plan.

 

(ff)           “ Restricted Stock Award ” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).

 

(gg)          “ Restricted Stock Award Agreement ” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan.

 

(hh)          “ Restricted Stock Unit Award ” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

 

(ii)            “ Restricted Stock Unit Award Agreement ” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions

 

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of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement will be subject to the terms and conditions of the Plan.

 

(jj)            “ Rule 405 ” means Rule 405 promulgated under the Securities Act.

 

(kk)          “ Rule 701 ” means Rule 701 promulgated under the Securities Act.

 

(ll)            “ Securities Act ” means the Securities Act of 1933, as amended.

 

(mm)       “ Shareholders Agreement ” means the Company’s Second Amended and Restated Shareholders Agreement, dated January 10, 2012, as may be amended from time to time.

 

(nn)          “ Stock Appreciation Right ” or “ SAR ” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5.

 

(oo)          “ Stock Appreciation Right Agreement ” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement will be subject to the terms and conditions of the Plan.

 

(pp)          “ Stock Award ” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right or any Other Stock Award.

 

(qq)          “ Stock Award Agreement ” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement will be subject to the terms and conditions of the Plan.

 

(rr)          “ Subsidiary ” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% .

 

(ss)           “ Ten Percent Stockholder ” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate.

 

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Exhibit 10.2.1

 

ATTACHMENT I

 

SENDGRID, INC.
2012 EQUITY INCENTIVE PLAN

 

OPTION AGREEMENT
(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

 

Pursuant to your Stock Option Grant Notice (“ Grant Notice ”) and this Option Agreement, SendGrid, Inc. (the “ Company ”) has granted you an option under its 2012 Equity Incentive Plan (the “ Plan ”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice.  The option is granted to you effective as of the date of grant set forth in the Grant Notice (the “ Date of Grant ”). If there is any conflict between the terms in this Option Agreement and the Plan, the terms of the Plan will control.  Capitalized terms not explicitly defined in this Option Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the Plan.

 

The details of your option, in addition to those set forth in the Grant Notice and the Plan, are as follows:

 

1.                                       VESTING.   Your option will vest as provided in your Grant Notice.  Vesting will cease upon the termination of your Continuous Service.

 

2.                                       NUMBER OF SHARES AND EXERCISE PRICE.   The number of shares of Common Stock subject to your option and your exercise price per share in your Grant Notice will be adjusted for Capitalization Adjustments.

 

3.                                       EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES.   If you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (that is, a “ Non-Exempt Employee ”), and except as otherwise provided in the Plan, you may not exercise your option until you have completed at least six months of Continuous Service measured from the Date of Grant, even if you have already been an employee for more than six months. Consistent with the provisions of the Worker Economic Opportunity Act, you may exercise your option as to any vested portion prior to such six month anniversary in the case of (i) your death or disability, (ii) a Corporate Transaction in which your option is not assumed, continued or substituted, (iii) a Change in Control or (iv) your termination of Continuous Service on your “retirement” (as defined in the Company’s benefit plans).

 

4.                                       EXERCISE PRIOR TO VESTING (“EARLY EXERCISE”).   If permitted in your Grant Notice ( i.e. , the “Exercise Schedule” indicates “Early Exercise Permitted”) and subject to the provisions of your option, you may elect at any time that is both (i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the unvested portion of your option; provided, however, that:

 



 

(a)                                  a partial exercise of your option will be deemed to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock;

 

(b)                                  any shares of Common Stock so purchased from installments that have not vested as of the date of exercise will be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement;

 

(c)                                   you will enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred; and

 

(d)                                  if your option is an Incentive Stock Option, then, to the extent that the aggregate Fair Market Value (determined at the Date of Grant) of the shares of Common Stock with respect to which your option plus all other Incentive Stock Options you hold are exercisable for the first time by you during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, your option(s) or portions thereof that exceed such limit (according to the order in which they were granted) will be treated as Nonstatutory Stock Options.

 

5.                                       METHOD OF PAYMENT.   You must pay the full amount of the exercise price for the shares you wish to exercise.  You may pay the exercise price in cash or by check, bank draft or money order payable to the Company or in any other manner permitted by your Grant Notice, which may include one or more of the following:

 

(a)                                  Provided that at the time of exercise the Common Stock is publicly traded, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.  This manner of payment is also known as a “broker-assisted exercise”, “same day sale”, or “sell to cover”.

 

(b)                                  Provided that at the time of exercise the Common Stock is publicly traded, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise.  “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, will include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company.  You may not exercise your option by delivery to the Company of Common Stock if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

 

(c)                                   If this option is a Nonstatutory Stock Option, subject to the consent of the Company at the time of exercise, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of your option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price.  You must pay any remaining balance of the aggregate exercise price not satisfied by the “net exercise” in cash or other permitted form of payment.  Shares of

 



 

Common Stock will no longer be outstanding under your option and will not be exercisable thereafter if those shares (i) are used to pay the exercise price pursuant to the “net exercise,” (ii) are delivered to you as a result of such exercise, and (iii) are withheld to satisfy your tax withholding obligations.

 

(d)                                  Pursuant to the following deferred payment alternative:

 

(i)                                     Not less than 100% of the aggregate exercise price, plus accrued interest, will be due four years from date of exercise or, at the Company’s election, upon termination of your Continuous Service.

 

(ii)                                 Interest will be compounded at least annually and will be charged at the minimum rate of interest necessary to avoid (1) the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement and (2) the classification of your option as a liability for financial accounting purposes.

 

(iii)                             In order to elect the deferred payment alternative, you must, as a part of your written notice of exercise, give notice of the election of this payment alternative and, in order to secure the payment of the deferred exercise price to the Company hereunder, if the Company so requests, you must tender to the Company a promissory note and a pledge agreement covering the purchased shares of Common Stock, both in form and substance satisfactory to the Company, or such other or additional documentation as the Company may request.

 

6.                                       WHOLE SHARES.   You may exercise your option only for whole shares of Common Stock.

 

7.                                       SECURITIES LAW COMPLIANCE.   In no event may you exercise your option unless the shares of Common Stock issuable upon exercise are then registered under the Securities Act or, if not registered, the Company has determined that your exercise and the issuance of the shares would be exempt from the registration requirements of the Securities Act.  The exercise of your option also must comply with all other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable).

 

8.                                       TERM.   You may not exercise your option before the Date of Grant or after the expiration of the option’s term.  The term of your option expires, subject to the provisions of Section 5(h) of the Plan, upon the earliest of the following:

 

(a)                                  immediately upon the termination of your Continuous Service for Cause;

 

(b)                                  three months after the termination of your Continuous Service for any reason other than Cause, your Disability or your death (except as otherwise provided in Section 8(d) below); provided, however, that if during any part of such three month period your option is not exercisable solely because of the condition set forth in the section above relating to “Securities Law Compliance,” your option will not expire until the earlier of the Expiration Date

 



 

or until it has been exercisable for an aggregate period of three months after the termination of your Continuous Service; provided further, that if (i) you are a Non-Exempt Employee, (ii) your Continuous Service terminates within six months after the Date of Grant, and (iii) you have vested in a portion of your option at the time of your termination of Continuous Service, your option will not expire until the earlier of (x) the later of (A) the date that is seven months after the Date of Grant, and (B) the date that is three months after the termination of your Continuous Service, and (y) the Expiration Date;

 

(c)                                   12 months after the termination of your Continuous Service due to your Disability (except as otherwise provided in Section 8(d)) below;

 

(d)                                  18 months after your death if you die either during your Continuous Service or within three months after your Continuous Service terminates for any reason other than Cause;

 

(e)                                   the Expiration Date indicated in your Grant Notice; or

 

(f)                                    the day before the 10 th anniversary of the Date of Grant.

 

If your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the Date of Grant and ending on the day three months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability.  The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three months after the date your employment with the Company or an Affiliate terminates.

 

9.                                       EXERCISE.

 

(a)                                  You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by (i) delivering a Notice of Exercise (in a form designated by the Company) or completing such other documents and/or procedures designated by the Company for exercise and (ii) paying the exercise price and any applicable withholding taxes to the Company’s Secretary, stock plan administrator, or such other person as the Company may designate, together with such additional documents as the Company may then require.

 

(b)                                  By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock acquired upon such exercise.

 



 

(c)                                   If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within 15 days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two years after the Date of Grant or within one year after such shares of Common Stock are transferred upon exercise of your option.

 

(d)                                  By exercising your option you agree that you will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any shares of Common Stock or other securities of the Company held by you, (i) for a period of 180 days following the effective date of a registration statement of the Company filed under the Securities Act or such longer period as the underwriters or the Company will request to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rules or regulations (the “ Lock-Up ”); provided, however , that nothing contained in this section will prevent the exercise of a reacquisition or repurchase option, if any, in favor of the Company during the Lock-Up period.  You further agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters that are consistent with the foregoing or that are necessary to give further effect thereto.  In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such periods.  You also agree that any transferee of any shares of Common Stock (or other securities) of the Company held by you will be bound by this Section 9(d).  The underwriters of the Company’s stock are intended third party beneficiaries of this Section 9(d) and will have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

10.                                TRANSFERABILITY .  Except as otherwise provided in this Section 10, your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.

 

(a)                                  Certain Trusts .  Upon receiving written permission from the Board or its duly authorized designee, you may transfer your option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust.  You and the trustee must enter into transfer and other agreements required by the Company.

 

(b)                                  Domestic Relations Orders .  Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your option pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2) that contains the information required by the Company to effectuate the transfer.  You are encouraged to discuss the proposed terms of any division of this option with the Company prior to finalizing the domestic relations order or marital settlement agreement to help ensure the required information is contained within the domestic relations order or marital settlement agreement.  If this option is an Incentive Stock Option, this option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

 



 

(c)                                   Beneficiary Designation .  Upon receiving written permission from the Board or its duly authorized designee, you may, by delivering written notice to the Company, in a form approved by the Company and any broker designated by the Company to handle option exercises, designate a third party who, on your death, will thereafter be entitled to exercise this option and receive the Common Stock or other consideration resulting from such exercise.  In the absence of such a designation, your executor or administrator of your estate will be entitled to exercise this option and receive, on behalf of your estate, the Common Stock or other consideration resulting from such exercise.

 

11.                                RIGHT OF FIRST REFUSAL. Shares of Common Stock that you acquire upon exercise of your option are subject to any right of first refusal that may be described in the Company’s bylaws in effect at such time the Company elects to exercise its right; provided, however, that if there is no right of first refusal described in the Company’s bylaws at such time, the right of first refusal described below will apply.  The Company’s right of first refusal will expire on the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on a national securities exchange or quotation system (the “ Listing Date ”).

 

(a)                                  Prior to the Listing Date, you may not validly Transfer (as defined below) any shares of Common Stock acquired upon exercise of your option, or any interest in such shares, unless such Transfer is made in compliance with the following provisions:

 

(i)                                     Before there can be a valid Transfer of any shares of Common Stock or any interest therein, the record holder of the shares of Common Stock to be transferred (the “ Offered Shares ”) will give written notice (by registered or certified mail) to the Company.  Such notice will specify the identity of the proposed transferee, the cash price offered for the Offered Shares by the proposed transferee (or, if the proposed Transfer is one in which the holder will not receive cash, such as an involuntary transfer, gift, donation or pledge, the holder will state that no purchase price is being proposed), and the other terms and conditions of the proposed Transfer.  The date such notice is mailed will be hereinafter referred to as the “ Notice Date ” and the record holder of the Offered Shares will be hereinafter referred to as the “ Offeror .”  If, from time to time, there is any stock dividend, stock split or other change in the character or amount of any of the outstanding Common Stock which is subject to the provisions of your option, then in such event any and all new, substituted or additional securities to which you are entitled by reason of your ownership of the shares of Common Stock acquired upon exercise of your option will be immediately subject to the Company’s Right of First Refusal (as defined below) with the same force and effect as the shares subject to the Right of First Refusal immediately before such event.

 

(ii)                                 For a period of 30 calendar days after the Notice Date, or such longer period as may be required to avoid the classification of your option as a liability for financial accounting purposes, the Company will have the option to purchase all (but not less than all) of the Offered Shares at the purchase price and on the terms set forth in Section 11(a)(iii) (the Company’s “ Right of First Refusal ”).  In the event that the proposed Transfer is one involving no payment of a purchase price, the purchase price will be deemed to be the Fair Market Value of the Offered Shares as determined in good faith by the Board in its discretion.  The Company may exercise its Right of First Refusal by mailing (by registered or certified mail)

 



 

written notice of exercise of its Right of First Refusal to the Offeror prior to the end of said 30 days (including any extension required to avoid classification of the option as a liability for financial accounting purposes).

 

(iii)                             The price at which the Company may purchase the Offered Shares pursuant to the exercise of its Right of First Refusal will be the cash price offered for the Offered Shares by the proposed transferee (as set forth in the notice required under Section 11(a)(i)), or the Fair Market Value as determined by the Board in the event no purchase price is involved.  To the extent consideration other than cash is offered by the proposed transferee, the Company will not be required to pay any additional amounts to the Offeror other than the cash price offered (or the Fair Market Value, if applicable).  The Company’s notice of exercise of its Right of First Refusal will be accompanied by full payment for the Offered Shares and, upon such payment by the Company, the Company will acquire full right, title and interest to all of the Offered Shares.

 

(iv)                              If, and only if, the option given pursuant to Section 11(a)(ii) is not exercised, the Transfer proposed in the notice given pursuant to Section 11(a)(i) may take place; provided, however , that such Transfer must, in all respects, be exactly as proposed in said notice except that such Transfer may not take place either before the 10 th  calendar day after the expiration of the 30 day option exercise period or after the 90 th  calendar day after the expiration of the 30 day option exercise period, and if such Transfer has not taken place prior to said 90 th  day, such Transfer may not take place without once again complying with this Section 11(a).  The option exercise periods in this Section 11(a)(iv) will be adjusted to include any extension required to avoid the classification of your option as a liability for financial accounting purposes.

 

(b)                                  As used in this Section 11, the term “ Transfer ” means any sale, encumbrance, pledge, gift or other form of disposition or transfer of shares of Common Stock or any legal or equitable interest therein; provided, however , that the term Transfer does not include a transfer of such shares or interests by will or intestacy to your Immediate Family (as defined below).  In such case, the transferee or other recipient will receive and hold the shares of Common Stock so transferred subject to the provisions of this Section, and there will be no further transfer of such shares except in accordance with the terms of this Section 11.  As used herein, the term “ Immediate Family ” will mean your spouse, the lineal descendant or antecedent, father, mother, brother or sister, child, adopted child, grandchild or adopted grandchild of you or your spouse, or the spouse of any child, adopted child, grandchild or adopted grandchild of you or your spouse.

 

(c)                                   None of the shares of Common Stock purchased on exercise of your option will be transferred on the Company’s books nor will the Company recognize any such Transfer of any such shares or any interest therein unless and until all applicable provisions of this Section 11 have been complied with in all respects.  The certificates of stock evidencing shares of Common Stock purchased on exercise of your option will bear an appropriate legend referring to the transfer restrictions imposed by this Section 11.

 

(d)                                  To ensure that the shares subject to the Company’s Right of First Refusal will be available for repurchase by the Company, the Company may require you to deposit the certificates evidencing the shares that you purchase upon exercise of your option with an escrow agent designated by the Company under the terms and conditions of an escrow agreement

 



 

approved by the Company.  If the Company does not require such deposit as a condition of exercise of your option, the Company reserves the right at any time to require you to so deposit the certificates in escrow.  As soon as practicable after the expiration of the Company’s Right of First Refusal, the agent will deliver to you the shares and any other property no longer subject to such restriction.  In the event the shares and any other property held in escrow are subject to the Company’s exercise of its Right of First Refusal, the notices required to be given to you will be given to the escrow agent, and any payment required to be given to you will be given to the escrow agent.  Within 30 days after payment by the Company for the Offered Shares, the escrow agent will deliver the Offered Shares that the Company has repurchased to the Company and will deliver the payment received from the Company to you.

 

12.                                RIGHT OF REPURCHASE.   To the extent provided in the Company’s bylaws in effect at such time the Company elects to exercise its right, the Company will have the right to repurchase all or any part of the shares of Common Stock you acquire pursuant to the exercise of your option.

 

13.                                OPTION NOT A SERVICE CONTRACT.   Your option is not an employment or service contract, and nothing in your option will be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment.  In addition, nothing in your option will obligate the Company or an Affiliate, their respective stockholders, boards of directors, officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

 

14.                                WITHHOLDING OBLIGATIONS.

 

(a)                                  At the time you exercise your option, in whole or in part, and at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “same day sale” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.

 

(b)                                  If this option is a Nonstatutory Stock Option, then upon your request and subject to approval by the Company, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes).  If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option.  Notwithstanding the filing

 



 

of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise.  Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

 

(c)                                   You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied.  Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company will have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein, if applicable, unless such obligations are satisfied.

 

15.                                TAX CONSEQUENCES . You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with the option. Because the Common Stock is not traded on an established securities market, the Fair Market Value is determined by the Board, perhaps in consultation with an independent valuation firm retained by the Company. You acknowledge that there is no guarantee that the Internal Revenue Service will agree with the valuation as determined by the Board, and you will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates in the event that the Internal Revenue Service asserts that the valuation determined by the Board is less than the “fair market value” as subsequently determined by the Internal Revenue Service.

 

16.                                NOTICES.   Any notices provided for in your option or the Plan will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.  The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this option by electronic means or to request your consent to participate in the Plan by electronic means.  By accepting this option, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 

17.                                GOVERNING PLAN DOCUMENT.   Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan.  If there is any conflict between the provisions of your option and those of the Plan, the provisions of the Plan will control.

 




Exhibit 10.2.2

 

SENDGRID, INC.
RESTRICTED STOCK UNIT GRANT NOTICE
(2012 EQUITY INCENTIVE PLAN)

 

SendGrid, Inc. (the “ Company ”), pursuant to its 2012 Equity Incentive Plan (the “ Plan ”), hereby awards to Participant a Restricted Stock Unit Award for the number of the Company’s Common Stock (“ Restricted Stock Units ”) set forth below (the “ Award ”).  The Award is subject to all of the terms and conditions as set forth in this Restricted Stock Unit Grant Notice (this “ Grant Notice ”) and in the Plan and the Restricted Stock Unit Award Agreement (the “ Award Agreement ”), both of which are attached hereto and incorporated herein in their entirety.  Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan or the Award Agreement.  In the event of any conflict between the terms in the Grant Notice or Award Agreement and the Plan, the terms of the Plan shall control.

 

Participant:

Date of Grant:

Vesting Commencement Date:

Number of Restricted Stock Units/Shares:

 

Vesting Schedule:                                              The shares subject to the Award shall vest as follows: [•].

 

Issuance Schedule:                                        Subject to any change on a Capitalization Adjustment, one share of Common Stock will be issued for each Restricted Stock Unit that vests at the time set forth in Section 6 of the Award Agreement.

 

Additional Terms/Acknowledgements:   Participant acknowledges receipt of, and understands and agrees to, this Grant Notice, the Award Agreement and the Plan.  Participant further acknowledges that as of the Date of Grant, this Grant Notice, the Award Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of the Common Stock pursuant to the Award specified above and supersede all prior oral and written agreements on the terms of this Award with the exception, if applicable, of (i) the written employment agreement or offer letter agreement entered into between the Company and Participant specifying the terms that should govern this specific Award, and (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law.

 

By accepting this Award, Participant acknowledges having received and read this Grant Notice, the Award Agreement and the Plan and agrees to all of the terms and conditions set forth in these documents.  Participant consents to receive Plan documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 

SENDGRID, INC.

PARTICIPANT

 

 

By:

 

 

 

 

 

Signature

 

 

Signature

 

 

 

 

 

Title:

 

 

Date:

 

 

 

 

 

 

Date:

 

 

 

 

 

ATTACHMENTS :          Award Agreement and 2012 Equity Incentive Plan

 



 

SENDGRID, INC.
RESTRICTED STOCK UNIT AWARD AGREEMENT
(2012 EQUITY INCENTIVE PLAN)

 

Pursuant to the Restricted Stock Unit Grant Notice (the “ Grant Notice ”) and this Restricted Stock Unit Award Agreement (this “ Agreement ”), SendGrid, Inc. (the “ Company ”) has awarded you (“ Participant ”) a Restricted Stock Unit Award (the “ Award ”) pursuant to Section 6(b) of the Company’s 2012 Equity Incentive Plan (the “ Plan ”) for the number of restricted stock units/shares (“ Restricted Stock Units ”) indicated in the Grant Notice.  Capitalized terms not explicitly defined in this Agreement or the Grant Notice shall have the same meanings given to them in the Plan.  The terms of your Award, in addition to those set forth in the Grant Notice, are as follows.

 

1.                                       GRANT OF THE AWARD.  This Award represents the right to be issued on a future date one (1) share of Common Stock for each Restricted Stock Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 below) as indicated in the Grant Notice.  As of the Date of Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the “ Account ”) the number of Restricted Stock Units/shares of Common Stock subject to the Award.  This Award was granted in consideration of your services to the Company.

 

2.                                       VESTING.  Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.  Upon such termination of your Continuous Service, the Restricted Stock Units/shares of Common Stock credited to the Account that were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such underlying shares of Common Stock.

 

3.                                       NUMBER OF SHARES.  The number of Restricted Stock Units subject to your Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.  Any additional Restricted Stock Units, shares, cash or other property that becomes subject to the Award pursuant to this Section 3, if any, shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Restricted Stock Units and shares covered by your Award.  Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional shares of Common Stock shall be created pursuant to this Section 3.  Any fraction of a share will be rounded down to the nearest whole share.

 

4.                                       SECURITIES LAW COMPLIANCE .  You may not be issued any Common Stock under your Award unless the shares of Common Stock underlying the Restricted Stock Units are either (i) then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act.  Your Award must also comply with other applicable laws and regulations governing the Award, and you shall not receive such Common Stock if the Company determines that such receipt would not be in material compliance with such laws and regulations.

 

5.                                       TRANSFER RESTRICTIONS .  Prior to the time that shares of Common Stock have been delivered to you, you may not transfer, pledge, sell or otherwise dispose of this Award or the shares issuable in respect of your Award, except as expressly provided in this Section 5.  For example, you may not use shares that may be issued in respect of your Restricted Stock Units as security for a loan.  The restrictions on transfer set forth herein will lapse upon delivery to you of shares in respect of your vested Restricted Stock Units.

 

(a)                                  Death .  Your Award is transferable by will and by the laws of descent and distribution.  At your death, vesting of your Award will cease and your executor or administrator of your estate shall be entitled to receive, on behalf of your estate, any Common Stock or other consideration that vested but was not issued before your death.

 

(b)                                  Domestic Relations Orders.  Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your right to receive the distribution of Common Stock or other consideration hereunder, pursuant to a domestic relations order or marital settlement agreement that contains the information required by the Company to effectuate the transfer.  You are encouraged to discuss the proposed terms of

 

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any division of this Award with the Company General Counsel prior to finalizing the domestic relations order or marital settlement agreement to verify that you may make such transfer, and if so, to help ensure the required information is contained within the domestic relations order or marital settlement agreement.

 

6.                                       DATE OF ISSUANCE .

 

(a)                                  The issuance of shares in respect of the Restricted Stock Units is intended to comply with Treasury Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner.  Subject to the satisfaction of the withholding obligations set forth in this Agreement, in the event one or more Restricted Stock Units vests, the Company shall issue to you one (1) share of Common Stock for each Restricted Stock Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 above).  The issuance date determined by this paragraph is referred to as the “ Original Issuance Date ”.

 

(b)                                  If the Original Issuance Date falls on a date that is not a business day, delivery shall instead occur on the next following business day.  In addition, if:

 

(i)                                     the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities, or (2) on a date when you are otherwise permitted to sell shares of Common Stock on an established stock exchange or stock market, and

 

(ii)                                 either (1) Withholding Taxes do not apply, or (2) the Company decides, prior to the Original Issuance Date, (A) not to satisfy the Withholding Taxes by withholding shares of Common Stock from the shares otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to permit you to pay your Withholding Taxes in cash,

 

then the shares that would otherwise be issued to you on the Original Issuance Date will not be delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from selling shares of the Company’s Common Stock in the open public market, but in no event later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the applicable year following the year in which the shares of Common Stock under this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).

 

(c)                                   The form of delivery ( e.g. , a stock certificate or electronic entry evidencing such shares) shall be determined by the Company.

 

7.                                       DIVIDENDS.  You shall receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment.

 

8.                                       RESTRICTIVE LEGENDS.  The shares of Common Stock issued under your Award shall be endorsed with appropriate legends as determined by the Company.

 

9.                                       EXECUTION OF DOCUMENTS.  You hereby acknowledge and agree that the manner selected by the Company by which you indicate your consent to your Grant Notice is also deemed to be your execution of your Grant Notice and of this Agreement.  You further agree that such manner of indicating consent may be relied upon as your signature for establishing your execution of any documents to be executed in the future in connection with your Award.

 

10.                                AWARD NOT A SERVICE CONTRACT .

 

(a)                                  Nothing in this Agreement (including, but not limited to, the vesting of your Award or the issuance of the shares subject to your Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Agreement or the Plan shall: (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an

 

2



 

Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that you may have.

 

(b)                                  The Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “ reorganization ”).  Such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Agreement, including but not limited to, the termination of the right to continue vesting in the Award.  This Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant for the term of this Agreement, for any period, or at all, and shall not interfere in any way with the Company’s right to conduct a reorganization.

 

11.                                WITHHOLDING OBLIGATIONS .

 

(a)                                  On each vesting date, and on or before the time you receive a distribution of the shares underlying your Restricted Stock Units, and at any other time as reasonably requested by the Company in accordance with applicable tax laws, you hereby authorize any required withholding from the Common Stock issuable to you and/or otherwise agree to make adequate provision in cash for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate that arise in connection with your Award (the “ Withholding Taxes ”).  Additionally, the Company or any Affiliate may, in its sole discretion, satisfy all or any portion of the Withholding Taxes obligation relating to your Award by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the Company; (ii) causing you to tender a cash payment; (iii) permitting or requiring you to enter into a “same day sale” commitment, if applicable, with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “ FINRA Dealer ”) whereby you irrevocably elect to sell a portion of the shares to be delivered in connection with your Restricted Stock Units to satisfy the Withholding Taxes and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Withholding Taxes directly to the Company and/or its Affiliates; or (iv) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you in connection with the Award with a Fair Market Value (measured as of the date shares of Common Stock are issued to pursuant to Section 6) equal to the amount of such Withholding Taxes; provided , however , that the number of such shares of Common Stock so withheld will not exceed the amount necessary to satisfy the Company’s required tax withholding obligations using the minimum statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income; and provided , further, that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, if applicable, such share withholding procedure will be subject to the express prior approval of the Company’s Compensation Committee.

 

(b)                                  Unless the tax withholding obligations of the Company and/or any Affiliate are satisfied, the Company shall have no obligation to deliver to you any Common Stock.

 

(c)                                   In the event the Company’s obligation to withhold arises prior to the delivery to you of Common Stock or it is determined after the delivery of Common Stock to you that the amount of the Company’s withholding obligation was greater than the amount withheld by the Company, you agree to indemnify and hold the Company harmless from any failure by the Company to withhold the proper amount.

 

12.                                TAX CONSEQUENCES.  The Company has no duty or obligation to minimize the tax consequences to you of this Award and shall not be liable to you for any adverse tax consequences to you arising in connection with this Award.  You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the tax consequences of this Award and by signing the Grant Notice, you have agreed that you have done so or knowingly and voluntarily declined to do so.  You understand that you (and not the Company) shall be responsible for your own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

 

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13.                                UNSECURED OBLIGATION.  Your Award is unfunded, and as a holder of a vested Award, you shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares or other property pursuant to this Agreement.  You shall not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 6 of this Agreement.  Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company.  Nothing contained in this Agreement, 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 you and the Company or any other person.

 

14.                                NOTICES .  Any notice or request required or permitted hereunder shall be given in writing to each of the other parties hereto and shall be deemed effectively given on the earlier of (i) the date of personal delivery, including delivery by express courier, or delivery via electronic means, or (ii) the date that is five (5) days after deposit in the United States Post Office (whether or not actually received by the addressee), by registered or certified mail with postage and fees prepaid, addressed at the following addresses, or at such other address(es) as a party may designate by ten (10) days’ advance written notice to each of the other parties hereto:

 

COMPANY:

SendGrid, Inc.

 

Attn: Stock Administrator

 

1451 Larimer St., 2 nd  Floor

 

Denver, CO 80202

 

 

PARTICIPANT:

Your address as on file with the Company

 

at the time notice is given

 

15.                                HEADINGS .  The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement or to affect the meaning of this Agreement.

 

16.                                MISCELLANEOUS .

 

(a)                                  The rights and obligations of the Company under your Award shall be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by, the Company’s successors and assigns.

 

(b)                                  You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.

 

(c)                                   You agree that you will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale with respect to any shares of Common Stock or other securities of the Company held by you, for a period of 180 days following the effective date of a registration statement of the Company filed under the Securities Act or such longer period as the underwriters or the Company will request to facilitate compliance with FINRA Rule 2711 or NYSE Member Rule 472 or any successor or similar rules or regulation(the “ Lock-Up Period ”).  You further agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters that are consistent with the foregoing or that are necessary to give further effect thereto.  In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period.  You also agree that any transferee of any shares of Common Stock (or other securities) of the Company held by you will be bound by this Section 16(c).  The underwriters of the Company’s stock are intended third party beneficiaries of this Section 16(c) and will have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

 

(d)                                  You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.

 

(e)                                   This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

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(f)                                    All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

 

17.                                GOVERNING PLAN DOCUMENT .  Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan.  Your Award (and any compensation paid or shares issued under your Award) is subject to recoupment in accordance with The Dodd—Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law.  No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company.

 

18.                                EFFECT ON OTHER EMPLOYEE BENEFIT PLANS.  The value of the Award subject to this Agreement shall not be included as compensation, earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the Company or any Affiliate except as such plan otherwise expressly provides.  The Company expressly reserves its rights to amend, modify, or terminate any or all of the employee benefit plans of the Company or any Affiliate.

 

19.                                CHOICE OF LAW.  The interpretation, performance and enforcement of this Agreement shall be governed by the law of the State of Delaware without regard to that state’s conflicts of laws rules.

 

20.                                SEVERABILITY .  If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid.  Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

 

21.                                OTHER DOCUMENTS .  You acknowledge receipt of and/or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.

 

22.                                AMENDMENT.  This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company.  Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that, except as otherwise expressly provided in the Plan, no such amendment materially adversely affecting your rights hereunder may be made without your written consent.  Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the Award as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change shall be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.

 

23.                                COMPLIANCE WITH SECTION 409A OF THE CODE This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4).  Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of the short-term deferral rule and is otherwise deferred compensation subject to Section 409A, and if you are a “Specified Employee” (within the meaning set forth in Section 409A(a)(2)(B)(i) of the Code) as of the date of your “separation from service” (within the meaning of Treasury Regulation Section 1.409A-1(h) and without regard to any alternative definition thereunder), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six (6) months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six (6) months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of adverse taxation on you in respect of the shares

 

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under Section 409A of the Code.  Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).

 

* * * * *

 

This Restricted Stock Unit Award Agreement shall be deemed to be signed by the Company and the Participant upon the signing by the Participant of the Restricted Stock Unit Grant Notice to which it is attached.

 

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Exhibit 10.5

 

SENDGRID, INC.

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (the “ Agreement ”) is made and entered into as of               , between SendGrid, Inc., a Delaware corporation (the “ Company ”), and             (“ Indemnitee ”).

 

RECITALS

 

A.                                     Highly competent persons have become more reluctant to serve corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

 

B.                                     Although furnishing of insurance to protect persons serving a corporation and its subsidiaries from certain liabilities has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Bylaws and Certificate of Incorporation of the Company require indemnification of the executive officers and directors of the Company and permit indemnification of other officers and certain other persons. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“ DGCL ”). The Bylaws, Certificate of Incorporation, and the DGCL expressly provide that their respective indemnification provisions are not exclusive, and contemplate that contracts may be entered into between the Company and members of the Board, officers, and other persons with respect to indemnification;

 

C.                                     The uncertainties relating to such liability insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

 

D.                                     The Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders, and that the Company should act to assure such persons that there will be increased certainty of protection in the future;

 

E.                                     It is reasonable, prudent, and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

 

F.                                      This Agreement is a supplement to and in furtherance of the Company’s Bylaws and Certificate of Incorporation and any resolutions adopted pursuant to such indemnification, and will not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee;

 

G.                                    Indemnitee does not regard the protection available under the Company’s Bylaws and Certificate of Incorporation and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director 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 or she be so indemnified; and

 

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H.                                    Indemnitee may have certain rights to indemnification and insurance provided by other entities or organizations which Indemnitee and such other entities and organizations intend to be secondary to the primary obligation of the Company to indemnify Indemnitee as provided in this Agreement, with the Company’s acknowledgement and agreement to the foregoing being a material condition to Indemnitee’s willingness to serve on the Board.

 

I.                                         This Agreement supersedes and replaces in its entirety any previous indemnification agreement entered into between the Company and the Indemnitee.

 

NOW, THEREFORE , in consideration of Indemnitee’s agreement to serve as an officer or a director from and after the date first written above, the parties agree as follows:

 

1.                                       Indemnity of Indemnitee . The Company agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by law, as such may be amended from time to time in accordance with the terms of this Agreement. In furtherance of the this indemnification, and without limiting the generality of such indemnification:

 

(a)                                  Proceedings Other Than Proceedings by or in the Right of the Company . Indemnitee will be entitled to the rights of indemnification provided in this Section 1(a) if, by reason of his or her Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee will be indemnified against all Expenses, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by him or her, or on his or her behalf, in connection with such Proceeding or any claim, issue, or matter. This indemnification is provided if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

 

(b)                                  Proceedings by or in the Right of the Company . Indemnitee will be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his or her Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee will be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company. Indemnification will not be provided against such Expenses if made in respect of any claim, issue, or matter in such Proceeding as to which Indemnitee will have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware will determine that such indemnification may be made.

 

(c)                                   Indemnification for Expenses of a Party Who is Wholly or Partly Successful . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he or she will be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection with each successfully resolved claim, issue, or matter. For purposes of this Section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, will be deemed to be a successful result as to such claim, issue, or matter.

 

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2.                                       Additional Indemnity . In addition to, and without regard to any limitations on, the indemnification provided for in Section 1, the Company agrees to indemnify and hold Indemnitee harmless against all Expenses, judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf if, by reason of his or her Corporate Status, he or she is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, any and all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that will exist on the Company’s obligations pursuant to this Agreement will be that the Company will not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, in Sections 6 and 7) to be unlawful.

 

3.                                       Contribution .

 

(a)                                  Whether or not the indemnification provided in Sections 1 and 2 is available, in respect of any threatened, pending, or completed action, suit, or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit, or proceeding), the Company will pay, in the first instance, the entire amount of any judgment or settlement of such action, suit, or proceeding without requiring Indemnitee to contribute to such payment, and the Company  waives and relinquishes any right of contribution it may have against Indemnitee. The Company will not enter into any settlement of any action, suit, or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit, or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee. The Company will not settle any action or claim in a manner that would impose any penalty or admission of guilt or liability on Indemnitee without Indemnitee’s written consent.

 

(b)                                  Without diminishing or impairing the obligations of the Company in the preceding subparagraph, if Indemnitee elects or is required to pay all or any portion of any judgment or settlement in any threatened, pending, or completed action, suit, or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit, or proceeding), the Company will contribute to the amount of Expenses, judgments, fines, and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors, or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit, or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such action, suit or proceeding arose. To the extent necessary to conform to law, the proportion determined on the basis of relative benefit may be further adjusted by reference to the relative fault of the Company and all officers, directors, or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such expenses, judgments, fines, or settlement amounts, as well as any other equitable considerations which the applicable law may require to be considered. The relative fault of the Company and all officers, directors, or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, will be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, and the degree to which their respective conduct is active or passive.

 

(c)                                   The Company agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by the Company’s officers, directors, or employees, other than Indemnitee, who may be jointly liable with Indemnitee.

 

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(d)                                  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, will contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement or for 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 to reflect: (i) the relative benefits received by the Company and Indemnitee as a result of the events and  transactions giving cause to such Proceeding; and (ii) the relative fault of the Company (and its directors, officers, employees, and agents) and Indemnitee in connection with such events and transactions.

 

4.                                       Indemnification for Expenses of a Witness . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in any Proceeding to which Indemnitee is not a party, he or she will be indemnified against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.

 

5.                                       Advancement of Expenses . Notwithstanding any other provision of this Agreement, the Company will advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within 30 days after the receipt by the Company of a statement from Indemnitee requesting such advance or advances, whether prior to or after final disposition of such Proceeding. Such statement will reasonably evidence the Expenses incurred by Indemnitee and will include or be preceded or accompanied by a written undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it is ultimately determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 will be unsecured and interest free.

 

6.                                       Procedures and Presumptions for Determination of Entitlement to Indemnification . The parties agree that the following procedures and presumptions will apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

 

(a)                                  To obtain indemnification under this Agreement, Indemnitee will submit to the Company a written request with such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company will, promptly on receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. Notwithstanding the foregoing, any failure of Indemnitee to provide such request to the Company, or to provide such a request in a timely fashion, will not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

 

(b)                                  On written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a), Indemnitee’s entitlement to indemnification will be determined in the specific case:

 

(1) by one of the following four methods, which will be at the election of the Board, unless a Change in Control has occurred:

 

(i) by a majority vote of the Disinterested Directors, even though less than a quorum;

 

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(ii) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum;

 

(iii) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which will be delivered to the Indemnitee; or

 

(iv) if so directed by the Board, by the stockholders of the Company; or

 

(2) if a Change in Control has occurred, by Independent Counsel in a written opinion to the Board, a copy of which will be delivered to the Indemnitee.

 

(c)                                   If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b), the Independent Counsel will be selected as provided in this Section 6(c). The Independent Counsel will be selected by the Board and notify the Indemnitee by written notice. Within 10 days after such notice has been given, Indemnitee may deliver the Company a written objection to such selection. But, that objection may only be asserted on the ground that the Independent Counsel does not meet the requirements of “ Independent Counsel ” as defined in Section 13, and the objection will include with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected will act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel 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 no Independent Counsel will have been selected and not objected to within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a), either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection made by the Indemnitee to the Company’s selection of Independent Counsel or for the appointment of a person selected by the court or by such other person as the court designates to serve as Independent Counsel. The person with respect to whom all objections are so resolved or the person so appointed will act as Independent Counsel under Section 6(b). The Company will pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b), and the Company will pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed. In no event will Indemnitee be liable for fees and expenses incurred by such Independent Counsel.

 

(d)                                  In making a determination with respect to entitlement to indemnification under this Agreement, the person or persons or entity making such determination will presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption will have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including by its Board or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its Board or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, will be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

(e)                                   Indemnitee will 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

 

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reasonable care by the Enterprise. In addition, the knowledge and actions, or failure to act, of any director, officer, agent, or employee of the Enterprise will not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it will in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company. Anyone seeking to overcome this presumption will have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

(f)                                    If the person, persons, or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification has not have made a determination within 60 days after receipt by the Company of the request, the requisite determination of entitlement to indemnification will be deemed to have been made, and Indemnitee will be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. Such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person, persons, or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation or information relating thereto. The provisions of this Section 6(f) will not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) and if (A) within 15 days after receipt by the Company of the request for such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting to be held within 75 days after such receipt, and such determination is made at that annual meeting, or (B) a special meeting of stockholders is called within 15 days after such receipt for the purpose of making such determination, such meeting is held for such purpose within 60 days after having been so called and such determination is made at that annual meeting.

 

(g)                                  Indemnitee will cooperate with the person, persons. or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing such person, persons, or entity on 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 Independent Counsel, member of the Board, or stockholder of the Company will act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons, or entity making such determination will be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification), and the Company indemnifies and agrees to hold Indemnitee harmless therefrom.

 

(h)                                  The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption, and uncertainty. In the event that any action, claim, or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it will be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit, or proceeding. Anyone seeking to overcome this presumption will have the burden of proof and the burden of persuasion by clear and convincing evidence.

 

(i)                                     The termination of any Proceeding or of any claim, issue, or matter in any Proceeding, by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in this Agreement) of itself adversely affect

 

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the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

 

7.                                       Remedies of Indemnitee .

 

(a)                                  In the event that (i) a determination is made pursuant to Section 6 that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within 10 days after receipt by the Company of a written request for such payment, or (v) payment of indemnification is not made within 10 days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6, Indemnitee will be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification. Indemnitee will commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company will not oppose Indemnitee’s right to seek any such adjudication.

 

(b)                                  In the event that a determination has been made pursuant to Section 6(b) that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 will be conducted in all respects as a de novo trial on the merits, and Indemnitee will not be prejudiced by reason of the adverse determination under Section 6(b).

 

(c)                                   If a determination has been made pursuant to Section 6(b) that Indemnitee is entitled to indemnification, the Company will be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent (i) a misstatement by Indemnitee of a material fact or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(d)                                  In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his or her rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company will pay on his or her behalf, in advance, any and all expenses (of the types described in the definition of Expenses) actually and reasonably incurred by him or her in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses, or insurance recovery.  The Company authorizes the Indemnitee from time to time to retain counsel of Indemnitee’s choice, at the expense of the Company to the extent provided hereunder or under applicable law, to advise and represent Indemnitee in connection with any such judicial adjudication or recovery, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any director, officer, stockholder, or other person affiliated with the Company.

 

(e)                                   The Company will be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding, and enforceable, and will stipulate in any such court that the Company is bound by all the provisions of this Agreement. The Company will indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, will (within 10 days after receipt by the Company of a written request

 

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therefore) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses, or insurance recovery, as the case may be.

 

(f)                                    Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement will be required to be made prior to the final disposition of the Proceeding.

 

8.                                       Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation .

 

(a)                                  The rights of indemnification and to receive advancement of Expenses as provided by this Agreement will not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders, a resolution of Board, or otherwise. No amendment, alteration, or repeal of this Agreement or of any provision of this Agreement will limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration, or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Certificate of Incorporation, Bylaws, and this Agreement, it is the intent of the parties of this Agreement that Indemnitee will enjoy all greater benefits so afforded by such change. No right or remedy in this Agreement conferred is intended to be exclusive of any other right or remedy, and every other right and remedy will be cumulative and in addition to every other right and remedy given under this Agreement or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy under this Agreement, or otherwise, will not prevent the concurrent assertion or employment of any other right or remedy.

 

(b)                                  To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents, or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise that such person serves at the request of the Company, the Company will procure such insurance policy or policies under which the Indemnitee will be covered in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent, or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms of this Agreement, the Company has director and officer liability insurance in effect, the Company will give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures in the respective policies. The Company will thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

(c)                                   The Company acknowledges that Indemnitee has or may have in the future certain rights to indemnification, advancement of expenses, or insurance provided by other entities or organizations (collectively, the “ Secondary Indemnitors ”). The Company agrees that (i) it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Secondary Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) it will be required to advance the full amount of expenses incurred by Indemnitee and will be liable for the full amount of all Expenses, judgments, penalties, fines, and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement, the Company’s Certificate of Incorporation or Bylaws (or any other agreement

 

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between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Secondary Indemnitors, and (iii) it irrevocably waives, relinquishes, and releases the Secondary Indemnitors from any and all claims against the Secondary Indemnitors for contribution, subrogation, or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Secondary Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company will affect the foregoing and the Secondary Indemnitors will have a right of contribution and be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Secondary Indemnitors are express third party beneficiaries of the terms of this Section 8(c).

 

(d)                                  Except as provided in Section 8(c), in the event of any payment under this Agreement, the Company will be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee (other than against the Secondary Indemnitors), who will execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

(e)                                   Except as provided in Section 8(c), the Company will not be liable under this Agreement to make any payment of amounts otherwise indemnifiable under this Agreement if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.

 

(f)                                    Except as provided in Section 8(c), the Company’s obligation to indemnify or advance Expenses under this Agreement to Indemnitee who is or was serving at the request of the Company as a director, officer, employee, or agent of any other corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise will be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise.

 

9.                                       Exceptions to Right of Indemnification . Notwithstanding any provision in this Agreement, the Company will not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

 

(a)                                  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, provided, that the foregoing will not affect the rights of Indemnitee or the Secondary Indemnitors in Section 8(c);

 

(b)                                  for 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;

 

(c)                                   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 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;

 

(d)                                  with respect to remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law (and, in this respect,

 

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both the Company and Indemnitee have been advised that the SEC believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication, as indicated in the last paragraph of this Section 9); or

 

(e)                                   in connection with any claim for reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act, or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), if Indemnitee is held liable therefor (including pursuant to any settlement).

 

For purposes of this Section 9, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification is sought or a separate proceeding or action to establish rights and liabilities under this Agreement.

 

Any provision herein to the contrary notwithstanding, the Company will not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act, or in any registration statement filed with the SEC under the Securities Act. Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K promulgated under the Securities Act currently generally requires the Company to undertake, in connection with any registration statement filed under the Securities Act, to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Securities Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. Indemnitee specifically agrees that any such undertaking will supersede the provisions of this Agreement and to be bound by any such undertaking.

 

10.                                Duration of Agreement . All agreements and obligations of the Company contained herein will continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and will continue thereafter so long as Indemnitee will be subject to any Proceeding (or any proceeding commenced under Section 7) by reason of his or her Corporate Status, whether or not he or she is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement will be binding on and inure to the benefit of and be enforceable by the parties of this Agreement and their respective successors (including any direct or indirect successor by purchase, merger, consolidation, or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors, and personal and legal representatives.

 

11.                                Security . To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations under this Agreement through an irrevocable bank line of credit, funded trust, or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

 

12.                                Enforcement .

 

(a)                                  The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it to induce Indemnitee to serve as an officer or

 

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director of the Company, and the Company acknowledges that Indemnitee is relying on this Agreement in serving as an officer or director of the Company.

 

(b)                                  Other than as provided in this Agreement, this Agreement constitutes the entire agreement between the parties with respect to this subject matter and supersedes all prior agreements and understandings, oral, written and implied, between the parties with respect to this subject matter, including without limitation any previous indemnification agreement entered into between the Company and the Indemnitee.

 

13.                                Definitions . For purposes of this Agreement:

 

(a)                                  Beneficial Owner ” has the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner will 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.

 

(b)                                  Board ” means the Board of Directors of the Company.

 

(c)                                   Change in Control ” means 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 is or becomes the Beneficial Owner (as defined above), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company’s then outstanding securities;

 

(ii)                                 Change in Board.   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, 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 clause (i), (iii) or (iv) of this definition of Change in Control) whose election by the Board 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 a least a majority of the members of the Board;

 

(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 30% 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 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, whether or not the Company is then subject to such reporting requirement.

 

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(d)            “ Corporate Status ” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

 

(e)            “ Disinterested Director ” means a non-executive director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

 

(f)             “ Enterprise ” means the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

 

(g)            “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(h)            “ Expenses ” includes all documented and reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses also will include Expenses incurred in connection with any appeal resulting from any Proceeding and any federal, state, local, or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including without limitation the premium, security for, and other costs relating to any cost bond, supersede as bond, or other appeal bond or its equivalent. Expenses will not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

(i)             “ 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 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 Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification under this Agreement. Notwithstanding the foregoing, the term “Independent Counsel” will 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 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.

 

(j)             “ Person ” for purposes of the definition of Beneficial Owner and Change in Control set forth above, will have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person will 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.

 

(k)            “ Proceeding ” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was an officer or director

 

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of the Company, by reason of any action taken by him or her or of any inaction on his or her part while acting as an officer or director of the Company, or by reason of the fact that he or she is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other Enterprise; in each case whether or not he or she is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his or her rights under this Agreement.

 

(l)             “ Sarbanes-Oxley Act ” will mean the Sarbanes-Oxley Act of 2002, as amended.

 

(m)           “ SEC ” will mean the Securities and Exchange Commission.

 

(n)            “ Securities Act ” will mean the Securities Act of 1933, as amended.

 

14.           Severability . The invalidity or unenforceability of any provision hereof will in no way affect the validity or enforceability of any other provision. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision will be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

 

15.           Modification and Waiver . No supplement, modification, termination or amendment of this Agreement will be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement will be deemed or will constitute a waiver of any other provisions hereof (whether or not similar) nor will such waiver constitute a continuing waiver.

 

16.           Notice By Indemnitee . Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered under this Agreement. The failure to so notify the Company will not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

 

17.           Notices . All notices and other communications given or made pursuant to this Agreement will be in writing and will be deemed effectively given:  (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) 5 days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications will be sent:

 

(a)

 

To Indemnitee at the address on the books and records of the Company.

 

 

 

(b)

 

To the Company at:

 

 

 

 

 

SendGrid, Inc.

 

 

1801 California Street

 

 

Suite 500

 

 

Denver, CO 80202

 

 

Attention: General Counsel

 

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or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

 

18.           Counterparts . This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature, electronic mail  (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other transmission method and in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument and be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

19.           Headings . The headings of the paragraphs of this Agreement are inserted for convenience only and will not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

20.           Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties will be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement will 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, (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 National Registered Agents, Inc. as its agent in the State of Delaware 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.

 

[SIGNATURE PAGE TO FOLLOW]

 

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The parties have executed this Agreement on and as of the day and year first above written.

 

 

SENDGRID, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

INDEMNITEE

 

 

 

 

 

 

 

Name:

 

 




Exhibit 10.6

 

SENDGRID, INC.

 

EXECUTIVE SEVERANCE BENEFIT PLAN

 

Section 1.                                           INTRODUCTION.

 

The SendGrid, Inc. Executive Severance Benefit Plan (the “ Plan ”) is hereby established effective as of the Effective Date.  The purpose of the Plan is to provide for the payment of severance benefits to selected employees of SendGrid, Inc. (the “ Company ”) that constitute a select group of management or highly compensated employees in the event that such employees become subject to involuntary employment terminations.  This Plan document also is the Summary Plan Description for the Plan.

 

For purposes of the Plan, the following terms are defined as follows:

 

(a)                                  2017 Plan ” means the Company’s 2017 Equity Incentive Plan, as amended.

 

(b)                                  Affiliate ” means any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act of 1933, as amended.  The Plan Administrator shall have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

 

(c)                                   Annual Base Salary ” means the annualized base pay amount (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation) as in effect immediately prior to a Covered Termination.

 

(d)                                  Board ” means the Board of Directors of the Company; provided, however, that if the Board has delegated authority to administer the Plan to the Compensation Committee of the Board, then “ Board ” shall also mean the Compensation Committee.

 

(e)                                   Cause ” shall have the meaning ascribed to such term in any Individual Service Arrangement defining such term and, in the absence of such agreement, such term means, with respect to an Eligible Employee, the occurrence of any of the following events: (i) such Eligible Employee’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Eligible Employee’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Eligible Employee’s intentional, material violation of any contract or agreement between the Eligible Employee and the Company or of any statutory duty owed to the Company; (iv) such Eligible Employee’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Eligible Employee’s gross misconduct.

 

(f)                                    Change in Control ” shall have the meaning provided to such term in the 2017 Plan.

 

(g)                                  “Closing” means the initial closing of the Change in Control as defined in the definitive agreement executed in connection with the Change in Control.  In the case of a series of transactions constituting a Change in Control, “Closing” means the first closing that satisfies the threshold of the definition for a Change in Control.

 

(h)                                  COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1985.

 

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(i)                                     Code ” means the Internal Revenue Code of 1986, as amended.

 

(j)                                     Company ” means SendGrid, Inc. or, following a Change in Control, the surviving Entity resulting from such event.

 

(k)                                  Covered Period ” means the period commencing on the Closing of a Change in Control and ending twelve (12) months following the Closing of a Change in Control.

 

(l)                                     Covered Termination ” means an employee’s termination from all positions he or she then holds with the Company, which termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h) without regard to any alternative definition thereunder), and (i) which is due to a termination by the Company without Cause and other than as a result of death or disability or (ii) due to a termination by the Eligible Employee with Good Reason.

 

(m)                              “Director” means a member of the Board.

 

(n)                                  Effective Date ” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Company’s common stock, pursuant to which the Company’s common stock is priced for the initial public offering.

 

(o)                                  Eligible Employee ” means an employee of the Company that meets all the requirements to be eligible to receive Plan benefits as set forth in Section 2, including timely provision of an effective Release (as such term is defined in Section 2(b)).

 

(p)                                  “Employment Agreement” means any individual employment offer letter, contract or agreement that an Eligible Employee has with the Company.

 

(q)                                  “Entity” means a corporation, partnership, limited liability company or other entity.

 

(r)                                   Equity Award ” means each compensatory equity award granted to an Eligible Employee, whether under the 2017 Plan, or otherwise.

 

(s)                                    Good Reason ” shall have the meaning ascribed to such term in any Individual Service Arrangement defining such term, if any, and shall also mean the occurrence of any of the following events without the Eligible Employee’s written consent; provided however, that any resignation by the Eligible Employee due to any of the following events shall be deemed for Good Reason only if (i) the employee gives the Company written notice of the intent to terminate for Good Reason within thirty (30) days after the occurrence of any of the events and that the employee asserts that grounds for a resignation for Good Reason exist as a result which is not corrected within thirty (30) days after the Company (or any successor thereto) receives such written notice from the employee; and (ii) the employee resigns within one hundred twenty (120) days of the first occurrence of the applicable event: (A) a material diminution of the Eligible Employee’s duties, position or responsibilities, provided, however, a mere change in title or reporting relationship following a Change in Control will not by itself constitute “Good Reason” for the Eligible Employee’s resignation, and further provided, however, that the acquisition of the Company and subsequent conversion of the Company as a whole to a division or unit of the acquiring entity will not by itself result in a “diminution;” (B) a reduction by the Company in the Eligible Employee’s base salary as in effect immediately prior to such reduction by more than ten percent (10%) (unless such reduction is made pursuant to an across the board reduction applicable to senior executives of the Company); or (C) the material relocation of the Eligible Employee’s assigned

 

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office location resulting in an increase in the Eligible Employee’s one-way commuting distance from the Eligible Employee’s then current principal place of employment by more than thirty (30) miles.

 

(t)                                     “Individual Severance Arrangement” means any Employment Agreement providing for severance or change in control benefits to an Eligible Employee or any other severance arrangement between the Eligible Employee and the Company other than the Plan, in each case that remains in effect through the date of a Covered Termination.

 

(u)                                  Plan Administrator ” means the Board prior to the Closing and the Representative upon and following the Closing.

 

(v)                                  Qualified Plan ” means a plan sponsored by the Company or an Affiliate that is intended to be qualified under Section 401(a) of the Internal Revenue Code.

 

(w)                                “Representative” means one or more members of the Board or other persons or Entities designated by the Board prior to or in connection with a Change in Control that will have authority to administer and interpret the Plan upon and following the Closing as provided in Section 8(a).

 

(x)                                  Severance Period ” means, either (i) six (6) months (or in the Case of the Company’s Chief Executive Officer, twelve (12) months) following a Covered Termination that is outside of the Covered Period or (ii) twelve (12) months (or in the case of the Company’s Chief Executive Officer, eighteen (18) months) following a Covered Termination during the Covered Period.

 

(y)                                  Target Bonus ” means, with respect to an Eligible Employee, the Eligible Employee’s target annual bonus under the Company’s annual cash bonus plan or policy, or if the Company does not maintain such a plan or policy, the target annual bonus under the terms of the Eligible Employee’s Employment Agreement or other agreement with the Company, in each case applicable to such Eligible Employee for the calendar year in which the Covered Termination of such Eligible Employee occurs.  If no cash bonus plan or policy or such an agreement is in effect for the employee for the year in which the Covered Termination occurs, the Target Bonus for such employee will be $0.

 

(z)                                   Termination Date ” means the effective date of an Eligible Employee’s Covered Termination.

 

Section 2.                                           ELIGIBILITY FOR BENEFITS.

 

(a)                                  Eligible Employee .  An employee of the Company is eligible to participate in the Plan if (i) the employee is a Senior Vice President or higher level officer; (ii) the Board has designated such employee as eligible to participate in the Plan and notified such employee in writing of the employee’s eligibility to participate; (iii) such employee’s employment with the Company terminates due to a Covered Termination; and (iv) such employee meets the other Plan eligibility requirements set forth in this Section 2 and the Plan.  The determination of whether an employee is an Eligible Employee shall be made by the Plan Administrator, in its sole discretion, and such determination shall be binding and conclusive on all persons.

 

(b)                                  Release Requirement.   In order to be eligible to receive benefits under the Plan, the employee also must execute a separation agreement and release containing, among other provisions, a general release of claims in favor of the Company and related persons and entities, confidentiality, return of property and non-disparagement, in a form and manner determined by the Company(the “ Release ”), and the Release must become effective within the applicable time period set forth therein, but in no event more than sixty (60) days following the Termination Date of the applicable Covered Termination.  The

 

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Release may be incorporated into a termination agreement or other agreement with the Eligible Employee.

 

(c)                                   No Duplicative Benefits Provided Under Plan.   This Plan does not supersede the terms of any Individual Severance Arrangement or Equity Award in effect as of the Effective Date.  Unless otherwise determined by the Plan Administrator in its discretion, if an employee is an Eligible Employee and otherwise eligible to receive severance benefits under this Plan that are of the same category and would otherwise duplicate the benefits available under the terms of any Individual Severance Arrangement (“ Duplicative Benefits ”) such Eligible Employee will receive severance benefits under the Individual Severance Arrangement in lieu of any Plan benefits to the extent such benefits are Duplicative Benefits, and severance benefits will be provided under the Plan only to the extent, if any, that Plan benefits are not Duplicative Benefits.

 

(d)                                  Exceptions to Benefit Entitlement.   An employee who otherwise is an Eligible Employee will not receive benefits under the Plan in the following circumstances, as determined by the Plan Administrator in its sole discretion:

 

(1)                                  The employee is terminated by the Company for any reason (including due to the employee’s death or disability) or voluntarily terminates employment with the Company in any manner, and in either case, such termination does not constitute a Covered Termination.  Voluntary terminations include, but are not limited to, resignation, retirement or failure to return from a leave of absence on the scheduled date.

 

(2)                                  The employee voluntarily terminates employment with the Company in order to accept employment with another entity that is wholly or partly owned (directly or indirectly) by the Company or an Affiliate.

 

(3)                                  The employee is offered an identical or substantially equivalent or comparable position with the Company or an Affiliate.  For purposes of the foregoing, a “substantially equivalent or comparable position” is one that provides the employee substantially the same level of responsibility and compensation.

 

(4)                                  The employee is offered immediate reemployment by a successor to the Company or an Affiliate or by a purchaser of the Company’s assets, as the case may be, following a Change in Control  in a “substantially equivalent or comparable position” as defined in Section 2(d)(3).  For purposes of the foregoing, “immediate reemployment” means that the employee’s employment with the successor to the Company or an Affiliate or the purchaser of its assets, as the case may be, results in uninterrupted employment such that the employee does not incur a lapse in pay or benefits as a result of the change in ownership of the Company or the sale of its assets.  For the avoidance of doubt, an employee who becomes immediately reemployed as described in this Section 2(d)(4) by a successor to the Company or an Affiliate or by a purchaser of the Company’s assets, as the case may be, following a Change in Control shall continue to be an Eligible Employee following the date of such reemployment.

 

(5)                                  The employee is rehired by the Company or an Affiliate and recommences employment prior to the date benefits under the Plan are scheduled to commence.

 

Section 3.                                           AMOUNT OF BENEFIT.

 

(a)                                  Severance Benefit.  Benefits under the Plan shall be provided to an Eligible Employee as follows, subject to any delay in payment that may be required by Section 5:

 

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(1)                                  Base Compensation.   The Eligible Employee will be entitled to receive an amount equal to the Eligible Employee’s Annual Base Salary (disregarding for this purpose, any reduction of the Eligible Employee’s Base Salary that results in a termination for Good Reason) for the Severance Period payable in substantially equal installments in accordance with the Company’s regular payroll practice over such period, commencing within 60 days after the Termination Date; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments shall begin to be paid in the second calendar year and the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Termination Date .

 

(2)                                  Pro-Rated Target Bonus . An amount equal to the Eligible Employee’s Target Bonus, pro-rated based on the number of days actually served in the calendar year during which the Termination Date occurs will be payable to the Eligible Employee within 60 days after the Termination Date; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payment shall be made in the second calendar year.

 

(3)                                  Accelerated Vesting of Stock Awards.

 

(1)                                  If, in connection with a Change in Control, (x) an Equity Award is assumed or continued by the successor or acquiror entity in such Change in Control or such Equity Award is substituted for a similar award of the successor or acquiror entity, and (y) an Eligible Employee experiences a Covered Termination during the Covered Period, then effective as of the effective date of the Release, to the extent not previously vested: (A) the vesting and exercisability of all outstanding stock options to purchase the Company’s common stock that are subject to time-based vesting restrictions that are held by the Eligible Employee on such date shall be accelerated in full, (B) any reacquisition or repurchase rights held by the Company in respect of common stock issued pursuant to any other stock award granted to the Eligible Employee by the Company that lapse based on the Eligible Employee’s continued performance of services shall lapse in full, and (C) the vesting of any other Equity Awards that are subject to time-based vesting restrictions granted to the Eligible Employee by the Company, and any issuance of shares triggered by the vesting of such stock awards, shall be accelerated in full; provided, however, that the foregoing provisions shall not apply to stock awards issued under or held in any Qualified Plan.  For purposes any Equity Awards that are subject to performance-based vesting shall only vest, if at all, in accordance with the terms of the applicable Plan and award agreement with respect thereto.

 

(2)                                  If, in connection with a Change in Control, an Equity Award that is subject to time-based vesting shall terminate and will not be so assumed or continued by the successor or acquiror entity in such Change in Control or substituted for a similar award of the successor or acquiror entity, then, each Eligible Employee will receive the benefit described in Section 3(a)(3)(1), above, effective as of immediately prior to the Closing with respect to each such Equity Award.

 

(3)                                  In order to give effect to the intent of the foregoing provision, notwithstanding anything to the contrary set forth in the Eligible Employee’s stock option and other stock award agreements or the applicable equity incentive plan under which such Equity Award was granted that provides that any then unvested portion of the stock option or other stock award will immediately expire upon the Eligible Employee’s termination of service, the stock options and stock awards referred to in this Section 3(a)(3) shall remain outstanding after an Eligible Employee’s Covered Termination to the extent necessary to give effect to the potential vesting acceleration in this Section 3(a)(3) (e.g., if an Eligible Employee’s Covered Termination occurs prior to the Closing), provided that no further vesting of any such Equity Awards shall occur during such period.

 

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(4)                                  Notwithstanding anything to the contrary set forth herein, the Eligible Employee’s Equity Awards shall remain subject to the terms of the applicable Company plan and award documents under which such stock option and other stock award was granted, including any provision for earlier termination of such stock awards upon a “corporate transaction,” “change in control” or similar event under the terms of the applicable Company equity incentive plan or substantially equivalent provisions applicable to such stock option or stock award.  In the event that the terms and conditions of an Individual Severance Arrangement or Equity Awards would provide more favorable benefits with respect to the accelerated vesting of Equity Awards in connection with a Change in Control and/or a Covered Termination than the terms and conditions of this Plan, then the Eligible Employee shall remain eligible to receive such benefits under such Individual Severance Arrangement or Equity Award, and not the applicable terms of this Plan.

 

(4)                                  Payment of Continued Group Health Plan Benefits.

 

(i)                                     Provided that the Eligible Employee is a participant in the Company’s group health plans as of immediately prior to the Covered Termination, if the Eligible Employee timely elects continued group health plan continuation coverage under COBRA with respect to such group health plans, the Company shall directly pay to the Company’s group health care provider an amount equal to the COBRA premiums, less the amount the Eligible Employee would have had to pay to receive group health coverage for the Eligible Employee and the Eligible Employee’s covered dependents based on the cost sharing levels in effect on the Eligible Employee’s Termination Date (which for the avoidance of doubt the Eligible Employee shall be required to pay directly to the Company’s group health care provider together with any administrative or additional costs due with respect to such COBRA coverage), for the Eligible Employee and the Eligible Employee’s covered dependents under such plans during the period commencing on the Termination Date and ending upon the last day of the Severance Period following the Covered Termination (the “ COBRA Payment Period ”).  Upon the conclusion of such period of insurance premium payments made by the Company, the Eligible Employee will be responsible for the entire payment of premiums (or payment for the cost of coverage) required under COBRA for the duration of the Eligible Employee’s eligible COBRA coverage period.  For purposes of this Section, (A) references to COBRA shall be deemed to refer also to analogous provisions of state law and (B) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by the Eligible Employee under an Internal Revenue Code Section 125 health care reimbursement plan, which amounts, if any, are the Eligible Employee’s sole responsibility.

 

(ii)                                 Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that it cannot provide the COBRA premium benefits without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then in lieu of paying COBRA premiums on the Eligible Employee’s behalf, the Company will instead pay the Eligible Employee on the last day of each remaining month of the COBRA Payment Period a fully taxable cash payment equal to the COBRA premium for that month, subject to applicable tax withholding (such amount, the “ Special Severance Payment ”), such Special Severance Payment to be made without regard to the Eligible Employee’s election of COBRA coverage or payment of COBRA premiums and without regard to the Eligible Employee’s continued eligibility for COBRA coverage during the COBRA Payment Period.  Such Special Severance Payment shall end upon expiration of the COBRA Payment Period.

 

(b)                                  Additional Benefits.  Notwithstanding the foregoing, the Company may, in its sole discretion, provide benefits to employees who are not Eligible Employees (“ Non-Eligible Employees ”) chosen by the Board, in its sole discretion, and the provision of any such benefits to a Non-Eligible Employee shall in no way obligate the Company to provide such benefits to any other Non-Eligible Employee, even if similarly situated.  If benefits under the Plan are provided to a Non-Eligible

 

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Employee, references in the Plan to “Eligible Employee” (and similar references) shall be deemed to refer to such Non-Eligible Employee.

 

(c)                                   Certain Reductions.  The Company, in its sole discretion, shall have the authority to reduce an Eligible Employee’s severance benefits, in whole or in part, by pay and benefits provided during a period following written notice of a plant closing or mass layoff, pay and benefits in lieu of such notice, or other similar benefits payable to the Eligible Employee by the Company or an Affiliate that become payable in connection with the Eligible Employee’s termination of employment pursuant to (i) any applicable legal requirement, including, without limitation, the Worker Adjustment and Retraining Notification Act or any other similar state law, (ii) any Company policy or practice providing for the Eligible Employee to remain on the payroll for a limited period of time after being given notice of the termination of the Eligible Employee’s employment, or (iii) any other severance benefit agreement or arrangement between the Company and the Eligible Employee, and the Plan Administrator shall so construe and implement the terms of the Plan, in each case to the extent compliant with Section 409A of the Code.  Any such reductions that the Company determines to make pursuant to this Section 3(c) shall be made such that any benefit under the Plan shall be reduced solely by any similar type of benefit under such legal requirement, agreement, policy or practice ( i.e ., any cash severance benefits under the Plan shall be reduced solely by any cash payments or severance benefits under such legal requirement, agreement, policy or practice, and any continued insurance benefits under the Plan shall be reduced solely by any continued insurance benefits under such legal requirement, agreement, policy or practice).  The Company’s decision to apply such reductions to the severance benefits of one Eligible Employee and the amount of such reductions shall in no way obligate the Company to apply the same reductions in the same amounts to the severance benefits of any other Eligible Employee, even if similarly situated.  In the Company’s sole discretion, such reductions may be applied on a retroactive basis, with severance benefits previously paid being re-characterized as payments pursuant to the Company’s statutory obligation.

 

(d)                                  Parachute Payments.  The following provisions shall not supersede any provisions to the contrary provided under any Individual Severance Arrangement, if applicable:

 

(1)                                  Any provision of the Plan to the contrary notwithstanding, if any payment or benefit an Eligible Employee would receive from the Company pursuant to the Plan or otherwise (“ Payment ”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then such Payment will be equal to the Reduced Amount (defined below).  The “ Reduced Amount ” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Eligible Employee’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the manner that results in the greatest economic benefit for the Eligible Employee.  If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata.

 

(2)                                  In the event it is subsequently determined by the Internal Revenue Service that some portion of the Reduced Amount as determined pursuant to clause (x) in the preceding paragraph is subject to the Excise Tax, the Eligible Employee agrees to promptly return to the Company a sufficient amount of the Payment so that no portion of the Reduced Amount is subject to the Excise Tax.  For the avoidance of doubt, if the Reduced Amount is determined pursuant to clause (y) in the preceding

 

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paragraph, the Eligible Employee will have no obligation to return any portion of the Payment pursuant to the preceding sentence.

 

(3)                                  Unless the Eligible Employee and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations.  If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required hereunder.  The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder.

 

Section 4.                                           RETURN OF COMPANY PROPERTY.

 

An Eligible Employee will not be entitled to any severance benefit under the Plan unless and until the Eligible Employee returns all Company Property.  For this purpose, “Company Property” means all Company documents (and all copies thereof) and other Company property which the Eligible Employee had in his or her possession at any time, including, but not limited to, Company files, notes, drawings, records, plans, forecasts, reports, studies, analyses, proposals, agreements, financial information, research and development information, sales and marketing information, operational and personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part).

 

Section 5.                                           TAX WITHHOLDING; OFFSET; SECTION 409A.

 

All payments under the Plan will be subject to applicable withholding for federal, state and local taxes.  If an Eligible Employee is indebted to the Company on his or her termination date, the Company reserves the right to offset any severance payments under the Plan by the amount of such indebtedness.  All severance benefits provided under the Plan are intended to satisfy the requirements for an exemption from application of Section 409A of the Code to the maximum extent that an exemption is available and any ambiguities herein shall be interpreted accordingly.

 

Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under the Plan that constitute “deferred compensation” within the meaning of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “ Section 409A ”) shall not commence in connection with an Eligible Employee’s termination of employment unless and until the Eligible Employee has also incurred a “separation from service,” as such term is defined in Treasury Regulations Section 1.409A-1(h) (“ Separation from Service ”), unless the Company reasonably determines that such amounts may be provided to the Eligible Employee without causing the Eligible Employee to incur the adverse personal tax consequences under Section 409A.

 

It is intended that (i) each installment of any benefits payable under the Plan to an Eligible Employee be regarded as a separate “payment” for purposes of Treasury Regulations Section 1.409A-2(b)(2)(i), (ii) all payments of any such benefits under the Plan satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulations Sections 1.409A-1(b)(4) and 1.409A-1(b)(9)(iii), and (iii) any such benefits consisting of COBRA premiums also satisfy, to the greatest extent possible, the exemption from the application of Section 409A

 

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provided under Treasury Regulations Section 1.409A-1(b)(9)(v).  However, if the Company determines that any such benefits payable under the Plan constitute “deferred compensation” under Section 409A and the Eligible Employee is a “specified employee” of the Company, as such term is defined in Section 409A(a)(2)(B)(i), then, solely to the extent necessary to avoid the imposition of the adverse personal tax consequences under Section 409A, (A) the timing of such benefit payments shall be delayed until the earlier of (1) the date that is six (6) months and one (1) day after the Eligible Employee’s Separation from Service and (2) the date of the Eligible Employee’s death (such applicable date, the “ Delayed Initial Payment Date ”), and (B) the Company shall (1) pay the Eligible Employee a lump sum amount equal to the sum of the benefit payments that the Eligible Employee would otherwise have received through the Delayed Initial Payment Date if the commencement of the payment of the benefits had not been delayed pursuant to this paragraph and (2) commence paying the balance, if any, of the benefits in accordance with the applicable payment schedule.

 

In no event shall payment of any benefits under the Plan be made prior to an Eligible Employee’s Termination Date or prior to the effective date of the Release.  If the Company determines that any payments or benefits provided under the Plan constitute “deferred compensation” under Section 409A, and the Eligible Employee’s Separation from Service occurs at a time during the calendar year when the Release could become effective in the calendar year following the calendar year in which the Eligible Employee’s Separation from Service occurs, then regardless of when the Release is returned to the Company and becomes effective, the Release will not be deemed effective any earlier than the latest permitted effective date.

 

Section 6.                                           REEMPLOYMENT.

 

In the event of an Eligible Employee’s reemployment by the Company during the period of time in respect of which severance benefits pursuant to the Plan have been paid, the Company, in its sole and absolute discretion, may require such Eligible Employee to repay to the Company all or a portion of such severance benefits as a condition of reemployment.

 

Section 7.                                           TRANSFER AND ASSIGNMENT.

 

The rights and obligations of an Eligible Employee under this Plan may not be transferred or assigned without the prior written consent of the Company.  The Plan shall be binding upon any entity or person who is a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company without regard to whether or not such entity or person actively assumes the obligations hereunder and without regard to whether or not a Change in Control occurs.

 

Section 8.                                           RIGHT TO INTERPRET AND ADMINISTER PLAN; AMENDMENT AND TERMINATION.

 

(a)                                  Interpretation and Administration.   Prior to the Closing, the Board shall be the Plan Administrator and shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of the Plan, including, but not limited to, the eligibility to participate in the Plan and amount of benefits paid under the Plan.  The rules, interpretations, computations and other actions of the Board shall be binding and conclusive on all persons.  Upon and after the Closing, the Plan will be interpreted and administered in good faith by the Representative who shall be the Plan Administrator during such period.  All actions taken by the Representative in interpreting the terms of the Plan and administering the Plan upon and after the Closing will be final and binding on all Eligible Employees.  Any references in this Plan to the “Board” or “Plan Administrator” with respect to periods following the Closing shall mean the Representative.

 

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(b)                                  Amendment.   The Plan Administrator reserves the right to amend this Plan at any time in its discretion; provided, however, that any amendment of the Plan that would adversely affect a particular employee will not be effective as to such employee without his or her written consent if at the time of such amendment such employee previously has been terminated in a Covered Termination.

 

(c)                                   Termination.  The Plan will automatically terminate following satisfaction of all the Company’s obligations under the Plan.  The Plan may be earlier terminated at any time at the discretion of the Plan Administrator, provided, however, that no such discretionary termination by the Plan Administrator may be implemented with respect to any employee without his or her written consent if at such time the employee previously has been terminated in a Covered Termination.

 

Section 9.                                           NO IMPLIED EMPLOYMENT CONTRACT.

 

The Plan shall not be deemed (i) to give any employee or other person any right to be retained in the employ of the Company or (ii) to interfere with the right of the Company to discharge any employee or other person at any time, with or without cause, which right is hereby reserved.

 

Section 10.                                    LEGAL CONSTRUCTION.

 

This Plan is intended to be governed by and shall be construed in accordance with the Employee Retirement Income Security Act of 1974 (“ ERISA ”) and, to the extent not preempted by ERISA, the laws of the State of Delaware.

 

Section 11.                                    CLAIMS, INQUIRIES AND APPEALS.

 

(a)                                  Applications for Benefits and Inquiries.   Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan Administrator in writing by an applicant (or his or her authorized representative).  The Plan Administrator is:

 

SendGrid, Inc.

Board of Directors

1801 California Street, Suite 500

Denver, CO 80202

 

(b)                                  Denial of Claims.   In the event that any application for benefits is denied in whole or in part, the Plan Administrator must provide the applicant with written or electronic notice of the denial of the application, and of the applicant’s right to review the denial.  Any electronic notice will comply with the regulations of the U.S. Department of Labor.  The notice of denial will be set forth in a manner designed to be understood by the applicant and will include the following:

 

(1)                                  the specific reason or reasons for the denial;

 

(2)                                  references to the specific Plan provisions upon which the denial is based;

 

(3)                                  a description of any additional information or material that the Plan Administrator needs to complete the review and an explanation of why such information or material is necessary; and

 

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(4)                                  an explanation of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review of the claim, as described in Section 11(d) below.

 

This notice of denial will be given to the applicant within ninety (90) days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an additional ninety (90) days for processing the application.  If an extension of time for processing is required, written notice of the extension will be furnished to the applicant before the end of the initial ninety (90) day period.

 

This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the application.

 

(c)                                   Request for a Review.   Any person (or that person’s authorized representative) for whom an application for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Plan Administrator within sixty (60) days after the application is denied.  A request for a review shall be in writing and shall be addressed to:

 

SendGrid, Inc.

Board of Directors

1801 California Street, Suite 500

Denver, CO 80202

 

A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant feels are pertinent.  The applicant (or his or her representative) shall have the opportunity to submit (or the Plan Administrator may require the applicant to submit) written comments, documents, records, and other information relating to his or her claim.  The applicant (or his or her representative) shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim.  The review shall take into account all comments, documents, records and other information submitted by the applicant (or his or her representative) relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

 

(d)                                  Decision on Review.   The Plan Administrator will act on each request for review within sixty (60) days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional sixty (60) days), for processing the request for a review.  If an extension for review is required, written notice of the extension will be furnished to the applicant within the initial sixty (60) day period.  This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the review.  The Plan Administrator will give prompt, written or electronic notice of its decision to the applicant. Any electronic notice will comply with the regulations of the U.S. Department of Labor.  In the event that the Plan Administrator confirms the denial of the application for benefits in whole or in part, the notice will set forth, in a manner calculated to be understood by the applicant, the following:

 

(1)                                  the specific reason or reasons for the denial;

 

(2)                                  references to the specific Plan provisions upon which the denial is based;

 

(3)                                  a statement that the applicant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim; and

 

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(4)                                  a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA.

 

(e)                                   Rules and Procedures.   The Plan Administrator will establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities in reviewing benefit claims.  The Plan Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the denial of benefits to do so at the applicant’s own expense.

 

(f)                                    Exhaustion of Remedies.   No legal action for benefits under the Plan may be brought until the applicant (i) has submitted a written application for benefits in accordance with the procedures described by Section 11(a) above, (ii) has been notified by the Plan Administrator that the application is denied, (iii) has filed a written request for a review of the application in accordance with the appeal procedure described in Section 11(c) above, and (iv) has been notified that the Plan Administrator has denied the appeal.  Notwithstanding the foregoing, if the Plan Administrator does not respond to an Eligible Employee’s claim or appeal within the relevant time limits specified in this Section 11, the Eligible Employee may bring legal action for benefits under the Plan pursuant to Section 502(a) of ERISA.

 

Section 12.                                    BASIS OF PAYMENTS TO AND FROM PLAN.

 

The Plan shall be unfunded, and all cash payments under the Plan shall be paid only from the general assets of the Company.

 

Section 13.                                    OTHER PLAN INFORMATION.

 

(a)                                  Employer and Plan Identification Numbers.   The Employer Identification Number assigned to the Company (which is the “Plan Sponsor” as that term is used in ERISA) by the Internal Revenue Service is 27-0554600.  The Plan Number assigned to the Plan by the Plan Sponsor pursuant to the instructions of the Internal Revenue Service is 510.

 

(b)                                  Ending Date for Plan’s Fiscal Year.   The date of the end of the fiscal year for the purpose of maintaining the Plan’s records is December 31.

 

(c)                                   Agent for the Service of Legal Process.   The agent for the service of legal process with respect to the Plan is:

 

SendGrid, Inc.

1801 California Street, Suite 500

Denver, CO 80202

 

In addition, service of legal process may be made upon the Plan Administrator.

 

(d)                                  Plan Sponsor.   The “Plan Sponsor” is:

 

SendGrid, Inc.

1801 California Street, Suite 500

Denver, CO 80202

(888) 985-7363

 

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(e)                                   Plan Administrator.   The Plan Administrator is the Board prior to the Closing and the Representative upon and following the Closing.  The Plan Administrator’s contact information is:

 

SendGrid, Inc.

Board of Directors or Representative

1801 California Street, Suite 500

Denver, CO 80202

(888) 985-7363

 

The Plan Administrator is the named fiduciary charged with the responsibility for administering the Plan.

 

Section 14.                                    STATEMENT OF ERISA RIGHTS.

 

Eligible Employees in this Plan (which is a welfare benefit plan sponsored by SendGrid, Inc.) are entitled to certain rights and protections under ERISA.  If you are an Eligible Employee, you are considered a participant in the Plan and, under ERISA, you are entitled to:

 

(a)                                  Receive Information About Your Plan and Benefits

 

(1)                                  Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as worksites, all documents governing the Plan and a copy of the latest annual report (Form 5500 Series), if applicable, filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration;

 

(2)                                  Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series), if applicable, and an updated (as necessary) Summary Plan Description.  The Plan Administrator may make a reasonable charge for the copies; and

 

(3)                                  Receive a summary of the Plan’s annual financial report, if applicable.  The Plan Administrator is required by law to furnish each Eligible Employee with a copy of this summary annual report.

 

(b)                                  Prudent Actions by Plan Fiduciaries.   In addition to creating rights for Eligible Employees, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan.  The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Eligible Employees and beneficiaries.  No one, including your employer, your union or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a Plan benefit or exercising your rights under ERISA.

 

(c)                                   Enforce Your Rights.  If your claim for a Plan benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

 

Under ERISA, there are steps you can take to enforce the above rights.  For instance, if you request a copy of Plan documents or the latest annual report from the Plan, if applicable, and do not receive them within thirty (30) days, you may file suit in a Federal court.  In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator.

 

13



 

If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court.

 

If you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court.  The court will decide who should pay court costs and legal fees.  If you are successful, the court may order the person you have sued to pay these costs and fees.  If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

 

(d)                                  Assistance with Your Questions.  If you have any questions about the Plan, you should contact the Plan Administrator.  If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.  You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.

 

14




Exhibit 10.7

 

 

 

 

 

 

 

 

 

 

 

 

 

SendGrid, Inc.
2016 VP Bonus Plan

 

 

 

 

 

 

SendGrid, Inc. Confidential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SendGrid, Inc.
2016 VP Bonus Plan

 



 

Adopted Effective January 1, 2016

 

PROGRAM OBJECTIVES

 

We believe it is important to tie our compensation to individual and company performance.  The 2016 VP Bonus Plan (the “Bonus Plan”) provides an opportunity whereby certain employees (a “Participant”) may be eligible to receive a bonus (a “Bonus”) based on a combination of the Participant’s Individual Performance and the Company’s Performance.

 

ELIGIBILITY

 

Participants are eligible to participate in the Bonus Plan as determined by the Chief Executive Officer. The Participant must be employed and in good standing on the date of the Target Bonus payment to be eligible for any portion of the Target Bonus and must execute the Participation Agreement attached hereto as Exhibit A.

 

BONUS PLAN CYCLE

 

The effective date of this Bonus Plan is January 1, 2016.  Participant’s Target Bonus for the full calendar year shall be as defined in the Participant’s Participation Agreement.  The Target Bonus will be paid on a regular payroll cycle no more than 75 calendar days following the end of the Bonus Period.  For purposes of this Bonus Plan, the Bonus Period is defined as the completion of calendar year 2016.

 

WEIGHTING OF AWARDS

 

Eligibility to receive a Participant’s Target Bonus is based upon a combination Individual Performance, weighted at 20% of Target Bonus, and the Company’s Performance (defined below), weighted at 80% of Target Bonus for the Bonus Period.

 

INDIVIDUAL PERFORMANCE

 

The Individual Performance Achievement of the potential Target Bonus shall consist of demonstrable activity of both competencies and responsibilities resulting in the following ratings.

 

Rating

Description

% of Target
Bonus

1 - Insufficient

Objectives were not achieved and the outcomes were poor

0%

2 - Below Expectations

Objectives were not quite achieved and the results were below expectations

<10%

3 - Good

Objectives were achieved and the results were what was expected

20%

4 - Great

Objectives were achieved and the results were beyond expectations

Discretionary

5 - Amazing

Objectives were achieved and the results were truly outstanding

Discretionary

 

COMPANY PERFORMANCE

 

The Company Performance Achievement of the potential Target Bonus shall consist of an array of metrics that reflect our Enduring Measures of Success to include:  1. Customer Satisfaction, 2. Employee Engagement, 3. Innovation, 4. Revenue growth and 5. Profitability. Annualized recurring revenue (“ARR”) is calculated by multiplying the Q4 2016 recurring revenue by four (4).

 

1 .


 

Enduring Measure
Connection

Metric

2016 Plan
($MM)

 

% of Target Bonus
@ 100%
Achievement

 

 

Financial

 

Revenue (GAAP)

$76.5

12.50%

 

Financial

 

ARR (Q4)

$85.5

12.50%

 

Financial

 

2H Adjusted NI

$0.5

25%

 

Customer

 

NPS

42

10%

 

Employee Engagement

 

Engagement %

75

10%

 

Innovation

 

ARR from New Products

$8.3MM

10%

 

2016 REVENUE PAYOUT MATRIX

 

 

2016 Revenue Goals ($MM)

 

 

 

 

 

 

 

 

Range

Low

Base

High

 

Revenue (GAAP)

 

(20%) to +20%

$61.20

$76.50

$91.80

 

ARR (Q4)

 

(10%) to +10%

$76.95

$85.50

$94.05

 

 

Revenue-related Goals Payout Matrix

 

 

 

 

 

 

 

 

Revenue (GAAP)

 

 

 

Low

 

Base

High

ARR (Q4)

 

Low

 

80%

85%

90%

 

Base

 

85%

100%

105%

 

High

 

90%

115%

120%

 

 

OTHER VARIABLE COMP ELEMENTS PAYOUT MATRIX

 

 

 

 

 

Payout Targets

 

Goal

 

Base Plan

Low (-20%)

Base

High (+20%)

 

2H Adjusted NI (MM)

 

$0.50

$0.40

$0.50

$0.60

 

NPS

 

42

36

42

54

 

Engagement

 

75

60

75

90

 

 

Goal

 

 

Payout %

 

2H Adjusted NI

 

 

80%

100%

120%

 

NPS

 

 

80%

100%

120%

 

Engagement

 

 

80%

100%

120%

 

2 .


 

Goal

Base Payout

Payout % of Total Variable in 2016

2H Adjusted NI

25%

20%

25%

30%

NPS

10%

8%

10%

12%

Engagement

10%

8%

10%

12%

 

Zero (0) payout below 80% achievement and capped payout above 120% achievement.  If results fall between levels then the respective Bonus percentage will be calculated based on linear interpolation.

 

MISCELLANEOUS

 

This Bonus Plan supersedes any and all other bonus plans that may have been discussed prior to the effective date of this Bonus Plan.

 

Eligible employees starting in their position after July 1st may or may not have their Target Bonus prorated.  Determination of proration is at the discretion of the CEO and/or the Company’s Board of Directors.

 

Participants who were on a leave of absence 30 or more days during the Bonus Plan period are eligible for a prorated Target Bonus consideration.

 

The Company reserves the right to amend, discontinue or rescind this Bonus Plan at any time and /or add, reduce or limit the amount of any Bonus payments or to limit the number of participants any time such actions are deemed appropriate and in the best interest of the Company.

 

The Bonus Plan is intended to provide a financial incentive to Participants and is not intended to confer any rights to continued employment upon Participants whose employment will remain at-will and subject to termination by either the Company or Participant at any time, with or without cause or notice.

 

The rights and obligations of a Participant under the Bonus Plan will be governed by and interpreted, construed and enforced in accordance with the laws of the State of Colorado without regard to its or any other jurisdiction’s conflicts of laws principles.

 

The Bonus Plan and the executed Participation Agreement set forth all of the agreements and understandings between the Company and Participant with respect to the subject matter hereof, and supersedes and terminates all prior agreements and understandings between the Company and Participant with respect to the subject matter hereof.

 

3 .



 

EXHIBIT A

 

SENDGRID, INC.
2016 VP BONUS PLAN
PARTICIPATION AGREEMENT

 

This Participation Agreement (the “Participation Agreement”) is entered into by and between SendGrid, Inc., a Delaware corporation (the “Company”), and the undersigned employee of the Company (“Participant”), as of the date set forth below.

 

This Participation Agreement is attached to a copy of the 2016 VP Bonus Plan (the “Plan”).  Each capitalized term not defined in this Participation Agreement will have the meaning ascribed to such term in the Plan.

 

The Board has designated you a Participant in the Plan.  You are encouraged to read the Plan in its entirety.  The final decision as to whether you have earned any payments under the Plan will be made by the Board or the Representative in accordance with the Plan.

 

Participant’s total Target Bonus for 2016 shall be 25% of earned base salary (“Target Bonus”).

 

In consideration of your eligibility to participate in the Plan as a Participant, a benefit to which you are not otherwise entitled, you hereby agree, to the greatest extent permitted by law, and to the extent applicable, to the following terms of the Plan:

 

1.                                      You must continue to be a satisfactory performer as determined by your manager.

 

2.                                      This Participation Agreement does not constitute a guarantee of a specific period or term of employment and does not constitute an employment contract.  Your employment remains “at will”, and you continue to be subject to all company policies and guidelines.

 

3.                                      SendGrid reserves the right to change, eliminate or replace all or parts of the Plan at will at any time, with or without notice, to adjust targets, objectives, to terminate the Plan or make any other adjustments and changes deemed appropriate.

 

4.                                      This Participation Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Participation Agreement and the Participation Agreement shall not be modified or rescinded, except by a written Participation Agreement signed by SendGrid, Inc. and you.  The provisions of this Agreement supersede all prior and contemporaneous discussions, writings and understandings of the parties with respect to the subject matter of this Participation Agreement.

 

To indicate your acceptance of your designation as a Participant in the Plan, please sign a copy of this Participation Agreement in the space indicated below.

 

 

 

 

 

 

Name

 

Sameer Dholakia, CEO for SendGrid, Inc.

 

 

 

 

 

 

Date

 

Date

 

4 .




Exhibit 10.8

 

SENDGRID, INC.

 

SENIOR EXECUTIVE CASH INCENTIVE BONUS PLAN

 

1.                                       Purpose .  This Senior Executive Cash Incentive Bonus Plan (the “ Incentive Plan ”) is intended to provide an incentive for superior work and to motivate eligible executives of SendGrid, Inc. (the “ Company ”) and its subsidiaries toward even higher achievement and business results, to tie their goals and interests to those of the Company and its stockholders and to enable the Company to attract and retain highly qualified executives. The Incentive Plan is for the benefit of Covered Executives (as defined below).

 

2.                                       Covered Executives .  From time to time, the Board (as defined below) may select certain key executives (the “ Covered Executives ”) to be eligible to receive bonuses hereunder.

 

3.                                       Administration .  The Plan shall be administered by the Board of Directors of the Company (the “ Board ”) or, at the discretion of the Board, such administrative authority may be delegated to the Compensation Committee of the Board of Directors of the Company (the “ Compensation Committee ”).  All references herein to the “Board” shall be deemed to refer to the group then responsible for administration of the Incentive Plan at the relevant time (i.e., either the Board or the Compensation Committee, as applicable).  The Board shall have the sole discretion and authority to administer and interpret the Incentive Plan.

 

4.                                       Bonus Determinations .

 

(a)                                  Performance Goals . A Covered Executive may receive a bonus payment under the Incentive Plan based upon the attainment of one or more Performance Goals approved by the Board.  As used herein, the term “ Performance Goals ” means the goal(s) (or combined goal(s)) determined by the Board, in its sole discretion, to be applicable to a Covered Executive.  The Performance Goals may differ from Covered Executive to Covered Executive.

 

(b)                                  Calculation of Performance Goals . At the beginning of each applicable performance period, the Board will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Covered Executive. In all other respects, Performance Goals will be calculated in accordance with the Company’s financial statements, generally accepted accounting principles, or under a methodology determined by the Board.

 

(c)                                   Bonus Requirements; Individual Goals . Except as otherwise set forth in this Section 4(c):

 

(i)                                      any bonuses paid to Covered Executives under the Incentive Plan shall be based upon objectively determinable bonus formulas that tie such bonuses to one or more performance criteria relating to the Performance Goals,

 

(ii)                                   bonus formulas for Covered Executives shall be adopted in each performance period by the Board and communicated to each Covered Executive at the beginning of each performance period, and

 



 

(iii)                                no bonuses shall be paid to Covered Executives unless and until the Board makes a determination with respect to the attainment of the performance criteria to the Performance Goals. Notwithstanding the foregoing, the Board may adjust bonuses payable under the Incentive Plan based on achievement of one or more individual performance objectives or pay bonuses (including, without limitation, discretionary bonuses) to Covered Executives under the Incentive Plan based on individual performance goals and/or upon such other terms and conditions as the Board may in its discretion determine.

 

(d)                                  Individual Bonuses . The Board shall establish a bonus opportunity for each Covered Executive for each performance period. For each Covered Executive, the Board shall have the authority to apportion the award so that a portion of the award shall be tied to attainment of Performance Goals and a portion of the award shall be tied to attainment of individual performance objectives.

 

(e)                                   Employment Requirement . Unless otherwise expressly provided in a written agreement between the Covered Executive and the Company, the payment of a bonus to a Covered Executive with respect to a performance period shall be conditioned upon the Covered Executive’s continued employment by the Company through the end of the performance period. If a Covered Executive was not employed for an entire performance period, the Board may pro-rate the bonus based on the number of days employed during such performance period.

 

5.                                       Timing of Payment

 

(a)                                  With respect to Performance Goals established and measured on a basis more frequently than annually (e.g., quarterly or semi-annually), the Performance Goals will be measured at the end of each performance period after the Company’s financial reports with respect to such period(s) have been published. If the Performance Goals and/or individual goals for such period are met, payments will be made as soon as practicable following the end of such period, but not later 74 days after the end of the fiscal year in which such performance period ends.

 

(b)                                  With respect to Performance Goals established and measured on an annual or multi-year basis, Performance Goals will be measured as of the end of each such performance period (e.g., the end of each fiscal year) after the Company’s financial reports with respect to such period(s) have been published. If the Performance Goals and/or individual goals for any such period are met, bonus payments will be made as soon as practicable, but not later than 74 days after the end of the relevant fiscal year.

 

(c)                                   For the avoidance of doubt, bonuses earned at any time in a fiscal year must be paid no later than 74 days after the last day of such fiscal year.

 

6.                                       No Guarantee of Employment .  The Incentive Plan is intended to provide a financial incentive to Covered Executives and is not intended to confer any rights to continued employment upon Covered Executives whose employment will remain at-will and subject to termination by either the Company or Covered Executive at any time, with or without cause or notice.

 

2



 

7.                                       Recovery Any amounts paid under this Incentive Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.  No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any plan of or agreement with the Company.

 

8.                                       Amendment and Termination .  The Company reserves the right to amend or terminate the Incentive Plan at any time in its sole discretion.

 

3




Exhibit 10.9

 

LEASE OF OFFICE SPACE

 

LANDLORD:

BOP 1801 CALIFORNIA STREET LLC,

a Delaware limited liability company, and

BOP 1801 CALIFORNIA STREET II LLC,

a Delaware limited liability company

 

TENANT:

SendGrid, Inc.

a Delaware corporation

 

PREMISES

IN

1801 CALIFORNIA STREET

DENVER, COLORADO

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE 1.0

DEFINITIONS

1

 

 

 

1.01

Definitions

1

 

 

 

ARTICLE 2

GRANT OF LEASE

3

 

 

 

2.01

Grant

3

 

 

 

2.02

Quiet Enjoyment

3

 

 

 

2.03

Covenants of Landlord and Tenant

3

 

 

 

ARTICLE 3.0

TERM AND POSSESSION

3

 

 

 

3.01

Term

3

 

 

 

3.02

Early Occupancy

3

 

 

 

3.03

Delayed Possession

4

 

 

 

3.04

Acceptance of Premises

4

 

 

 

ARTICLE 4.0

RENT AND OCCUPANCY COSTS

4

 

 

 

4.01

Annual Rent

4

 

 

 

4.02

Occupancy Costs

5

 

 

 

4.03

Other Charges

5

 

 

 

4.04

Payment of Rent - General

5

 

 

 

4.05

Annual Rent — Partial Month

6

 

 

 

4.06

Payment - Occupancy Costs

6

 

 

 

ARTICLE 5

USE OF PREMISES

7

 

 

 

5.01

Use

7

 

 

 

5.02

Compliance with Laws

7

 

 

 

5.03

Vacation of the Premises

7

 

 

 

5.04

Nuisance

7

 

 

 

5.05

Sale of Goods from Premises

7

 

 

 

ARTICLE 6.0

SERVICES, MAINTENANCE, REPAIR AND ALTERATIONS BY LANDLORD

7

 

 

 

6.01

Operation of Building

7

 

 

 

6.02

Services to Premises

8

 

 

 

6.03

Building Service

8

 

 

 

6.04

Maintenance, Repair and Replacement

9

 

 

 

6.05

Additional Services and Utilities

10

 

i



 

TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

6.06

Alterations by Landlord

11

 

 

 

6.07

Access by Landlord

11

 

 

 

6.08

Energy, Conservation and Security

12

 

 

 

ARTICLE 7.0

MAINTENANCE, REPAIR, ALTERATIONS AND IMPROVEMENTS BY TENANT

12

 

 

 

7.01

Condition of Premises

12

 

 

 

7.02

Failure to Maintain Premises

12

 

 

 

7.03

Alterations by Tenant

12

 

 

 

7.04

Trade Fixtures and Personal Property

13

 

 

 

7.05

Mechanic’s Liens

13

 

 

 

7.06

Signs

13

 

 

 

ARTICLE 8.0

TAXES

14

 

 

 

8.01

Tenant’s Pro Rata Share

14

 

 

 

8.02

Tenant’s Other Taxes

14

 

 

 

8.03

Right to Contest

14

 

 

 

ARTICLE 9.0

INSURANCE

14

 

 

 

9.01

Landlord’s Insurance

14

 

 

 

9.02

Tenant’s Insurance

15

 

 

 

ARTICLE 10.0

INJURY TO PERSON OR PROPERTY

15

 

 

 

10.01

Indemnity by Tenant

15

 

 

 

10.02

Indemnity by Landlord

16

 

 

 

10.03

Subrogation

16

 

 

 

ARTICLE 11.0

ASSIGNMENT AND SUBLETTING

16

 

 

 

11.01

Assignment

16

 

 

 

11.02

Subleasing

16

 

 

 

11.03

First Offer to Landlord

17

 

 

 

11.04

Limitation

17

 

 

 

11.05

Tenant’s Obligations Continue

18

 

 

 

11.06

Subsequent Assignments

18

 

 

 

11.07

Building Directory Changes

18

 

ii



 

TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

ARTICLE 12.0

SURRENDER

18

 

 

 

12.01

Possession

18

 

 

 

12.02

Trade Fixtures, Personal Property and Improvements

19

 

 

 

12.03

Merger

19

 

 

 

12.04

Payments After Termination or Notice

19

 

 

 

ARTICLE 13.0

HOLDING OVER

19

 

 

 

13.01

Month-to-Month Tenancy

19

 

 

 

13.02

Tenancy at Sufferance

19

 

 

 

13.03

General

20

 

 

 

ARTICLE 14.0

RULES AND REGULATIONS

20

 

 

 

14.01

Purpose

20

 

 

 

14.02

Observance

20

 

 

 

14.03

Modification

20

 

 

 

14.04

Non-Compliance

20

 

 

 

14.05

Rules Modified

20

 

 

 

ARTICLE 15.0

EMINENT DOMAIN

21

 

 

 

15.01

Taking of Premises

21

 

 

 

15.02

Partial Taking of Building

21

 

 

 

15.03

Surrender

21

 

 

 

15.04

Partial Taking of Premises

22

 

 

 

15.05

Awards

22

 

 

 

ARTICLE 16.0

DAMAGE BY FIRE OR OTHER CASUALTY

22

 

 

 

16.01

Limited Damage to Premises

22

 

 

 

16.02

Major Damage to Premises

23

 

 

 

16.03

Abatement

23

 

 

 

16.04

Major Damage to Building

23

 

 

 

16.05

Limitation on Landlord’s Liability

23

 

 

 

ARTICLE 17.0

TRANSFERS BY LANDLORD

24

 

 

 

17.01

Sale, Conveyance and Assignment

24

 

 

 

17.02

Effect of Sale, Conveyance, or Assignment

24

 

 

 

17.03

Subordination

24

 

iii



 

TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

17.04

Attornment

24

 

 

 

17.05

Non-disturbance

25

 

 

 

17.06

Effect of Attornment

25

 

 

 

17.07

Execution of Instruments

26

 

 

 

ARTICLE 18.0

NOTICES, ACKNOWLEDGEMENTS, AND AUTHORITIES FOR ACTION

26

 

 

 

18.01

Notices

26

 

 

 

18.02

Acknowledgements

26

 

 

 

18.03

Authorities for Action

27

 

 

 

ARTICLE 19.0

TENANT’S DEFAULT AND LANDLORD’S REMEDIES

27

 

 

 

19.01

Interest and Costs

27

 

 

 

19.02

Events of Default

27

 

 

 

19.03

Landlord’s Remedies

28

 

 

 

19.04

Effect on Subleases

30

 

 

 

19.05

Landlord Default and Self Help

30

 

 

 

ARTICLE 20.0

BANKRUPTCY

31

 

 

 

20.01

Bankruptcy

31

 

 

 

ARTICLE 21.0

TELECOMMUNICATIONS

33

 

 

 

21.01

Limitation of Responsibility

33

 

 

 

21.02

Necessary Service Interruptions

34

 

 

 

21.03

Removal of Equipment, Wiring, and Other Facilities

34

 

 

 

21.04

New Provider Installations

34

 

 

 

21.05

Provider License Expiration

35

 

 

 

21.06

Limit of Default or Breach

35

 

 

 

21.07

Installation and Use of Wireless Technologies

35

 

 

 

21.08

Limitation

36

 

 

 

21.09

Limitation of Liability For Equipment Interference

36

 

 

 

ARTICLE 22.0

IMPROVEMENT ALLOWANCE

36

 

 

 

22.01

Improvement Allowance

36

 

 

 

22.02

Landlord’s Work

37

 

 

 

22.03

Allowance Offset

38

 

iv



 

TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

ARTICLE 23.0

TENANT’S OPTION TO EXTEND TERM

38

 

 

 

23.01

Grant

38

 

 

 

23.02

Terms

38

 

 

 

23.03

Documentation

39

 

 

 

23.04

Non-Severability

39

 

 

 

ARTICLE 24.0

MARKET RENT

39

 

 

 

24.01

Definition

39

 

 

 

24.02

Determination on Market Rent

39

 

 

 

24.03

Disagreement on Market Rent

39

 

 

 

ARTICLE 25.0

RIGHT OF FIRST REFUSAL

41

 

 

 

25.01

Notice of Availability

41

 

 

 

25.02

Right of First Refusal

41

 

 

 

25.03

Terms

41

 

 

 

25.04

Documentation

42

 

 

 

25.05

Non-Severability

42

 

 

 

ARTICLE 26.0

TERMINATION OPTION

42

 

 

 

26.01

Grant

42

 

 

 

26.02

Survival

43

 

 

 

26.03

Documentation

43

 

 

 

26.04

Non-Severability

43

 

 

 

ARTICLE 27.0

MISCELLANEOUS

43

 

 

 

27.01

Relationship of Parties

43

 

 

 

27.02

Consent Not Unreasonably Withheld

43

 

 

 

27.03

Name of Building and Project

43

 

 

 

27.04

Applicable Law and Construction

43

 

 

 

27.05

Entire Agreement

44

 

 

 

27.06

Offer Irrevocable

44

 

 

 

27.07

Amendment or Modification

44

 

 

 

27.08

Construed Covenants and Severability

44

 

 

 

27.09

No Implied Surrender or Waiver

44

 

 

 

27.10

Successors Bound

45

 

v



 

TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

27.11

Letter of Credit

45

 

 

 

27.12

Lease Approval

46

 

 

 

27.13

Nondiscrimination

46

 

 

 

27.14

Personal Liability

46

 

 

 

27.15

Brokerage Commission

46

 

 

 

27.16

Unavoidable Delay

46

 

 

 

27.17

Hazardous Materials

47

 

 

 

27.18

Authorization

48

 

 

 

27.19

No Air Rights

48

 

 

 

27.20

Recording; Confidentiality

48

 

 

 

27.21

Alternate Electricity Provider

48

 

 

 

27.22

Non-Severability

48

 

 

 

27.23

Prohibited Persons and Transactions

48

 

 

 

27.24

Taxable REIT Subsidiary

49

 

 

 

27.25

Parking

49

 

 

 

27.26

Rooftop Space

49

 

 

 

27.27

Back-up Generator

50

 

 

 

27.28

Relocation/Redevelopment

50

 

 

 

27.29

Legal Proceedings

51

 

 

 

27.30

Counterparts

51

 

Exhibit A

Depiction of the Premises

Exhibit B

Definitions; Occupancy Costs; Additional Charges; Miscellaneous

Exhibit C

Rules and Regulations

Exhibit D

Construction Procedures

Exhibit E

Janitorial Specifications

Exhibit F

Subordination Non-Disturbance and Attornment Agreement

 

vi



 

LEASE OF OFFICE SPACE

 

BETWEEN:

 

BOP 1801 CALIFORNIA STREET LLC ,

 

 

 

 

a Delaware limited liability company, and

 

 

 

 

BOP 1801 CALIFORNIA STREET II LLC ,

 

 

 

 

a Delaware limited liability company,

 

 

 

 

1801 California Street, Suite 200

 

 

 

 

Denver, Colorado 80202

 

(collectively, “ Landlord ”)

 

 

 

 

 

AND:

 

SENDGRID, INC.

 

 

 

 

a Delaware corporation

 

1801 California Street, Suite 500

 

 

Denver, Colorado 80202

 

(“ Tenant ”)

 

 

 

 

 

PREMISES IN:

 

1801 CALIFORNIA STREET

 

 

 

 

Denver, Colorado 80202

 

 

 

 

 

 

 

DATE:

 

March 25, 2016

 

(to be dated upon Landlord’s execution)

 

LANDLORD AND TENANT , in consideration of the covenants herein contained, hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

1.1           Definitions . In this Lease:

 

(a)            “ Annual Rent ” means the amount payable by Tenant to Landlord in respect of each year of the Term under Section 4.1.

 

(b)            “ Article ” means an article of this Lease.

 

(c)            “ Building ” means the building as defined in Exhibit B .

 

(d)            “ Building Standard ” means the quantity and quality of materials, equipment, finishing, workmanship and other elements from time to time specified by Landlord for the Building.

 

(e)            “ Commencement Date ” means the earlier (i) the date Tenant commences business from the Premises; or (ii) September 1, 2016.

 

(f)             “ Delivery Date ” means five (5) business days after the Effective Date.

 

(g)            “ Effective Date ” shall mean the date upon which Landlord and Tenant have executed this Lease, and on which the terms and conditions, and obligations related thereto, shall become binding upon Landlord and Tenant.

 

1



 

(h)            “ Exhibit A ” means the floor plans attached hereto as Exhibit A .

 

(i)             “ Exhibit B ” means the provisions relating to Occupancy Costs and other matters attached hereto as Exhibit B .

 

(j)             “ Exhibit C ” means the Rules and Regulations attached hereto as Exhibit C .

 

(k)            “ Exhibit D ” means the Construction Procedures attached hereto as Exhibit D .

 

(l)             “ Exhibit E ” means the Janitorial Specifications attached hereto as Exhibit E .

 

(m)           “ Exhibit F ” means the Subordination Non-Disturbance and Attornment Agreement (“ SNDA ”) attached hereto as Exhibit F .

 

(n)            “ Fiscal Year ” means a 12 month period (all or part of which falls within the Term) from time to time determined by Landlord, at the end of which Landlord’s books are balanced for auditing and/or taxation purposes. Landlord’s current Fiscal Year ends on December 31, 2016.

 

(o)            “ Land ” means the Land as defined in Exhibit B .

 

(p)            “ Lease ” means this lease, and all Exhibits attached to this Lease, and every instrument complying with Section 27.7 which by its terms amends, modifies or supplements this Lease.

 

(q)            “ Letter of Credit ” means that certain Letter of Credit in the amount of One Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00) pursuant to the terms and conditions contained in 28.14 below.

 

(r)            “ Occupancy Costs ” means amounts payable by Tenant to Landlord under Section 4.2.

 

(s)             “ Other Charges ” means amounts payable by Tenant to Landlord under Section 4.3.

 

(t)             “ Premises ” means approximately 52,124 rentable square feet on the entire 5th floor and a portion of the 6th floor of the Building as generally indicated on Exhibit A and A-1 .

 

(u)            “ Rent ” means the aggregate of all amounts payable by Tenant to Landlord under and subject to Sections 4.1, 4.2 and 4.3.

 

(v)            “ Rent Commencement Date ” means the day after the expiration of the “ Rent Concession Period ,” as defined hereafter, upon which Tenant shall be responsible for the payment of Annual Rent and Occupancy Costs.

 

2



 

(w)           “ Rent Concession Period ” means the period beginning on the Commencement Date and continuing through the 240th day thereafter.

 

(x)            “ Section ” means a section of this Lease.

 

(y)            “ Term ” means the period of time set out in Section 3.1.

 

All other capitalized terms shall have the meaning set forth in the Lease.

 

ARTICLE 2

 

GRANT OF LEASE

 

2.1           Grant . On the Effective Date, and subject to Landlord’s obligation to complete Landlord’s Work as described in Section 22.2, and for the valuable consideration contained herein the sufficiency of which the parties acknowledge, Tenant hereby leases and accepts from Landlord the Premises in its “as-is” condition to have and to hold during the Term, subject to the terms and conditions of this Lease. All terms and conditions of this Lease, and obligations required hereunder, shall apply to the parties as of the Effective Date pursuant to the terms and conditions of this Lease. Upon written notice from Tenant, Landlord will repair or replace any latent defects to ‘Landlord’s Work” as described in Section 22.2 below, provided Tenant provides such notice within one year from the Commencement Date.

 

2.2           Quiet Enjoyment . Landlord shall warrant and defend Tenant in the quiet enjoyment and possession of the Premises during the Term, subject to the terms and conditions of this Lease.

 

2.3           Covenants of Landlord and Tenant . Landlord covenants to observe and perform all of the terms and conditions to be observed and performed by Landlord under this Lease. Tenant covenants to pay the Rent when due under this Lease, and to observe and perform all of the terms and conditions to be observed and performed by Tenant under this Lease.

 

ARTICLE 3

 

TERM AND POSSESSION

 

3.1           Term . This Lease shall commence on the Effective Date and continue through the last day of the ninety second (92nd) full calendar month (“ Expiration Date ”) following the Commencement Date (“ Term ”), unless terminated earlier as provided in this Lease. If the Commencement Date is a date other than the September 1, 2016, Landlord and Tenant will promptly enter into an amendment of lease or letter agreement, prepared by Landlord, stipulating the actual Commencement Date of the Term.

 

3.2           Early Occupancy . Commencing on the Delivery Date, Tenant shall have the right to access the Premises for the construction of its Improvements (as described in Article 22 below) and to install Tenant’s cabling, furniture, fixtures and, equipment fifteen (15) business days prior to the Commencement Date (“ Early Occupancy Period ”) and shall have no obligation to pay Annual Rent or Occupancy Cost during the Early Occupancy Period, provided Tenant

 

3


 

does not commence business from the Premises. During the Early Occupancy Period, Landlord will make available to Tenant and Tenant’s Contractor’s (as defined in Exhibit D attached hereto) (at no cost to Tenant) Building services, including HVAC, electrical to the Premises and access to the Building’s freight elevator, provided Tenant (or its designee) coordinates with Landlord, a schedule for such move-in at times and in a manner that will not unreasonably interfere with Landlord’s general operation of the Building.

 

3.3           Delayed Possession . Subject to Article 22 below, if for any reason Landlord is delayed in delivering possession of all or any portion of the Premises to Tenant for the commencement of its Improvements on the Delivery Date, then Tenant shall take possession of the Premises on the date not later than sixty (60) days thereafter when Landlord delivers possession of all the Premises, which date shall be conclusively established by notice to Tenant at least five days before such date. In the event of any delay in the Delivery Date, then the Commencement Date shall be extended on a day for day basis for each day of delay. In the event Landlord fails to deliver the Premises within such time period, Tenant shall have the right to terminate this Lease at any time after the expiration of such sixty (60) day period with ten (10) days written notice at any time thereafter. In the event that Landlord delivers the Premises to Tenant in such ten (10) business day period, this Lease shall remain in full force and effect.

 

3.4           Acceptance of Premises . Subject to Landlord completing Landlord’s Work as described in Article 22 below, on the Delivery Date Landlord shall deliver the Premises to Tenant in its “as-is” condition for the commencement of Tenant’s Improvements as described in Article 22 of the Lease. Taking possession of all or any portion of the Premises by Tenant shall be conclusive evidence as against Tenant that the Premises or such portion thereof are in satisfactory condition on the date of taking possession, subject to any latent defects to Landlord’s Work as described in Section 2.1 above.

 

ARTICLE 4

 

RENT AND OCCUPANCY COSTS

 

4.1           Annual Rent . Tenant shall pay to Landlord Annual Rent for the Premises in monthly installments as described below, and each installment of Annual Rent shall be due on the first day of each calendar month without notice or setoff (except as expressly set forth in this Lease) as follows:

 

Time Period (full month)

 

Rate Per RSF

 

Annual Rent

 

Monthly Rent

 

Rent Concession Period

 

$

0.00

 

$

0.00

 

$

0.00

 

Rent Commencement Date — Month 20

 

$

21.00

 

$

1,094,604.00

 

$

91,217.00

 

Month 21 — Month 32

 

$

21.50

 

$

1,120,665.96

 

$

93,388.83

 

Month 33 — Month 44

 

$

22.00

 

$

1,146,728.04

 

$

95,560.67

 

Month 45 — Month 56

 

$

22.50

 

$

1,172,790.00

 

$

97,732.50

 

Month 57 — Month 68

 

$

23.00

 

$

1,198,851.96

 

$

99,904.33

 

Month 69 — Month 80

 

$

23.50

 

$

1,224,914.04

 

$

102,076.17

 

Month 81 — Month 92

 

$

24.00

 

$

1,250,976.00

 

$

104,248.00

 

 

4



 

Notwithstanding the Rent Concession Period, Tenant agrees that its obligation to pay the Annual Rent and Occupancy Costs (as described hereafter) payments abated hereunder during the Rent Concession Period shall continue throughout the Term of the Lease; provided, however, that such amounts shall only become due and payable if Tenant commits an Event of Default and Landlord commences and is successful in an action to recover Rent and/or possession of the Premises. If an Event of Default exists hereunder pursuant to Article 19, after any cure period and Landlord commences an action to recover Rent and/or possession of the Premises, then the unamortized portion of abated Annual Rent and Occupancy Costs payments as of the date of such Event of Default, shall become immediately due and payable with interest on such sums at the lesser of one and one-half percent (1.5%) per month or the maximum rate permitted by law from the date of the Event of Default. Annual Rent during the Rent Concession Period shall be calculated at $21.00 per rentable square foot of space in the Premises. Occupancy Costs during the Rent Concession Period shall be calculated in accordance with the Lease. Tenant’s obligation for the unamortized portion of abated Annual Rent and Occupancy Costs not collected during the Rent Concession Period shall be independent of and in addition to Landlord’s other damages pursuant to Article 19 of the Lease. Abated Annual Rent and Occupancy Costs shall be amortized using an 8% interest factor on a straight-line basis over the initial Term of the Lease.

 

If the Rent Commencement Date is other than the first day of a calendar month, the monthly installment of Annual Rent for the month in which the Rent Commencement Date occurs shall be prorated on a daily basis in accordance with the procedure set forth in Section 4.5.

 

4.2           Occupancy Costs . Subject to the Rent Concession Period when no Occupancy Costs are due, Tenant shall pay to Landlord, at the times and in the manner provided in Section 4.6, the Occupancy Costs determined under Exhibit B , which are estimated to be $11.97 per rentable square foot (2016 calendar year). Notwithstanding the foregoing, any increase to Occupancy Costs in any Fiscal Year shall be limited to five percent (5%) (on a cumulative basis) over the prior Occupancy Costs paid during the prior Fiscal Years, which limit shall not apply to (i) Taxes. (ii) insurance, (iii) utilities, (iv) snow removal, and (v) any cost incurred to comply with government regulation.

 

4.3           Other Charges . Tenant shall pay to Landlord, at the times and in the manner provided in this Lease or, if not so provided, within thirty (30) days of receipt of an invoice from Landlord, all amounts (other than those payable under Sections 4.1 and 4.2) which are payable by Tenant to Landlord under this Lease.

 

4.4           Payment of Rent - General . All amounts payable by Tenant to Landlord under this Lease shall be deemed to be Rent and shall be payable and recoverable as Rent in the manner herein provided, and Landlord shall have all rights against Tenant for default in any such payment as in the case of arrears of Rent as is more particularly hereinafter provided. Rent shall be paid to Landlord, without deduction or set-off (except as otherwise expressly set forth in this Lease), in legal tender of the jurisdiction in which the Building is located, at the address of Landlord as set forth in the beginning of this Lease, or to such other person or at such other address as Landlord may from time to time designate in writing. Tenant’s obligation to pay Rent for the entire Term shall survive the expiration or earlier termination of this Lease and is independent of any covenant or obligation of Landlord hereunder (except as otherwise expressly

 

5



 

set forth in this Lease). The covenants and obligations of Landlord under this Lease are dependent upon the performance by Tenant of all of its covenants and obligations hereunder.

 

4.5           Annual Rent — Partial Month . If the Term begins or ends on a day other than the first or last day of a calendar month, the installment of Annual Rent payable for such partial calendar month of the Term shall be that proportion of the Annual Rent which the number of days from the first day of such partial calendar month to the last day of the partial calendar month bears to 365 days.

 

4.6           Payment - Occupancy Costs .

 

(a)            Prior to the Commencement Date and the beginning of each Fiscal Year thereafter, Landlord shall compute and deliver to Tenant a bona fide estimate of Occupancy Costs for the appropriate Fiscal Year and without further notice Tenant shall pay to Landlord in monthly installments one-twelfth of such estimate simultaneously with Tenant’s payments of Annual Rent during such Fiscal Year. Any failure by Landlord to deliver any such estimate as aforesaid shall not relieve Tenant of its obligation to pay Occupancy Costs as herein provided. If at any time it reasonably appears to Landlord that the Occupancy Costs for the current Fiscal Year will vary from Landlord’s estimate then Landlord may prospectively readjust the Occupancy Costs for such Fiscal Year by written notice delivered to Tenant, but not more often than one (1) time per Fiscal Year, and subsequent payments by Tenant for such Fiscal Year will be based upon such readjusted Occupancy Costs.

 

(b)            Unless delayed by causes beyond Landlord’s reasonable control, Landlord shall deliver to Tenant within 120 days after the end of each Fiscal Year a written statement (the “ Statement ”) setting out in reasonable detail the amount of Occupancy Costs for such Fiscal Year and certified to be correct by a representative of Landlord. If the aggregate of monthly installments of Occupancy Costs actually paid by Tenant to Landlord during such Fiscal Year differs from the amount of Occupancy Costs payable for such Fiscal Year under Section 4.2 as indicated in the Statement, then, as the case may be, Tenant shall pay the difference to Landlord or Landlord shall issue a credit to Tenant against the Rent next remaining to be paid hereunder for the difference, or if no Rent then remains to be paid, refund the difference to Tenant, without interest, within 30 days after the date of delivery of the Statement.

 

(c)            If Tenant disagrees with the accuracy of Occupancy Costs as set forth in the Statement or in any adjustment thereto made by Landlord pursuant to subsection 4.6(d), Tenant shall be required to give Landlord written notice thereof within one hundred and twenty (120) days after the date Landlord gives Tenant the Statement or notice of adjustment thereto, as the case may be, or Tenant shall conclusively be deemed to have accepted the accuracy of the Statement, or modification thereto, as the case may be, and to have waived any right to claim any readjustment in connection therewith. If Tenant so disagrees with the Statement, or modification thereto, as the case may be, and gives such notice to Landlord, Tenant shall nevertheless make payment in accordance with any notice given by Landlord, but the disagreement shall be referred by Landlord for prompt decision by a mutually acceptable nationally or regionally recognized public accountant, who shall be unaffiliated with and unrelated to either Landlord or Tenant or any of their member, partners, officers, directors or employees, who shall be deemed to be acting as an expert and not arbitrator, and a written determination signed by the selected expert, and

 

6



 

duly certified to both Landlord and Tenant, shall be final and binding on both Landlord and Tenant. Any adjustment required to any previous payment made by Tenant or Landlord by reason of any such decision shall be made within thirty (30) days after resolution of the amount. In the event that the adjustment to the Occupancy Costs that were the subject of the disagreement represents (i) less than five percent (5%), Tenant shall bear all costs of the expert making such determination; otherwise Landlord shall bear all costs of the expert making such determination.

 

ARTICLE 5

 

USE OF PREMISES

 

5.1           Use . The Premises shall be used and occupied for general office purposes, or for such other purpose as Landlord may specifically authorize in writing. Tenant shall have access to and the non-exclusive right to use the Common Areas and associated amenities, including, but not limited to, the fitness center and conference rooms located in the Building, and a secure bicycle storage area, at no additional charge.

 

5.2           Compliance with Laws . The Premises shall be used and occupied in a safe, careful and proper manner so as not to contravene any present or future governmental or quasi-governmental laws in force or regulations or orders or the commercially reasonable requirements of Landlord’s insurance carriers, of which Tenant has received due written notice. If due solely to Tenant’s use of the Premises, improvements thereto are necessary to comply with any of the foregoing or with the requirements of insurance carriers, Tenant shall pay the entire cost thereof.

 

5.3           Vacation of the Premises . Tenant may vacate the Premises or any portion thereof (but shall remain obligated for the payment of all Rent due hereunder), at any time during the Term, and such vacation shall not be deemed a default under the terms of this Lease.

 

5.4           Nuisance . To the extent not caused by Landlord, Tenant, its employees, agents and invitees, shall not cause or maintain any nuisance in or about the Premises, and Tenant shall keep the Premises free of debris, rodents, vermin and anything of a dangerous, noxious or offensive nature or which could create a fire hazard (through undue load on electrical circuits or otherwise) or undue vibration, heat or noise.

 

5.5           Sale of Goods from Premises . Tenant shall not conduct or permit the conduct of any “fire,” “bankruptcy,” “going out of business,” or auction sale in or from the Premises.

 

ARTICLE 6

 

SERVICES, MAINTENANCE, REPAIR AND ALTERATIONS BY LANDLORD

 

6.1           Operation of Building . During the Term, Landlord shall operate and maintain the Building in accordance with all applicable laws and regulations, including the obligation to maintain all common areas in the Building (including the lobby, common areas on multi-tenant floors, and ADA compliant bathrooms on multi-tenant floors), and the requirements of Landlord’s insurance carriers and standards, and shall provide the services set out in Sections 6.2 and 6.3.

 

7



 

6.2           Services to Premises . Landlord shall provide in the Premises the following services, which shall be provided in a manner consistent with Class A office towers in the Denver central business district (“ CBD ”):

 

(a)            heat, ventilation and cooling as required for the comfortable use and occupancy of the Premises during normal business hours to include HVAC cooling capacity to the Premises at approximately one (1) ton per 600 square feet and to a standard of comfort based on a temperature set point of 70 degrees to 74 degrees,

 

(b)            daily weekday cleaning and service of the restrooms located in the Premises, janitorial services at least five (5) days a week, and window washing, as further described on Exhibit E , provided Tenant shall leave the Premises in a reasonably tidy condition at the end of each business day,

 

(c)            electric power as supplied by the local utility company. Tenant shall be entitled to its pro rata share of the Base Building’s electrical capacity for each floor on which Tenant occupies space. The Base Building capacity for each floor includes: two 2771480 volt, three phase panels of 200 amps capacity; and two 1201208 volt, three phase panels of 100 amps capacity each, providing a minimum of six (6) watts per rentable square foot in the Premises of electrical capacity. Landlord shall not be required to supply to Tenant or the Premises electrical power in excess of Tenant’s pro rata share of the above stated Base Building capacity for items consistent with Tenant operations of unmetered areas beyond 12 hours per day, electrical power to computer rooms, to above Building Standard lighting fixtures, or to supplemental air conditioning equipment,

 

(d)            replacement of Building Standard LED lighting and ballasts as required from time to time as a result of normal usage,

 

(e)            domestic running water tempered for the Premises washrooms and necessary supplies in Premises washrooms sufficient for the normal use thereof by Tenant, its employees and customers, 24/7; and if Tenant installs a kitchen in the Premises and connects a water line to the kitchen as part of its Improvements, then Landlord will provide domestic running water service to the kitchen, and

 

(f)             maintenance, repair and replacement as set out in Section 6.4.

 

6.3           Building Service . Landlord shall provide in the Building the following services:

 

(a)            domestic running water tempered and necessary supplies in washrooms sufficient for the normal use thereof by occupants in the Building, 2417, and subject to Landlord’s repair and maintenance obligations,

 

(b)            access to and egress from the Premises, 24/7, including elevator service if included in the Building,

 

(c)            heat, ventilation, cooling, lighting, electric power, domestic running water and janitorial service in those areas of the Building from time to time designated by Landlord for

 

8



 

use during normal business hours by Tenant in common with all tenants and other persons in the Building but under the exclusive control of Landlord,

 

(d)            a general directory board on which Tenant shall be entitled to have its name shown, provided that Landlord shall have exclusive control thereof and of the space thereon to be allocated to each tenant,

 

(e)            the Building is currently be monitored 24 hours per day by recorded, digital, color cameras in the main floor common area and on-site guards; access outside of normal business hours shall be controlled by a card key system and on-site guards; and Landlord will continue to provide security services in the manner consistent with other Class A office towers in the CBD,

 

(f)             the Building shall have a wet-type sprinkler system servicing the entire Building comparable to other Class A office towers in the CBD, supplemented by two (2) fire pumps, with loud speakers and elevators controls, and be equipped with a fully-addressed life-safety system featuring smoke detection and activation on each floor, pressurized stairwells, a damper smoke exhaust system on each floor, emergency lighting, and elevator control systems; additionally, there shall be manual pull stations and smoke detectors with a voice and bell evacuation system, and

 

(g)            maintenance, repair and replacement as set out in Section 6.4.

 

6.4           Maintenance, Repair and Replacement . Landlord shall operate, maintain, repair and replace the systems, facilities and equipment necessary for the proper operation of the Building and for provision of Landlord’s services under Sections 6.2 and 6.3 (but not including any systems, facilities or equipment located in and exclusively servicing the Premises (expressly excluding the restrooms within the Premises) such as, without limitation, non-Building Standard items such as non-Building Standard lighting, partitioned glass, doors and frames, and non-Building Standard plumbing fixtures, such as sinks, water heaters, refrigerators, and garbage disposals, and supplemental air conditioning equipment, all of which Tenant shall be responsible for pursuant to Section 7.1), and shall maintain and repair the entrance lobbies, elevator cores and stairwells, vertical duct work, foundations, structure, roofing system and roof of the Building and repair damage to the Building, provided that,

 

(a)            if all or part of such systems, facilities and equipment are destroyed, damaged or impaired, Landlord shall have a reasonable time in which to complete necessary repair or replacement, and during that time shall be required only to maintain such services as are reasonably possible in the circumstances,

 

(b)            Landlord may temporarily discontinue such services or any of them at such times as may be reasonably necessary due to causes (except lack of funds) beyond the reasonable control of Landlord, provided that Landlord shall notify Tenant reasonably in advance of any such planned shutdown of services (except that no notice shall be required in the event of an emergency);

 

9



 

(c)            Landlord shall use reasonable diligence in carrying out its obligations under this Section 6.4, but shall not be liable under any circumstances for any consequential damage to any person or property for any failure to do so,

 

(d)            except as provided in subsection (f) below, no reduction or discontinuance of such services as permitted by this Lease shall be construed as an eviction of Tenant or release Tenant from any obligation of Tenant under this Lease,

 

(e)            nothing contained herein shall derogate from the provisions of Article 16, and

 

(f)             if, due to damage, maintenance, repair or replacement as contemplated by this Section 6.4, or due to discontinuation of services within the control of Landlord to be provided by Landlord as contemplated by this Section 6.4 that are within control of Landlord, the Premises or any portion thereof become untenable for a period in excess of five (5) business days, the Annual Rent and Occupancy Costs payable by Tenant hereunder shall be proportionately reduced based on the number of square feet within the Premises which are thereby rendered untenantable from the date that they become untenable until the earlier of (i) completion by Landlord of the repairs to the Premises (or the part thereof rendered untenantable), or restoration of services, as the case may be; or (ii) until Tenant again uses the Premises (or the part thereof rendered untenantable) in its business.

 

6.5           Additional Services and Utilities .

 

(a)            If from time to time requested in writing by Tenant, and to the extent that it is reasonably able to do so, Landlord shall provide in the Premises heat, ventilation and cooling during times other than normal business hours, provided that Tenant shall within 30 days of receipt of any invoice for any such additional service pay Landlord therefor at reasonable rates as Landlord may from time to time establish. The current rate is Ninety-nine and 86/100 Dollars ($99.86) per hour per floor. If from time to time requested in writing by Tenant, and to the extent that it is reasonably able to do so, Landlord shall provide in the Premises other services in addition to those set out in Section 6.2, provided that Tenant shall within 30 days of receipt of any invoice for any such additional service pay Landlord therefore at reasonable rates as Landlord may from time to time establish.

 

(b)            Tenant shall not without Landlord’s written consent install or operate in the Premises above-standard office equipment (including telephone equipment or lighting) which generates sufficient heat to materially affect the temperature otherwise maintained in the Premises by the air conditioning system as normally operated as described above. If Landlord reasonably determines that Tenant’s equipment is materially affecting the temperature required to be maintained by Landlord, Landlord will provide Tenant written notice with reasonable documentation, and if Tenant does not rectify the condition causing such excessive heat within thirty (30) days after receipt of Landlord’s notice, then Landlord may install supplementary air conditioning units, facilities or services in the Premises, or modify its air conditioning system, as may in Landlord’s reasonable opinion be required to maintain proper temperature levels, and Tenant shall pay Landlord within thirty (30) days of receipt of any invoice for the cost thereof, including installation, operation and maintenance expense. In the event that supplemental HVAC

 

10



 

is installed in the Premises, Tenant shall pay Landlord the reasonable rate, as Landlord may determine from time to time, charged per ton of connected load per month for Tenant’s use of condenser water provided by Landlord for supplemental HVAC units. The current rate is nineteen and 10/100 Dollars ($19.10) per ton of connected load per month for Tenant’s use of condenser water provided by Landlord. The price of condenser water may change from time to time based on Landlord’s costs to provide the service..

 

(c)            If Landlord shall from time to time reasonably determine that the use of electricity or any other utility or service in the Premises provided by Landlord pursuant to Section 6.2 above, is disproportionate to the use of other tenants, Landlord shall provide Tenant written notice with reasonable documentation of such disproportionate use, and Tenant shall have thirty (30) days to rectify the condition causing such disproportionate use. If Landlord reasonably determines such disproportionate use continues after such thirty (30) day period, Landlord may separately charge Tenant for, and Tenant shall pay to Landlord, the excess costs at reasonable rates attributable to such disproportionate use together with the costs incurred by Landlord in determining that Tenant’s use is disproportional. At Landlord’s request, Tenant shall install and maintain, at Tenant’s expense, metering devices for measuring the use of any such utility or service in the Premises.

 

6.6           Alterations by Landlord . Landlord may from time to time, in a workmanlike and professional manner:

 

(a)            make repairs, replacements, changes or additions to the structure, systems, facilities and equipment in the Premises) where necessary or desirable to serve the Premises or other parts of the Building,

 

(b)            make changes in or additions to any part of the Building not in or forming part of the Premises, and

 

(c)            change or alter the location of the Common Areas, provided that in doing so Landlord shall not alter the size of the Premises or materially disturb or interfere with Tenant’s use of the Premises and operation of its business, or deny reasonable access to the Premises.

 

6.7           Access by Landlord . Tenant shall permit Landlord to enter the Premises with reasonable notice (provided no notice shall be required for janitorial service or other regularly scheduled maintenance obligations) outside normal business hours, and during normal business hours where such will not unreasonably disturb or interfere with Tenant’s use of the Premises and operation of its business, to examine, inspect and show the Premises to persons wishing to lease them (except that Landlord shall not show the Premises to any brokers, potential tenants or their representatives until the last six (6) months of the Term, and only if Tenant has not exercised its renewal option) or to any lender, prospective lender or purchaser of the Building or Project (as defined in Exhibit B ), or any portion thereof or interest therein, to provide services or make repairs, replacements, changes or alterations as set out in this Lease, to monitor Tenant’s compliance with its obligations hereunder, and to take such steps as Landlord may reasonably deem necessary or desirable for the safety, improvement or preservation of the Premises or the Building. Landlord shall (except in an emergency) consult with or give reasonable notice to

 

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Tenant prior to such entry, but no such entry shall constitute an eviction or entitle Tenant to any abatement of Rent, or otherwise relieve Tenant of any of its obligations hereunder, except as expressly set forth in this Lease.

 

6.8           Energy, Conservation and Security . Landlord shall be deemed to have observed and performed the terms and conditions to be performed by Landlord under this Lease, including those relating to the provision of utilities and services, if in so doing it acts in accordance with a law or code of any governmental or quasi-governmental authority having jurisdiction, or as necessary to maintain the Building’s LEED status.

 

ARTICLE 7

 

MAINTENANCE, REPAIR, ALTERATIONS AND IMPROVEMENTS BY TENANT

 

7.1           Condition of Premises . Excluding those items Landlord is required to maintain under this Lease, Tenant shall maintain the Premises and all improvements therein in good order and in first-class condition and shall make repairs, replacements and alterations as needed, including those necessary to comply with the requirements of any governmental or quasi-governmental authority having jurisdiction.

 

7.2           Failure to Maintain Premises . If Tenant fails to perform any obligation under this Article 7 within the applicable notice and cure periods set forth in Article 19, then after not less than 10 business days’ written notice to Tenant specifying the obligation Tenant has failed to perform, Landlord may enter the Premises and perform such obligation without liability to Tenant for any loss or damage to Tenant thereby incurred, and without the same constituting an eviction or entitling Tenant to any abatement of Rent or otherwise relieving Tenant from any of its obligations hereunder, and Tenant shall pay Landlord for the cost thereof, plus 15% of such cost for overhead and supervision, within thirty (30) days of receipt of Landlord’s invoice therefor.

 

7.3           Alterations by Tenant . Tenant may from time to time at its own expense, make changes, additions and improvements in the Premises to better adapt the same to its business, provided that any change, addition or improvement shall

 

(a)            comply with the requirements of any governmental or quasi-governmental authority having jurisdiction and with the requirements of Landlord’s insurance carriers,

 

(b)            be made only with the prior written consent of Landlord (which shall not be unreasonably withheld, conditioned or delayed, provided, however, that in no event may changes be made to the structure or systems of the Building), provided that Tenant will not be required to obtain Landlord’s prior written consent to any non-structural change, addition or improvement not affecting Building systems, the aggregate cost of which in any instance is less than $50,000.00 in any Fiscal Year,

 

(c)            equal or exceed the then current standard for the Building and be performed in a good and workmanlike manner, and

 

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(d)            be carried out only by persons selected by Tenant and reasonably approved in writing by Landlord who shall if required by Landlord deliver to Landlord, before commencement of the work (i) proof of worker’s compensation in the amount required by statute; and (ii) commercial general liability and property damage insurance coverage, with Landlord and Landlord’s property management agent named as an additional insured, in amounts, with companies, and in a form reasonably satisfactory to Landlord, which shall remain in effect during the entire period in which the work will be carried out.

 

Any increase in property taxes on or fire or casualty insurance premiums for the Building solely attributable to such change, addition or improvements shall be borne solely by Tenant. if Landlord fails to respond to a requested alteration within thirty (30) days after receipt of Tenant’s written request, Landlord shall be deemed to have consented to the requested alteration.

 

7.4           Trade Fixtures and Personal Property . Tenant may install in the Premises its usual trade fixtures and personal property in a proper, lawful and workmanlike manner, without causing damage to the Premises, provided that no such installation shall interfere with or damage the mechanical or electrical systems or the structure of the Building. Prior to the vacation of the Premises, if applicable, or expiration or early termination of the Lease, trade fixtures and personal property installed in the Premises by Tenant shall, at Tenant’s sole expense, be removed from the Premises, and Tenant shall promptly repair at its own expense any damage to the Premises or Building resulting from such installation and removal.

 

7.5           Mechanic’s Liens . Tenant shall pay before delinquency all costs for work done or caused to be done by Tenant in the Premises which could result in any lien or encumbrance on Landlord’s interest in the Land or Building or any part thereof, shall keep the title to the Land or Building and every part thereof free and clear of any lien or encumbrance in respect of such work, and shall indemnify and hold harmless Landlord against any claim, loss, cost, demand and legal or other expense, whether in respect of any lien or otherwise, arising out of the supply of material, services or labor for such work. Tenant shall immediately notify Landlord of any such lien, claim of lien or other action of which it has or reasonably should have knowledge and which affects the title to the Land or Building or any part thereof, and shall cause the same to be removed within ten (10) business days, or shall post a bond in the amount of one and one-half times the amount of the lien within such ten (10) business day period, failing which Landlord may take such action as Landlord deems reasonably necessary to remove the same and the entire cost thereof shall be immediately due and payable by Tenant to Landlord. Tenant shall permit Landlord to post a notice on the Premises as may be contemplated by applicable law, as amended from time to time, or any comparable or other statutory provision for protection of the Building and the Project and Landlord’s interest therein from mechanic’s or other liens and to take all other actions Landlord may deem necessary and reasonable for Landlord to protect its interests in the Project from such liens.

 

7.6           Signs . Any sign, lettering, decal or design of Tenant placed in or upon the Premises which is visible from the exterior of the Premises or the Building (other than suite entry and directional signage) shall be at Tenant’s expense and subject to approval by Landlord (in its sole discretion); provided Landlord shall install Building standard directional and suite entrance identification on any multitenant floor at Landlord’s expense. Any sign, lettering, decal or design of Tenant placed in a Common Area shall conform to the uniform pattern of identification signs

 

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for tenants in the Building as prescribed by Landlord from time to time and shall be removed, and the surface it was located upon repaired and restored to the condition it was in prior to the installation of the same, by Tenant at its sole expense at or prior to the expiration of the Term. Tenant shall not inscribe or affix any sign, lettering, decal or design in the Premises or Building which is visible from the exterior of the Building. Notwithstanding the foregoing, Tenant shall have the right to install its corporate lettering and logo in the elevator lobby on any full floor occupied by Tenant, subject to Landlord’s reasonable consent as to the size of such signage.

 

ARTICLE 8

 

TAXES

 

8.1           Tenant’s Pro Rata Share . Tenant will reimburse Landlord for Tenant’s pro rata share of Taxes (as defined in Exhibit B ), as established as part of the Occupancy Costs set forth in Exhibit B attached hereto.

 

8.2           Tenant’s Other Taxes . In addition to Tenant’s pro rata share of Taxes, Tenant shall pay before delinquency every tax, assessment, license fee, excise and other charge, however described, which is imposed, levied, assessed or charged by any governmental or quasi-governmental authority having jurisdiction and which is payable in respect of the Term upon or on account of

 

(a)            operations at, occupancy of, or conduct of business in or from the Premises, and

 

(b)            fixtures or personal property in the Premises which do not belong to Landlord.

 

8.3           Right to Contest . Tenant shall have the right to contest in good faith the validity or amount of any tax, assessment, license fee, excise fee and other charge which it is responsible to pay under Section 8.2, and to withhold payment of the same during the pendency of such contest, provided Tenant shall provide Landlord evidence reasonably acceptable to Landlord, that no contest by Tenant will involve the possibility of forfeiture, sale or disturbance of Landlord’s interest in the Premises.

 

ARTICLE 9

 

INSURANCE

 

9.1           Landlord’s Insurance . During the Term, Landlord shall maintain at its own expense (subject to contribution by Tenant of its pro rata share of Occupancy Costs under Section 4.2) commercial general liability insurance insuring against claims for bodily injury personal injury, and property damage occurring at the Project in amounts not less than $5,000,000.00 for each occurrence and $5,000,000.00 general aggregate (provided, however, that such insurance may be provided in any combination of primary and follow-form excess insurance), all risk property and casualty insurance in an amount not less than the eighty percent (80%) of the insurable replacement cost of the Project (insuring against the usual hazards and casualties, including fire) with extended coverage, boiler and pressure vessel insurance, and

 

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other insurance on the Project and all property and interest of Landlord in the Project with coverage and in amounts deemed reasonable by Landlord from time to time. Policies for such insurance shall waive any right of subrogation against Tenant and all individuals and entities for who Tenant is responsible in law.

 

9.2           Tenant’s Insurance . During the Term, Tenant shall maintain at its own expense

 

(a)            property insurance against risks of direct physical loss equal to, at a minimum, amounts sufficient to cover all leasehold improvements paid for by Tenant, fixtures and property in the Premises at replacement cost value, and

 

(b)            commercial general liability insurance, with blanket contractual liability coverage with Landlord and Landlord’s agent named as an additional insured, against claims for death, personal injury and property damage in or about the Premises, in amounts not less than $5,000,000.00 for each occurrence and $5,000,000.00 general aggregate, provided, however, that such insurance may be provided in any combination of primary and follow-form excess insurance.

 

Policies for such insurance shall be obtained from financially reputable insurers rated not less than “ A minus ” by AM Best or equivalent rating agency, shall require at least fifteen (15) days written notice to Landlord of termination during the Term except in the event of cancellation due to non-payment of premium, then a ten (10) days written notice shall be given, and shall waive any right of subrogation against Landlord and individuals and entities for whom Landlord is responsible in law. Tenant shall deliver to Landlord on the Commencement Date and on each anniversary thereof, evidence reasonably satisfactory to Landlord of such policies and that the policies are in full force and effect.

 

ARTICLE 10

 

INJURY TO PERSON OR PROPERTY

 

10.1         Indemnity by Tenant . Tenant shall indemnify and hold harmless Landlord (and if Landlord requests, defend Landlord with counsel reasonably acceptable to Landlord) from and against liabilities, obligations, losses, damages, fines, penalties, demands, claims, causes of action, judgments, costs and expenses, including, without limitation, attorneys’ fees, which may be imposed on or incurred, suffered or paid by or asserted against Landlord or the Building or any interest therein, arising from or by reason of or in connection with:

 

(a)            the use, non-use, possession, occupation, condition, operation or maintenance of the Premises by Tenant or any of its agents, contractors, servants, employees, licensees or invitees;

 

(b)            any negligent or tortious act on the part of Tenant or any of its agents, contractors, servants, employees, licensees or invitees;

 

(c)            any accident, injury, death or damage to any person or property occurring in the Premises;

 

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(d)            any theft, loss or damage to, however caused, to books, records, data or information (computer generated or otherwise), files, money, securities, negotiable instruments or papers in or about the Premises;

 

(e)            any loss or damage resulting from Tenant’s negligent or willful interference with or obstruction of deliveries to or from the Premises; and

 

(f)             any pollutant, toxic or hazardous material, substance or waste, or any other material which may adversely affect the environment, whether or not now recognized to have such to effect, which Tenant, its employees, agents, contractors or invitees bring upon, keep, use or locate in, on or about the Building, or any release or disposal of any such material, substance or waste in, on, about or from the Building by any of the foregoing.

 

Nothing contained in this Section 10.1 shall be deemed to require Tenant to indemnify Landlord to any extent prohibited by law. Nothing contained in this Section 10.1 shall subject Tenant to any consequential or special damages.

 

10.2         Indemnity by Landlord . Landlord shall indemnify and hold harmless Tenant from and against liabilities, obligations, losses, damages, fines, penalties, demands, claims, causes of action, judgments, costs and expenses, including, without limitation, attorneys’ fees, which may be imposed on or incurred, suffered or paid by or asserted against Tenant, arising from or by reason of or in connection with any accident, injury, occurrence or damage in, about or to the Common Areas, the Building or the Project, (expressly excluding the Premises), except to the extent caused by the gross negligence or willful misconduct of Tenant or Tenant’s agents, contractors or employees; Nothing contained in this Section 10.2 shall be deemed to require Landlord to indemnify Tenant to any extent prohibited by law. Nothing contained in this Section 10.2 shall subject Landlord to any consequential or special damages.

 

10.3         Subrogation . The provisions of this Article 10 shall not abrogate or impair the waiver of any right of subrogation against Tenant in Landlord’s insurance under Section 9.1 and the waiver of any right of subrogation against Landlord in Tenant’s insurance under Section 9.2.

 

ARTICLE 11

 

ASSIGNMENT AND SUBLETTING

 

11.1         Assignment . Tenant, if not then in default beyond any applicable cure period under this Lease and with Landlord’s prior written consent, may assign this Lease, subject to Sections 11.3 and 11.4, to any assignee who, in Landlord’s reasonable opinion, will not be inconsistent with the character of the Building and its other tenants, will use the Premises in a manner consistent with Article 5 thereof, and has the financial capability of complying with the then remaining obligations of Tenant hereunder. Without limiting the foregoing, if Tenant is not then in default beyond any applicable cure period under this Lease, Tenant, without Landlord’s prior written consent (but with the obligation of written notice to Landlord), may assign this Lease to an entity controlling, controlled by or under common control with Tenant, or with or into which Tenant is merged, reorganized, or consolidated; or which purchases or accepts a transfer of Tenant’s stock, or which purchases all or substantially all of Tenant’s assets, other

 

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than by the operation of law which is otherwise prohibited by this Lease (each a “ Permitted Transferee ”). For purposes of this Section 11.1, “control” means the direct or indirect ownership of more than 50% of an entity’s equity.

 

11.2         Subleasing . Tenant, if not then in default beyond any applicable cure period under this Lease and with Landlord’s prior written consent and subject to Sections 11.3 and 11.4, may sublet all or any part of the Premises to a sublessee who, in Landlord’s reasonable opinion, will not be inconsistent with the character of the Building and its other tenants, will use the Premises in a manner consistent with Article 5 thereof, and has the financial capability of complying with its obligations set forth in the sublease. Without limiting the foregoing, if Tenant is not then in default beyond any applicable cure period under this Lease, Tenant, without Landlord’s prior written consent (but with the obligation of written notice to Landlord), may sublet all or part of the Premises to a Permitted Transferee.

 

11.3         First Offer to Landlord . Subject to Section 11.4 below, if Tenant wishes to sublet all or any part of the Premises pursuant to Section 11.2 above (except to a Permitted Transferee) prior to Tenant offering or accepting an offer to sublease the space to any third party, Tenant shall first offer in writing to sublet to Landlord on such terms as Tenant is willing to sublease to a third party. If Tenant wishes to assign this Lease (except to a Permitted Transferee) pursuant to Section 11.1 above, then prior to Tenant offering or accepting an offer to assign the Premises to any third party, Tenant shall first offer to Landlord in writing to surrender this Lease on the effective date of the proposed assignment by Tenant. Landlord will have fifteen (15) days from the receipt of Tenant’s offer to sublease or assign either to accept or reject it in writing. If Landlord fails to provide written notice of acceptance within said 15-day period, Landlord shall be deemed to have rejected Tenant’s offer, If Landlord accepts the offer, Tenant will then execute and deliver to Landlord, or to any party designated or named by Landlord, an assignment or sublease, as the case may be. If Landlord rejects, or is deemed to have rejected, Tenant’s offer to sublease or assign this Lease, then Tenant shall have the right to offer to sublease or assign to a third party on terms and conditions reasonably satisfactory to Tenant, and Landlord shall have no right to recapture; provided, if Tenant does not enter into a sublease or assignment with a third party within six (6) months from Landlord’s receipt of Tenant’s notice, Tenant shall again be obligated to re-offer the space to Landlord.

 

11.4         Limitation . Except as specifically provided in this Article 11.0, Tenant shall not assign or transfer this Lease or any interest therein or sublet or in any way part with possession of all or any part of the Premises, or permit all or any part of the Premises to be used or occupied by any other person. Any assignment, transfer or subletting or purported assignment, transfer or subletting except as specifically provided herein shall be null and void and of no force and effect without limiting Landlord’s right to approve or disapprove any assignment or sublease pursuant to Sections 11.1 and 11.2 hereof. Except as provided above for Permitted Transferees, Landlord shall not be required to consent to an assignment of this Lease or a sublease of all or part of the Premises by Tenant to, or the use or occupancy of all or part of the Premises by, any tenant in the Building. The rights and interests of Tenant under this Lease shall not be assignable by operation of law without Landlord’s written consent, which consent may be withheld in Landlord’s absolute discretion. Except with respect to an assignment or sublease to a Permitted Transferee, Tenant shall pay to Landlord immediately upon receipt by Tenant from time to time fifty percent (50%) of (a) all consideration paid by the assignee under an approved assignment for Tenant’s

 

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leasehold under this Lease in excess of the Annual Rent and Occupancy Costs payable by Tenant to Landlord under this Lease, excluding any consideration paid for Tenant’s personal property and other assets (excluding improvements and fixtures that are required to remain in the Premises at the end of the Term), the value of Tenant’s business as a going concern, Tenant’s Work paid for by Tenant in excess of the Allowance as provided in Article 22, and subsequent alterations paid for by Tenant, or (b) all revenue from any approved sublease which exceeds the sum of (i) all Annual Rent and Occupancy Costs payable by Tenant to Landlord under this Lease in respect of the Premises being subleased for the period of time to which such revenue under such sublease relates, and (ii) any actual, reasonable and customary out-of-pocket costs and expenses incurred by Tenant in connection with such subleasing, including, without limitation, brokerage commissions, improvement allowances, and rent concessions. All such amounts shall constitute Rent and be subject to all terms and provisions of this Lease, including, without limitation, Article 19 hereof. Upon Landlord’s approval of any assignment, use or occupation, Tenant shall pay to Landlord a reasonable charge to cover Landlord’s administrative costs in connection with that approval not to exceed $2,500.00 in each instance.

 

11.5         Tenant’s Obligations Continue . No assignment, transfer or subletting (or use or occupation of the Premises by any other person) which is permitted under this Article 11 shall in any way release or relieve Tenant of its obligations under this Lease.

 

11.6         Subsequent Assignments . Landlord’s consent to an assignment, transfer or subletting (or use or occupation of the Premises by any other person) shall not be deemed to be a consent to any subsequent assignment, transfer, subletting, use or occupation, all of which shall be permitted only in accordance with the provisions of this Article 11.

 

11.7         Building Directory Changes . The listing or posting of any name, other than that of Tenant, whether on the door or exterior wall of the Premises, the Building’s tenant directory in the lobby or elevator, or elsewhere, shall not:

 

(a)            constitute a waiver of Landlord’s right to withhold consent to any sublet or assignment pursuant to this Article 11;

 

(b)            be deemed an implied consent by Landlord to any sublet of the Premises or any portion thereof, to any assignment or transfer of the Lease, or to any unauthorized occupancy of the Premises, except in accordance with the express terms of the Lease; or

 

(c)            operate to vest any right or interest in the Lease or in the Premises.

 

ARTICLE 12

 

SURRENDER

 

12.1         Possession . Upon the expiration or other termination of the Term, subject to Article 13, all right, title and interest of Tenant in the Premises shall cease. Upon such expiration or other termination, Tenant shall immediately quit and surrender possession of the Premises in substantially the condition in which Tenant is required to maintain the Premises excepting only (I) reasonable wear and tear; and (ii) damage caused by casualty, provided Tenant assigns all insurance proceeds required to be maintained by Tenant from the casualty to the Improvements

 

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(as defined in Section 22.1 below). Tenant shall not be obligated to remove any of the initial Improvements or subsequent alterations, changes or improvements made by Tenant, provided that Landlord’s consent to such improvements is not conditioned on Tenant removing the same upon expiration or early termination of the Lease. Landlord shall not require the removal of any initial Improvements or subsequent improvements, alterations or changes if the same do not impact the base Building electrical or mechanical systems or structural nature of the Building. Tenant shall be required to remove: (a) internal staircase installed by Tenant, including repairing floor openings to slab condition, (b) all telecommunication equipment installed by Tenant where ever located, and as required by Section 21.3, (c) any “ Back-up Generator ” as described by Section 27.27 below, and (d) any initial Improvements or subsequent improvements, or subsequent alterations or changes made by Tenant that impacts the Building’s electrical, mechanical or structural systems which Landlord requires removal as a condition to its consent, and shall repair any damage caused by the removal all in accordance with the provisions of Article 7.

 

12.2         Trade Fixtures, Personal Property and Improvements . After the expiration or other termination of the Term, and after five (5) business days’ notice to Tenant, all of Tenant’s trade fixtures, personal property and improvements (which were required to be removed) remaining in the Premises shall be deemed conclusively to have been abandoned by Tenant and may be appropriated, sold, destroyed or otherwise disposed of by Landlord without obligation to compensate Tenant or to account therefor, and Tenant shall pay to Landlord on written demand the actual costs incurred by Landlord in connection therewith.

 

12.3         Merger . The voluntary or other surrender of this Lease by Tenant or the cancellation of this Lease by mutual agreement of Tenant and Landlord shall not work a merger, and shall at Landlord’s option terminate all or any subleases and subtenancies or operate as an assignment to Landlord of all or any subleases or subtenancies. Landlord’s option hereunder shall be exercised by notice to Tenant and al! known sublessees or subtenants in the Premises or any part thereof.

 

12.4         Payments After Termination or Notice . Subject to Article 13, no payments of money by Tenant to Landlord after the expiration or other termination of the Term or after the giving of any notice of default (other than a demand for payment of money) by Landlord to Tenant, shall reinstate, continue or extend the Term or make ineffective any notice of default given to Tenant prior to the payment of such money. After the service of notice or the commencement of a suit, or after final judgment granting Landlord possession of the Premises, Landlord may receive and collect any sums of Rent due under this Lease, and the partial payment thereof shall not make ineffective any notice of default, or in any manner affect any pending suit or any judgment theretofore obtained.

 

ARTICLE 13

 

HOLDING OVER

 

13.1         Month-to-Month Tenancy . If with Landlord’s prior written consent, which may be withheld in Landlord’s sole discretion, Tenant remains in possession of the Premises after the expiration or other termination of the Term, Tenant shall be deemed to be occupying the

 

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Premises on a month-to-month tenancy only, at a monthly rental equal to 150% of the last monthly installment of Rent as determined in accordance with Article 4, and such month-to-month tenancy may be terminated by Landlord or Tenant on the last day of any calendar month by delivery of at least 30 days advance notice of termination to the other.

 

13.2         Tenancy at Sufferance . If without Landlord’s written consent, which may be withheld in Landlord’s sole discretion, Tenant remains in possession of the Premises after the expiration or other termination of the Term, Tenant shall have committed an unlawful detention of the Premises and Landlord shall be entitled to all rights and remedies available at law or equity as a result thereof; provided, however, that if at any time after the expiration or termination of the Term, Landlord so notifies the Tenant in writing, Tenant shall be deemed to be occupying the Premises upon a tenancy at sufferance only, at a monthly rental rate equal to two (2) times the monthly installments of Rent for the last month of the Term determined in accordance with Article 4. Such tenancy at sufferance may be terminated by Landlord at any time by notice of termination to Tenant, and by Tenant by written notice to Landlord at any time within the first fifteen (15) days of such tenancy at sufferance, and thereafter on the last day of any calendar month by at least 30 days advance notice of termination to Landlord. Notwithstanding the foregoing, Landlord shall also be entitled to such other remedies and damages provided under this Lease or at law as a result of such tenancy at sufferance.

 

13.3         General . Any month-to-month tenancy or tenancy at sufferance hereunder shall be subject to all other terms and conditions of this Lease except any right of extension or rights of first refusal.

 

ARTICLE 14

 

RULES AND REGULATIONS

 

14.1         Purpose . The Rules and Regulations in Exhibit C have been adopted by Landlord for the safety, benefit and convenience of all tenants and other persons in the Building.

 

14.2         Observance . Tenant shall at all times comply with, and shall cause its employees, agents, licensees and invitees to comply with, the Rules and Regulations from time to time in effect.

 

14.3         Modification . Landlord may from time to time, for the purposes set out in Section 14.1, amend, delete from, or add to the Rules and Regulations, provided that any such modification

 

(a)            shall not be inconsistent with any other provision of this Lease,

 

(b)            shall be reasonable and have general application to all similarly situated tenants in the Building, and

 

(c)            shall be effective only upon delivery of a copy thereof to Tenant at the Premises.

 

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14.4         Non-Compliance . Landlord shall use reasonable efforts to secure compliance by all tenants and other persons with the Rules and Regulations from time to time in effect, but shall not be responsible to Tenant for failure of any person to comply with such Rules and Regulations nor shall any such failure relieve Tenant of its obligation to comply with the Rules and Regulations.

 

14.5         Rules Modified . Notwithstanding any provision in Exhibit C to the contrary or otherwise, Tenant may, without the prior consent or approval of Landlord: (a) arrange for caterers and other food and beverage vendors of its choice to deliver food, beverages and ancillary items to the Premises, and Landlord will cooperate with Tenant in good faith to facilitate such deliveries, and (b) have and use on the Premises equipment for dispensing and preparing food and beverages for consumption on the Premises, including, but not limited to, a beer keg, toasters, panini presses, soda dispensers and an electric warming drawer, provided any such use shall not be in violation of any code or ordinance (including fire and life safety), require any additional venting, or be prepared using an open flame. Tenant’s preparation of food shall not be detectable outside of the Premises or create odors which would disrupt another tenant’s use or enjoyment of its premises.

 

ARTICLE 15

 

EMINENT DOMAIN

 

15.1         Taking of Premises . If during the Term, all of the Building or the Premises is permanently taken for any public or quasi-public use under any statute or by right of eminent domain, or purchased under threat of such taking, this Lease shall automatically terminate on the date on which the condemning authority takes possession of the Premises (the “ Date of Such Taking ”).

 

15.2         Partial Taking of Building . If during the Term, only part but a substantial part of the Building is taken or purchased as set out in Section 15.1, then

 

(a)            if in the reasonable opinion of Landlord, substantial alteration or reconstruction of the Building is necessary or desirable as a result thereof, whether or not the Premises are or may be affected, Landlord shall have the right to terminate this Lease by giving Tenant at least 30 days written notice of such termination, provided that Landlord also terminates the leases of similarly situated or affected tenants, which notice shall be given within 30 days after the Date of Such Taking, and

 

(b)            if more than 25% of the rentable square feet in the Premises is included in such taking or purchase, and Landlord is unable to provide Tenant with comparable contiguous replacement premises in the Project, Tenant shall have the right to terminate this Lease by giving at least 30 days written notice thereof, which notice shall be given within the later to occur of 30 days after Landlord confirms that it is not able to provide Tenant with comparable contiguous replacement premises in the Building, or 30 days after the Date of Such Taking, if in Tenant’s reasonable judgment, the Premises cannot be operated by Tenant in an economically viable fashion because of such partial taking.

 

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If either party exercises its right of termination hereunder, this Lease shall terminate on the date stated in the notice, provided, however, that Tenant shall have a commercially reasonable period of time to vacate the Premises.

 

15.3         Surrender . On any such date of taking under Sections 15.1 or 15.2, Tenant shall immediately surrender to Landlord the Premises or portion thereof taken and all interests therein under this Lease. Landlord may re-enter and take possession of the Premises, or portion thereof taken, and remove Tenant therefrom, and the Rent shall no longer accrue from the Date of Such Taking, as to the Premises or portion thereof taken, and if only a portion of the Premises is included as a part of such taking, then that portion of the Rent attributable to such portion, determined by Landlord pro rata based on the number of rentable square feet contained within Such portion, shall no longer accrue from the Date of Such Taking_ After such termination, and on notice from Landlord stating the Rent then owing, Tenant shall forthwith pay Landlord such Rent.

 

15.4         Partial Taking of Premises . If any portion of the Premises (but less than the whole thereof) is so taken, and no rights of termination herein conferred are timely exercised, the Term of this Lease shall expire with respect to the portion so taken on the Date of Such Taking. In such event, the Rent payable hereunder with respect to such portion so taken shall no longer accrue from such date, and the Annual Rent and Occupancy Costs thereafter payable with respect to the remainder not so taken shall be adjusted pro rata by Landlord in order to account for the resulting reduction in the number of square feet in the Premises.

 

15.5         Awards . Upon any such taking or purchase, Landlord shall be entitled to receive and retain the entire award or consideration for the affected lands and improvements subject to the rights of any mortgagee of Landlord’s interest in the Land or the Building as their respective interests may appear, and Tenant shall not have or advance any claim against Landlord or the condemning authority for the value of its leasehold estate or the unexpired Term of this Lease. Nothing herein shall give Landlord any interest in or preclude Tenant from seeking and recovering on its own account from the condemning authority any award or compensation attributable to the taking or purchase of Tenant’s chattels and trade fixtures, or attributable to Tenant’s removal or relocation expenses; and business interruption or other damages arising out of the taking or purchase; provided that any such separate claim by Tenant shall not reduce or adversely affect the amount of Landlord’s award. If any such award made or compensation paid to either party specifically includes an award or amount for the other, the party first receiving the same shall promptly account therefore to the other.

 

ARTICLE 16

 

DAMAGE BY FIRE OR OTHER CASUALTY

 

16.1         Limited Damage to Premises . If all or part of the Premises are rendered untenantable by damage from fire or other casualty which in Landlord’s reasonable opinion, as set forth in a written notice given to Tenant within sixty (60) days after the casualty, can be substantially repaired under applicable laws and governmental regulations within 270 days from the date of such casualty (employing normal construction methods without overtime or other premium), Landlord shall within said 270 days (subject to the rights of any mortgagee of the

 

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Land or the Building in and to such insurance proceeds), repair such damage, including damage to the leasehold improvements in the Premises paid for by Landlord and improvements made by Tenant and not designated by Landlord to be removed at the end of the Term. Landlord will not be required to repair any damage to any leasehold improvements paid for by Tenant and required to be removed at the end of the Term in excess of the amount covered by proceeds from Tenant’s insurance policy covering such improvements. Landlord will have no obligation to repair or restore any other property of Tenant (such as Tenant’s furniture or trade fixtures), and Tenant, at its expense, will repair or restore such property to the extent Tenant elects. In the event that in the reasonable opinion of Landlord or Tenant such damage by fire or casualty cannot be substantially repaired within such 270 day period, then either party can terminate this Lease by written notice to the other within ninety (90) days after the date of casualty.

 

16.2         Major Damage to Premises . If all or part of the Premises are rendered untenantable by damage from fire or other casualty which in Landlord’s or Tenant’s reasonable opinion, as set forth in a written notice given to Tenant or Landlord given within sixty (60) days after the casualty, cannot be substantially repaired under applicable laws and governmental regulations within 270 days from the date of such casualty (employing normal construction methods without overtime or other premium), then either Landlord or Tenant may elect to terminate this Lease as of the date of such casualty by written notice delivered to the other not more than thirty (30) days after the first notice described in this Section 16.2, failing which Landlord shall as soon as reasonably practical (subject to the rights of any mortgagee of the Land or the Building in and to such insurance proceeds), repair such damage other than damage to improvements, furniture, chattels or trade fixtures which do not belong to Landlord, which shall be repaired forthwith by Tenant at its own expense.

 

16.3         Abatement . If Landlord is required to repair damage to all or part of the Premises under Sections 16.1 or 16.2, the Annual Rent and Occupancy Costs payable by Tenant hereunder shall be proportionately reduced based on the number of square feet within the Premises which are thereby rendered untenantable from the date of such casualty until five days after completion by Landlord of the repairs to the Premises (or the part thereof rendered untenantable) or until Tenant again uses the Premises (or the part thereof rendered untenantable) in its business, whichever first occurs.

 

16.4         Major Damage to Building . If all or a substantial part (whether or not including the Premises) of the Building is rendered untenantable by damage from fire or other casualty to such a material extent that Landlord determines not to repair the same. Landlord may elect to terminate this Lease as of the date of such casualty (or on the date of notice if the Premises are unaffected by such casualty) by written notice delivered to Tenant not more than 60 days after the date of such casualty, and provided Landlord terminates the leases of similarly situated tenants. If Landlord elects not to terminate this Lease, Landlord shall, but only to the extent that sufficient insurance proceeds are available therefor (and subject to the rights of any mortgagee of the Land or the Building in and to such insurance proceeds), commence repair of the damaged portion of the Building, and the Lease shall remain in full force and effect in accordance with its terms, subject to Section 16.3 above. If Landlord does not receive insurance proceeds sufficient to restore the Building, Landlord shall provide written notice thereof to Tenant promptly upon becoming aware of same, and Tenant shall have the right to terminate this Lease by providing written notice to Landlord within thirty (30) days after receipt of Landlord’s notice.

 

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16.5         Limitation on Landlord’s Liability . Except as specifically provided in this Article 16, there shall be no reduction of Rent and Landlord shall have no liability to Tenant by reason of any injury to or interference with Tenant’s business or property arising from fire or other casualty, howsoever caused, or from the making of any repairs resulting therefrom in or to any portion of the Building or the Premises.

 

ARTICLE 17

 

TRANSFERS BY LANDLORD

 

17.1         Sale, Conveyance and Assignment . Nothing in this Lease shall restrict the right of Landlord to sell, convey, assign or otherwise deal with the Building, subject only to the rights of Tenant under this Lease.

 

17.2         Effect of Sale, Conveyance, or Assignment . Provided that the transferor delivers to the transferee any funds the transferor holds in which Tenant has an interest (such as a security deposit) and the transferee assumes this Lease in writing, a sale, conveyance or assignment of the Building shall operate to release Landlord from liability accruing from and after the effective date thereof upon all of the covenants, terms and conditions of this Lease, express or implied, except as such may relate to the period prior to such effective date, or a condition in existence prior to such effective date, and effective as of such effective date, Tenant shall look solely to Landlord’s successor in interest in and to this Lease with respect to liability originating on and after such effective date. This Lease shall not be affected by any such sale, conveyance or assignment, and Tenant shall immediately and automatically attorn to Landlord’s successor in interest thereunder. Such attornment shall be effective and self-operative upon Landlord’s sale, conveyance or assignment of the Building, without the execution of any further instruments or the undertaking of any further acts, provided however, that Landlord shall give proper written notice to Tenant of such transfer.

 

17.3         Subordination . This Lease is and shall be subject and subordinate in all respects to all mortgages or deeds of trust and assignments of leases and rents in effect on the Effective Date and encumbering the Building or Land and to all extensions, amendments, modifications, supplements, consolidations, extensions, revisions and replacements thereof and to all advances made or hereafter made upon the security thereof. . This Lease shall be subject and subordinate in all respects to any mortgage or deed of trust and assignment of leases and rents coming into effect after the Effective Date and encumbering the Building or Land on the condition that the holder of such future mortgage, deed of trust and assignment of leases and rents agrees in writing not to disturb the tenancy of Tenant under this Lease in the event of foreclosure so long as an Event of Default is not continuing. However, a holder of any mortgage or deed of trust may elect to subordinate, in whole or in part, by an instrument in form and substance satisfactory to the holder, the mortgage or deed of trust to this Lease. Notwithstanding the foregoing, Landlord will use commercially reasonable efforts to obtain from the current lender the Subordination, Non-Disturbance and Attornment Agreement attached hereto as Exhibit F ; provided the parties acknowledge that Exhibit F includes Tenant’s requested changes to lender’s standard form and Tenant shall be obligated to negotiate any changes included therein directly with lender.

 

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17.4         Attornment . Subject to Section 17.5, if the Building is transferred to any person or entity (herein called “ Purchaser ”) by reason of foreclosure or other proceedings for enforcement of a mortgage or deed of trust, or by delivery of a deed in lieu of such foreclosure or other proceedings, or if the rights under any assignment of leases and rents are exercised by the holder thereof, Tenant shall immediately and automatically attorn to Purchaser or the holder of the assignment of leases and rents, as the case may be upon receipt of proper notice of such assignment.

 

17.5         Non-disturbance . No attornment under Section 17.4 shall be effective unless (and until):

 

(a)            the holder of the mortgage or deed of trust has subordinated, in whole or in part, the mortgage or deed of trust to this Lease, or

 

(b)            Purchaser delivers to Tenant a written undertaking binding upon Purchaser and enforceable by and for the benefit of Tenant under applicable law, that this Lease and Tenant’s rights hereunder shall continue undisturbed while Tenant is not in default despite such enforcement proceedings and transfer.

 

17.6         Effect of Attornment . Upon attornment under Section 17.4, this Lease shall continue in full force and effect as a direct lease between Purchaser (or the holder of the assignment of leases and rents if applicable) and Tenant, upon all of the same terms, conditions and covenants as are set forth in this Lease except that, after such attornment, Purchaser (or the holder of the assignment of leases and rents if applicable) shall not be

 

(a)            subject to any offsets or defenses which Tenant might have against Landlord, excluding Tenant’s express abatement and/or offset rights set forth in this Lease that accrue after the time that Purchaser takes possession of the Building, or

 

(b)            bound by any prepayment by Tenant of more than one month’s installment of Rent, unless such prepayment shall have been approved in writing by, in the case of a transfer in connection with a foreclosure, deed in lieu of foreclosure or other proceedings relating to any such mortgage or deed of trust, the mortgagee of Landlord’s interest in the Land or Building, by Purchaser or by any predecessor in interest of Purchaser except Landlord or, in the case of the exercise of the rights under any assignment of leases and rents, by the holder of such assignment of leases and rents or by any predecessor in interest of such holder, or

 

(c)            subject to the obligations hereunder except, in the case of a transfer in connection with a foreclosure, deed in lieu of foreclosure or other proceedings relating to any such mortgage or deed of trust, during the period of Purchasers ownership of the Building or Land; or, in the case of the exercise of the rights under any assignment of leases and rents, by the holder of such assignment of leases and rents or by any predecessor in interest of such holder, during the period after Landlord’s default and prior to the Purchaser acquiring legal title to the Building or Land, or

 

(d)            liable for any previous act or omission by Landlord under this Lease; provided such Purchaser shall be subject to the obligations of Landlord hereunder during the period of Purchaser’s ownership of the Building or Land, or

 

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(e)            obligated with respect to any security deposit under this Lease unless such security deposit has been physically delivered to Purchaser or holder of any assignment of leases and rents, as the case may be, or

 

(f)             bound or liable under any provisions in this Lease whereby Landlord assumed the obligations of Tenant covering space in other buildings.

 

17.7         Execution of Instruments . The subordination and attornment provisions of this Article 17 shall be self-operating and (except as specifically required in Section 17.3) no further instrument shall be necessary. Nevertheless Tenant, on request by and without cost to Landlord or any successor in interest, shall execute and deliver any and all commercially reasonable estoppels and/or subordination, non-disturbance and attornment agreements further evidencing such subordination and (where applicable hereunder) attornment.

 

ARTICLE 18

 

NOTICES, ACKNOWLEDGEMENTS, AND AUTHORITIES FOR ACTION

 

18.1         Notices . All notices, demands, billings, consents or other instruments or communications provided for under this Lease shall be in writing, signed by the party giving the same, and shall be deemed properly given and received (a) when actually hand delivered and received or (b) three business days after placement in the United States mail, if sent by registered or certified mail, postage prepaid, or (c) the business day following delivery to an overnight courier service, if such courier service obtains a written acknowledgement of receipt, addressed, if to Tenant prior to the Commencement Date at:

 

SendGrid, Inc.
1451 Larimer Street, 2nd floor
Denver, Colorado 80202

 

and thereafter, at

 

SendGrid, Inc.
1801 California Street
Suite 500
Denver, CO 80202

 

and, if to Landlord, at the address set forth in the first paragraph of this Lease, with a copy to:

 

Brookfield Office Properties
U.S. Commercial Operations
Figueroa at Wilshire
601 South Figueroa Street, Suite 2200
Los Angeles, CA 90017
Attention: Vice President - Regional Counsel

 

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or, at such other addresses as either party may notify the other of in writing in the manner provided in this Section 18.1.

 

18.2         Acknowledgements . Tenant shall at any time and from time to time, within 10 days after Landlord’s written request, execute, acknowledge and deliver a written statement, with the form and substance of such notice and the party or parties to whom it is addressed to be reasonably determined by Landlord, ratifying this Lease and, except as otherwise noted by Tenant in the statement, certifying as to the truth or untruth of the matters as are set forth in such statement. Any such statement may be relied upon by any prospective transferee or encumbrancer of all or any portion of the Building or any assignee of any such persons. If Tenant fails to timely deliver such statement, Tenant shall be deemed to have acknowledged that this Lease is in full force and effect, without modification except as may be represented by Landlord, and that there are no uncured defaults in Landlord’s performance.

 

18.3         Authorities for Action . Landlord may act in any matter provided for herein by its property manager, or any of its officers or general partners and any other person who shall from time to time be designated by Landlord by notice to Tenant. Tenant shall designate in writing one or more persons to act on its behalf in any matter provided for herein and may from time to time change, by notice to Landlord, such designation. In the absence of any such designation, the person or persons executing this Lease for Tenant and Landlord shall be deemed to be authorized to act on behalf of Tenant and Landlord respectively, in any matter provided for herein.

 

ARTICLE 19

 

TENANT’S DEFAULT AND LANDLORD’S REMEDIES

 

19.1         Interest and Costs . Tenant shall pay monthly to Landlord interest at a rate equal to the 1.5% per month, on all Rent required to be paid hereunder from the due date for payment thereof until the same is fully paid and satisfied. Tenant shall indemnify Landlord against all costs and charges (including legal fees) lawfully and reasonably incurred in enforcing payment thereof, and in obtaining possession of the Premises after default of Tenant or upon expiration or earlier termination of the Term of this Lease, or in enforcing any covenant, proviso or agreement of Tenant herein contained.

 

19.2         Events of Default . Each of the following events will constitute a material breach by Tenant and an “ Event of Default ” under this Lease:

 

(a)            Failure to Pay Rent . Tenant fails to pay Annual Rent, Occupancy Costs or any Other Charges payable by Tenant under the terms of this Lease when due, and such failure continues for five (5) days after written notice from Landlord to Tenant of such failure; provided that with respect to Annual Rent and Occupancy Costs, Tenant will be entitled to only two notices of such failure during any calendar year and if, after two such notices are given in any calendar year, Tenant fails, during such calendar year, to pay any such amounts when due, such failure will constitute an Event of Default without further notice by Landlord or additional cure period.

 

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(b)            Failure to Perform Other Obligations . Tenant breaches or fails to comply in with any other provision of this Lease applicable to Tenant, and such breach or noncompliance continues for a period of ten (10) days after notice by Landlord to Tenant; or, if such breach or noncompliance cannot be reasonably cured within such ten (10) day period, Tenant does not in good faith continuously and diligently commence to cure such breach or noncompliance within such ten (10) day period, and does not diligently complete such cure within forty five (45) days after receipt of such notice from Landlord. However, if such breach or noncompliance causes or results in (I) a dangerous condition on the Premises or Building, (ii) any insurance coverage carried by Landlord or Tenant with respect to the Premises or Building being jeopardized, or (iii) a material disturbance to another tenant, then an Event of Default will exist if such breach or noncompliance is not cured as soon as reasonably possible after notice by Landlord to Tenant, and in any event is not cured within ten (10) days after such notice. For purposes of this subsection 19.2(b), financial inability will not be deemed a reasonable ground for failure to immediately cure any breach of, or failure to comply with, the provisions of this Lease.

 

(c)            Transfer of interest Without Consent . Tenant’s interest under this Lease or in the Premises is transferred or passes to, or devolves upon, any other party in violation of Article 11.

 

(d)            Execution and Attachment Against Tenant . Tenant’s interest under this Lease or in the Premises is taken upon execution or by other process of law directed against Tenant, or is subject to any attachment by any creditor or claimant against Tenant and such attachment is not discharged or disposed of within 20 days after levy.

 

(e)            Bankruptcy or Related Proceedings . Tenant files a petition in bankruptcy or insolvency, or for reorganization or arrangement under any bankruptcy or insolvency laws, or voluntarily takes advantage of any such laws by answer or otherwise, or dissolves or makes an assignment for the benefit of creditors, or involuntary proceedings under any such laws or for the dissolution of Tenant are instituted against Tenant, or a receiver or trustee is appointed for the Premises or for all or substantially all of Tenant’s property, and such proceedings are not dismissed or such receivership or trusteeship vacated within 60 days after such institution or appointment.

 

19.3         Landlord’s Remedies . Time is of the essence. If any Event of Default occurs, Landlord will have the right, at Landlord’s election, then or at any later time, to exercise any one or more of the remedies described below. Exercise of any of such remedies will not prevent the concurrent or subsequent exercise for any other remedy provided for in this Lease or otherwise available to Landlord at law or in equity.

 

(a)            Cure by Landlord . Landlord may, at Landlord’s option but without obligation to do so, and without releasing Tenant from any obligations under this Lease, make any payment or take any action as Landlord reasonably deems necessary or desirable to cure any Event of Default in such manner and to such extent as Landlord deems necessary or desirable. Landlord may do so without additional demand on, or additional written notice to, Tenant and without giving Tenant an additional opportunity to cure such an Event of Default. Tenant covenants and agrees to pay Landlord, upon demand, all advances, costs and expenses of

 

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Landlord in connection with making any such payment or taking any such action, including reasonable attorney’s fees, together with interest at the rate described in Section 19.1 from the date of payment of any such advances, costs and expenses by Landlord.

 

(b)            Termination of Lease and Damages . Landlord may terminate this Lease, effective at such time as may be specified by written notice to Tenant, and demand (and, if such demand is refused, recover) possession of the Premises from Tenant. Tenant will remain liable to Landlord for damages in an amount equal to the Annual Rent, Occupancy Costs and Other Charges which would have been owing by Tenant for the balance of the Term had this Lease not been terminated, less the net proceeds, if any, of any reletting of the Premises by Landlord subsequent to such termination, after deducting all Landlord’s expenses in connection with such recovery of possession or reletting. Landlord will be entitled to collect and receive such damages from Tenant on the days on which the Annual Rent, Occupancy Costs and Other Charges would have been payable if this Lease had not been terminated. Alternatively, at Landlord’s option, Landlord will be entitled to recover from Tenant, as damages for loss of the bargain and not as a penalty, an aggregate sum equal to (i) all unpaid Annual Rent, Occupancy Costs and Other Charges for any period prior to the termination date of this Lease (including interest from the due date to the date of the award at the rate described in Section 19.1), plus any other sum of money and damages owed by Tenant to Landlord for events or actions occurring prior to the termination date; plus (ii) the present value at the time of termination (calculated at the Prime Rate of the Wells Fargo Denver, N.A. or its successor on the termination date) of the amount, if any, by which (A) the aggregate of the Annual Rent, Occupancy Costs, and all Other Charges payable by Tenant under this Lease that would have accrued for the balance the Term after termination (with respect to Occupancy Costs, such aggregate will be calculated by assuming that Occupancy Costs for the Fiscal Year in which termination occurs and for each subsequent Fiscal Year remaining in the Term of this Lease had not been terminated will increase by 8% per year over the amount of Occupancy Costs for the prior Fiscal Year), exceeds (B) the amount of such Annual Rent, Occupancy Costs and Other Charges which Landlord will receive for the remainder of the Term from any reletting of the Premises occurring prior to the date of the award, or if the Premises have not been relet prior to the date of the award the amount, if any, of such Annual Rent, Occupancy Costs and Other Charges which could reasonably be recovered reletting the Premises for the remainder of the Term at the then-current fair rental value, in either case taking into consideration loss of Rent while finding a new tenant, the amortized portion of the tenant improvements provided for a new tenant for the remainder of the Term, and rent abatements necessary to secure a new tenant, leasing brokers’ commissions and other costs which Landlord has incurred or might incur in leasing the Premises to new tenant; plus (iii) interest on the amount described in (ii) above from the termination date to the date of the award at the rate described in Section 19.1.

 

(c)            Repossession and Reletting . Landlord may lawfully reenter and take possession of all or any part of the Premises, without additional demand or notice, and repossess the same and expel Tenant and any party claiming by, through or under Tenant, and remove the effects of both as and to the extent permitted by Colorado law, without prejudice to any remedies for arrears of Rent or right to bring any proceeding for breach of covenants or conditions. No such reentry or taking possession of the Premises by Landlord will be construed as an election by Landlord to terminate this Lease unless a written notice of such intention is given to Tenant. No notice from Landlord or notice given under a forcible entry and detainer statute or similar laws

 

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will constitute an election by Landlord to terminate this Lease unless such notice specifically so states. Landlord reserves the right, following any reentry or reletting, to exercise its right to terminate this Lease by giving Tenant such written notice, in which event the Lease will terminate as specified in such notice. After recovering possession of the Premises, Landlord may, from time to time, but will not be obligated to, relet all or any part of the Premises for Tenant’s account, for such term or terms and on such conditions and other terms as Landlord, in its discretion, determines. Landlord may make such repairs, alterations or improvements as Landlord considers appropriate to accomplish such reletting, and Tenant will reimburse Landlord upon demand for al] costs and expenses, including attorneys’ fees, which Landlord may incur in connection with such reletting. Landlord may collect and receive the rents for such reletting but Landlord will in no way be responsible or liable for any failure to relet the Premises or for any inability to collect any rent due upon such reletting. Regardless of Landlord’s recovery of possession of the Premises, Tenant will continue to pay on the dates specified in this Lease, the Annual Rent, Occupancy Costs, and Other Charges which would be payable if such repossession had not occurred, less a credit for the net amounts, if any, actually received by Landlord through any reletting of the Premises. Alternatively, at Landlord’s option, Landlord will be entitled to recover from Tenant, as damages for loss of the bargain and not as a penalty, an aggregate sum equal to (i) all unpaid Annual Rent, Occupancy Costs and Other Charges for any period prior to the repossession date (including interest from the due date to the date of the award at the rate described in Section 19.1), plus any other sum of money and damages owed by Tenant to Landlord for events or actions occurring prior to the repossession date plus (ii) the present value at the time of repossession (calculated at the Prime Rate of the Wells Fargo Denver, N. A. or its successor on the repossession date) of the amount, if any, by which (A) the aggregate of the Annual Rent, Occupancy Costs and all Other Charges payable by Tenant under this Lease that would have accrued for the balance of the Term after repossession (with respect to Occupancy Costs, such aggregate will be calculated by assuming that Occupancy Costs for the Fiscal Year in which repossession occurs and for each subsequent Fiscal Year remaining in the Term if Landlord had not repossessed the Premises will increase by 8% per year over the amount of Occupancy Costs for the prior Fiscal Year), exceeds (13) the amount of such Annual Rent, Occupancy Costs and Other Charges which Landlord will receive for the remainder of the Term from any reletting of the Premises occurring prior to the date of the award, the amount, if any, of such Annual Rent, Occupancy Costs and Other Charges which could reasonably be recovered by reletting the Premises for the remainder of the Term at the then-current fair rental value, in either case taking into consideration loss of Rent while finding a new tenant, the amortized portion of tenant improvements provided to a new tenant for the remainder of the Term, and rent abatements necessary to secure a new tenant, leasing brokers’ commissions and other costs which Landlord has incurred or might incur in leasing the Premises to a new tenant: plus (iii) interest on the amount described in (ii) above from the repossession date to the date of the award at the rate described in Section 19.1.

 

(d)            Bankruptcy Relief . Nothing contained in this Lease will limit or prejudice Landlord’s right to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization or dissolution proceeding, an amount equal to the maximum allowable by any laws governing such proceeding in effect at the time when such damages are to be proved, whether or not such amount be greater, equal or less than the amounts recoverable, either as damages or Rent, under this Lease.

 

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19.4         Effect on Subleases . Whether or not Landlord elects to terminate this Lease on account of any default by Tenant, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord’s sole discretion, succeed to Tenant’s interest in such subleases, licenses, concessions or arrangements. In the event of Landlord’s election to succeed to Tenant’s interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.

 

19.5         Landlord Default and Self Help . If Landlord defaults in the performance of any of its obligations under this Lease, Tenant will notify Landlord in writing of the default and Landlord will have a reasonable period of time, not to exceed thirty (30) days, to cure the default; provided, however, if the default cannot reasonably be cured within such thirty (30) day period, then Landlord will have an additional reasonable period of time to cure the default as long as Landlord commences the cure within the thirty (30) day period and thereafter diligently pursues the cure. If Landlord fails to perform any of its obligations required by Article 6, and such failure solely and materially affects Tenant’s use and occupancy of the Premises, then after notice and Landlord’s failure to cure such breach within such thirty (30) day period thereafter, or such reasonable additional period if Landlord is diligently and continuously proceeding with such repair, then Tenant shall have the right to provide Landlord written notice and thereafter proceed to repair or replace any condition necessary to cure such default, and offset Tenant’s actual and reasonable out-of-pocket costs relating to such cure against 50% of the next installments of Annual Rent and Occupancy Costs, until such costs are fully recovered. Notwithstanding the foregoing, Tenant shall have no right to take any action that will (i) affect any structural component of the Building or Building systems, or (ii) have a material adverse effect of any other Project tenant or occupant; and provided further, that Tenant shall release, indemnify, protect, defend (with counsel reasonably acceptable to Landlord) and hold harmless the Landlord from and against all claims arising from Tenant’s exercise of its rights under this Section 19.6. The pursuit of the remedy provided for in this Section does not exclude the simultaneous pursuit of any other available remedy, including injunctive relief.

 

ARTICLE 20

 

BANKRUPTCY

 

20.1         Bankruptcy .

 

(a)            In the event a petition is filed by or against Tenant under the Bankruptcy Code, Tenant, as debtor and debtor in possession, and any trustee who may be appointed, agree to adequately protect Landlord as follows, consistent with and subject to the U.S. Bankruptcy Code:

 

(i)             to pay monthly in advance on the first day of each month as reasonable compensation for use and occupancy of the Premises an amount equal to all Rent due pursuant to this Lease; and

 

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(ii)            to perform each and every obligation of Tenant under this Lease until such time as this Lease is either rejected or assumed by order of a court of competent jurisdiction; and

 

(iii)          to determine within 60 days after the filing of such petition whether to assume or reject this lease; and

 

(iv)           to give Landlord at least 30 days prior written notice, unless a shorter notice period is agreed to in writing by the parties, of any proceeding relating to any assumption of this Lease; and

 

(v)            to give at least 30 days prior written notice of any vacation or abandonment (including any vacation or abandonment specifically described in Section 5.3) of the Premises, any such vacation or abandonment to be deemed a rejection of this Lease; and

 

(vi)           to do all other things of benefit to Landlord otherwise required of Tenant under the Bankruptcy Code.

 

Tenant shall be deemed to have rejected this Lease in the event of the failure to comply with any of the above.

 

(b)            If Tenant or a trustee elects to assume this Lease subsequent to the filing of a petition under the Bankruptcy Code, Tenant, as debtor and as debtor in possession, and any trustee who may be appointed agree as follows, consistent with and subject to the U.S. Bankruptcy Code:

 

(i)             to cure each and every existing breach by Tenant within not more than 90 days of assumption of this Lease; and

 

(ii)            to compensate Landlord for any actual pecuniary loss resulting from any existing breach, including without limitation, Landlord’s reasonable costs, expenses and attorneys fees incurred as a result of the breach, as determined by a court of competent jurisdiction, within 90 days of assumption of this Lease; and

 

(iii)          in the event of an existing breach, to provide adequate assurance of Tenant’s future performance, including without limitation:

 

(1)            the deposit of an additional sum equal to three months’ Rent to be held (without any allowance for interest thereon) to secure Tenant’s obligations under the Lease; and

 

(2)            the production to Landlord of written documentation establishing that Tenant has sufficient present and anticipated financial ability to perform each and every obligation of Tenant under this Lease; and

 

(3)            assurances, in a form acceptable to Landlord, as may be required under any applicable provision of the Bankruptcy Code; and

 

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(iv)           the assumption will not breach any provision of this Lease; and

 

(v)            the assumption will be subject to all of the provisions of this Lease unless the prior written consent of Landlord is obtained; and

 

(vi)           the prior written consent to the assumption of any mortgagee or ground lessor to which this Lease has been assigned as collateral security is obtained.

 

(c)            If Tenant assumes this Lease and proposes to assign the same pursuant to the provisions of the Bankruptcy Code to any person or entity who shall have made a bona fide offer to accept any assignment of this lease on terms acceptable to Tenant, then notice of such proposed assignment, setting forth:

 

(i)             the name and address of such person,

 

(ii)            all the terms and conditions of such offer, and

 

(iii)          the adequate assurance to be provided Landlord to assure such person’s future performance under the Lease, including without limitation, the assurances referred to in any applicable provision of the Bankruptcy Code, shall be given to Landlord by Tenant no later than twenty (20) days after receipt by Tenant, but in any event no later than ten (10) days prior to the date that Tenant shall make application to a court of competent jurisdiction for authority and approval to enter into such assignment and assumption, and Landlord shall thereupon have the prior right and option, to be exercised by notice to Tenant given at any time prior to the effective date of such proposed assignment, to accept an assignment of this Lease upon the same terms and conditions and for the same consideration, if any, as the bona fide offer made by such person, less any brokerage commissions which may be payable out of the consideration to be paid by such person for the assignment of this Lease. The adequate assurance to be provided Landlord to assure the assignee’s future performance under the Lease shall include without limitation:

 

(1)            the deposit of a sum equal to three (3) months’ Rent to be held (without any allowance for interest thereon) as security for performance hereunder; and

 

(2)            a written demonstration that the assignee meets all reasonable financial and other criteria of Landlord as did Tenant and its business at the time of execution of this Lease, including the production of the most recent audited financial statement of the assignee prepared by a certified public accountant; and

 

(3)            the assignee’s use of the Premises will be in compliance with the terms of Article 5 of this Lease; and

 

(4)            assurances, in a form acceptable to Landlord, as to all matters identified in any applicable provision of the Bankruptcy Code.

 

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ARTICLE 21

 

TELECOMMUNICATIONS

 

21.1         Limitation of Responsibility . Tenant acknowledges and agrees that all telephone and telecommunications services desired by Tenant shall be ordered and utilized at the sole expense of Tenant. Unless Landlord otherwise requests or consents in writing, all of Tenant’s telecommunications equipment (other than connections) shall be and remain solely in Tenant’s Premises, in accordance with reasonable rules and regulations adopted by Landlord from time to time. Unless otherwise specifically agreed to in writing, Landlord shall have no responsibility for the maintenance of Tenant’s telecommunications equipment, including wiring; or for any wiring or other infrastructure to which Tenant’s telecommunications equipment may be connected. Tenant agrees that, to the extent any such service is interrupted, curtailed, or discontinued, Landlord shall have no obligation or liability with respect thereto, and it shall be the sole obligation of Tenant at its expense to obtain substitute service; provided, however, Landlord shall be responsible for any damages arising from Landlord’s malicious and willful discontinuance or interference with Tenant’s telecommunication equipment. Notwithstanding the foregoing, Tenant shall have the right to its prorata share and access to the Building riser system to install its telecommunication cabling at no additional cost (other than any cost charged by any third party service provider related to the riser space) provided such installation does not interfere with other telecommunication systems, is coordinated with Landlord, and does not exceed Tenant’s pro rata share of the riser space.

 

21.2         Necessary Service Interruptions . Landlord shall have the right, upon reasonable prior notice to Tenant (at least 12 hours except in the event of an emergency or if such longer notice is not reasonably feasible or practical), to interrupt or turn off telecommunications facilities in the event of emergency or as necessary in connection with repairs to the Building or Project or installation of telecommunications equipment for other tenants of the Building or Project. In the event of an emergency, Landlord shall provide Tenant as much advance notice as possible. Landlord shall exercise commercially reasonable efforts to perform any scheduled shutdowns during non-business hours and shall restore services as soon as reasonably practical after the shutdown occurs.

 

21.3         Removal of Equipment, Wiring, and Other Facilities . Any and all telecommunications equipment installed in Tenant’s Premises or elsewhere in the Project, by or on behalf of Tenant, including wiring, or other facilities for telecommunications transmittal, shall be removed prior to the expiration or earlier termination of the Lease term by Tenant at its sole cost. Landlord shall have the right, however, upon written notice to Tenant given no later than thirty (30) days prior to the expiration or earlier termination of the Lease term, to require Tenant to abandon and leave in place, without additional payment to Tenant or credit against rent, any and all telecommunications wiring, and related infrastructure, and selected components thereof, whether located in Tenant’s Premises or elsewhere in the Project.

 

21.4         New Provider Installations . Landlord represents that the following companies have an agreement with Landlord to provide telecommunications services in the Project: CenturyLink, Verizon, Cogent, Comcast, Zayo and Level 3. In the event that Tenant wishes at any time to utilize the services of a telephone or telecommunications provider whose equipment

 

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is not then servicing the Project, or to materially expand the services or infrastructure of a provider currently providing service to the Project, no such provider shall be permitted to install its lines or other equipment within the Project without first securing the prior written approval of Landlord. Landlord’s approval shall not be deemed any kind of warranty or representation by Landlord, including, without limitation, any warranty or representation as to the suitability, competence, or financial strength of the provider. Without limitation of the foregoing standard, it shall be reasonable for Landlord to refuse to give its approval unless all of the following conditions are satisfied to Landlord’s satisfaction:

 

(a)            Landlord shall incur no expense whatsoever with respect to any aspect of the provider’s provision of its services, including, without limitation, the costs of installation, materials, and services;

 

(b)            prior to commencement of any work in or about the Project by the provider, the provider shall supply Landlord with such written indemnities, insurance, financial statements, and such other items as Landlord reasonably determines to be necessary to protect its financial interests and the interests of the Building relating to the proposed activities of the provider;

 

(c)            the provider agrees to abide by such rules and regulations, building and other codes, job site rules, and such other requirements as are reasonably determined by Landlord to be necessary to protect the interests of the Project, the tenants in the Project, and Landlord, in the same or similar manner as Landlord has the right to protect itself and the Project with respect to proposed alterations as described in this Lease;

 

(d)            Landlord reasonably determines that there is sufficient space in the Project for the placement of the provider’s equipment and materials;

 

(e)            the provider agrees to abide by Landlord’s requirements, if any, that provider use existing building conduits and pipes or use building contractors (or other contractors approved by Landlord);

 

(f)             Landlord receives from the provider such compensation as is reasonably determined by Landlord to compensate it for space used in the Building and/or Project for the storage and maintenance of the provider’s equipment, and the costs which may reasonably be expected to be incurred by Landlord;

 

(g)            the provider agrees to deliver to Landlord detailed as built plans immediately after the installation of the provider’s equipment is complete; and

 

(h)            all of the foregoing matters are documented in a written license agreement between Landlord and the provider, the form and content of which are reasonably satisfactory to Landlord.

 

21.5         Provider License Expiration . If the license between any provider and Landlord shall terminate by natural expiration, Landlord shall exercise reasonable efforts to notify Tenant at least thirty (30) days before the expiration so Tenant may arrange for alternative service. If

 

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Landlord does not receive advance notice from the provider, or the license expires for any other reason, Landlord shall have no obligation to Tenant.

 

21.6         Limit of Default or Breach . Notwithstanding any provision of the proceeding paragraphs to the contrary, the refusal of Landlord to grant its approval to any prospective telecommunications provider shall not be deemed a default or breach by Landlord of its obligation under this Lease and until Landlord is adjudicated to have acted recklessly or maliciously with respect to Tenant’s request for approval, and in that event, Tenant shall still have no right to terminate the Lease or claim an entitlement to rent abatement, but may, as Tenant’s sole and exclusive recourse, seek a judicial order of specific performance compelling Landlord to grant its approval as to the prospective provider in question. The provisions of this paragraph may be enforced solely by Tenant and Landlord, are not for the benefit of any other party (including any subtenant), and specifically, but without limitation, no telephone or telecommunications provider shall be deemed a third party beneficiary of this Lease.

 

21.7         Installation and Use of Wireless Technologies . Except as otherwise provided in this Lease, Tenant shall not utilize any wireless communications equipment (other than usual and customary cellular telephones and a wireless computer network dedicated to Tenant’s or its invitees, employees and partners sole use), including antennae and satellite receiver dishes, within Tenant’s Premises, the Building, and/or the Project without Landlord’s prior written consent. Such consent may be conditioned in such a manner so as to protect Landlord’s financial interests and the interests of the Project, and the other tenants therein, in a manner similar to the arrangements described in the immediately preceding paragraphs.

 

21.8         Limitation . Landlord acknowledges and agrees that Tenant will use and permit the use of the Premises for the sale, lease, license, or otherwise of electronic commerce services to tenants and occupants in the Building that are now or may become customers of Tenant, including, but not limited to, hardware and software services that allow users to conduct business-to-business or business-to consumer services over networks utilizing, by way of example, e-mail, electronic data interchange, data archiving, e-forms, electronic file transfer, facsimile transfers, and similar services. Tenant shall be permitted to market such services to occupants of the Building in the ordinary course of its business in accordance with the normal and customary marketing methods used by Tenant to market to customers and potential customers that are not occupants of the Building; provided, however, that Tenant shall be prohibited from (a) marketing its services to the occupants of the Building as a specifically targeted group or subgroup, (b) utilizing as a selling point in its marking or mentioning to such occupants that Tenant is an occupant of the Building, and (c) permitting its salespeople and other employees to physically canvass, solicit and peddle in the Building.

 

21.9         Limitation of Liability For Equipment Interference . In the event that telecommunications equipment, wiring, and facilities or satellite and antennae equipment of any type installed by or at the request of Tenant within Tenant’s Premises, on the roof, or elsewhere within or on the Project causes interference to equipment used by another party, Tenant shall assume all liability related to such interference. Tenant shall use reasonable efforts, and shall cooperate with Landlord and other parties, to promptly eliminate such interference. In the event that Tenant is unable to do so, Tenant will substitute alternative equipment which remedies the situation. If such interference persists, Tenant shall discontinue the use of such equipment and, at

 

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Landlord’s discretion, remove such equipment according to the foregoing specifications. Landlord shall enforce the provisions of this Section 21.9 against Tenant and all tenants of the Project in a non-discriminatory manner.

 

ARTICLE 22

 

IMPROVEMENT ALLOWANCE

 

22.1         Improvement Allowance . In addition to the obligation of Landlord to perform “ Landlord’s Work ” as provided in Section 22.2 below, Landlord shall provide to Tenant an improvement allowance (“ Allowance ”) in an amount equal Two Million Eight Hundred Sixty-six Thousand Eight Hundred Twenty and no/100 Dollars ($2,866,820.00), based on Fifty-five and no/100 Dollars ($55.00) per rentable square foot of space in the Premises, for the contribution toward all customary hard and soft costs of demolition and construction of the Tenant’s improvements to the Premises, including design and engineering fees, project management and other professional fees (excluding legal), architectural and space planning services, construction and occupancy permitting (“ Tenant’s Work ”). Tenant shall have the right to apply a portion of the Allowance up to Five Hundred Twenty-one Thousand Two Hundred Forty and no/100 Dollars ($521,240.00) based on Ten and no/100 Dollars ($10.00) per rentable square foot of in the Premises, towards fixturing, security system, data and telecommunication cabling and equipment, data systems, demountable walls, and customary moving expenses reasonably approved by Landlord (the foregoing, together with Tenant’s Work, collectively the “ Improvements) all in accordance with the procedures described in Exhibit D .” If Tenant does not use the entire portion of the $10.00 per rentable square foot allocated towards the aforementioned uses, then Tenant shall have the right to apply any unused portion thereof against the next installment(s) of Annual Rent or Occupancy Costs until such unused portion is fully allocated. Landlord will make available (at no cost to Tenant) Building services, including HVAC, standard Building electrical to the Premises and access to the Building’s freight elevator, provided Tenant (or its designee) coordinates with Landlord, a schedule for such times and in a manner that will not unreasonably interfere with Landlord’s general operation of the Building; and Landlord will cooperate with Tenant in good faith in connection with the foregoing.

 

Tenant shall be responsible for coordinating the construction of the Improvements and shall have the right to select its own project manager. Tenant shall select a contractor and major subcontractors from Landlord’s approved contractors list. Tenant shall be obligated to utilize BCEIR Engineers for Tenant’s mechanical, electrical work, and plumbing design, and Martin/Martin for all structural design. Tenant shall have the right to request the Allowance in no more than four (4) installments, and upon satisfaction of the following items for each draw request, Landlord will pay such installments: (i) Tenant delivers a schedule of values and shows in reasonable detail the completion of the portion of Improvements is proportionate to the amount of the Allowance draw request using the AIA G702 form; (ii) Tenant delivers to Landlord properly executed conditional mechanics’ lien waivers from all of Tenant’s contractors and subcontractors in compliance with all applicable laws; and upon completion and a non-conditional final lien waiver subject to final payment; and (iii) Tenant delivers to Landlord a certificate signed by Tenant’s architect (AIA Application for Payment or equal), in a form reasonably acceptable to Landlord, certifying that the construction of the applicable part of the Improvements in the Premises has been substantially completed (for the final draw request only),

 

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subject to minor punch list work. Provided that Tenant is not in default beyond any applicable notice and cure period at any draw request, then within thirty (30) days after satisfaction of items (i) through (iii) above, Landlord shall pay to Tenant all amounts shown in (i) above. All requests for reimbursement in connection with the completion of the Improvements shall be submitted by Tenant to Landlord as provided herein, but in no case later than 180 days following the Commencement Date. In the event Tenant fails to submit invoices for reimbursement on or before the expiration of such 180 day period. Tenant shall forfeit its right to any portion of the Allowance not requested as provided in this Section. Tenant shall pay to Landlord a fee equal to one percent (1%) of the “hard” construction costs of the Improvements, including cabling but expressly excluding the cost of Landlord’s Work as described below.

 

In addition to the Allowance, Landlord will pay Tenant’s architect, Hampton Architecture, Inc., its space planning allowance, per a separate agreement between Landlord and architect, in an amount not to exceed Twelve cents ($.12) per rentable square foot of the Premises.

 

22.2         Landlord’s Work . At Landlord’s sole cost and expense, Landlord shall be responsible for (i) renovating the women’s and men’s restrooms on the 5th and 6th floors with Landlord’s new Building standard and fully ADA and other applicable laws and code compliant restrooms; (ii) construction of a multi-tenant corridor and demising Tenant’s Premises on the 6th floor using Building Standard materials; and (iii) installing direct digital controls on the existing VAV boxes within the Premises in place as of the Delivery Date; and (iv) the reinstallation of any diffusers and HVAC duct work removed by Landlord on the 5th floor of the Premises to the condition existing prior to such removal (“ Landlord’s Work ”); provided Landlord shall have the right to perform Landlord’s Work during such time as Tenant is performing Tenant’s Work; and, provided further, that Landlord and Tenant and their respective contractors will coordinate with each other to minimize any interference to the other resulting from the performance of their respective “ Work ” required under this Article 22. Landlord’s Work shall be completed within one hundred and twenty (120) days following the Delivery Date.

 

22.3         Allowance Offset . If Landlord fails to pay all or any portion of the Allowance in accordance with the provisions of Section 22.1, then Tenant may offset such unpaid Allowance from the Annual Rent as it becomes due under this Lease until the entire unpaid Allowance amount due has been recovered, together with simple interest at the rate of one-half percent (.5%) per month on such portion thereof as remains unpaid and/or unrecovered each month (calculated from the date Landlord was required to pay the Allowance in full); provided that prior to offsetting any such amount against Annual Rent under this Lease, Tenant shall have (a) given written notice to Landlord of Landlord’s default, which notice shall include the amount of the offset claimed and the basis for the offset claimed, and (b) afforded Landlord the opportunity to cure such default pursuant to the Lease. If and to the extent Landlord’s default has not been timely cured, then Tenant shall have the right to continuously exercise its monthly offset rights without any additional notices to Landlord. However, notwithstanding the foregoing, Tenant shall not be entitled to exercise its offset right for any month on the commencement of which Tenant is in default under this Lease beyond applicable cure periods (i) for failure to pay any monetary obligation, or (ii) for failure to maintain the insurance required under Section 9.2, or (iii) due to the existence of a condition which poses a serious and immediate risk to human health or safety in or around the Premises or Project.

 

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ARTICLE 23

 

TENANT’S OPTION TO EXTEND TERM

 

23.1         Grant . Subject to the terms and conditions of this Article, Landlord hereby grants Tenant one (1) option to extend the Term (“ Extension Option ”) for a period of five (5) years (“ Extended Term ”) upon the terms and conditions set out in this Article, if

 

(a)            Tenant is not in default under this Lease beyond any applicable notice and cure period at the time it exercises or at the commencement of the Extended Term, and is not subleasing more than twenty (20%) of the Premises, except to a Permitted Transferee; and

 

(b)            Tenant delivers to Landlord written notice (“ Option Notice ”) exercising its Extension Option no earlier than fifteen (15) months, nor less than twelve (12) months prior to the end of the initial Term.

 

23.2         Terms . With respect to the Extended Term:

 

(a)            Such Extension Option will apply to all of the Premises.

 

(b)            Annual Rent shall be equal to the then-current Market Rent (as described in Article 24 below) as of the commencement of the Extended Term,

 

(c)            Occupancy Costs shall be determined in the manner set out in Exhibit 13:

 

(d)            Unless an allowance, if any, is provided in the determination of Market Rent as provided in Article 24 (in which event Landlord will include it in its determination of Market Rent), Tenant shall take the space in an “as-is” condition with all Improvements to be Tenant’s responsibility at Tenant’s cost; and

 

(e)            In the event Tenant fails to so notify Landlord or declines to exercise said Extension Option, such right shall terminate and no longer be in effect.

 

23.3         Documentation . Landlord and Tenant shall execute and deliver appropriate documentation to evidence the renewal terms and conditions.

 

23.4         Non-Severability . The rights of Tenant under this Article 23 shall not be severed from the Lease or separately sold, assigned, or otherwise transferred (other than to a Permitted Transferee), and shall expire on the expiration or earlier termination of this Lease.

 

ARTICLE 24

 

MARKET RENT

 

24.1         Definition . “ Market Rent ” means the annual rental amount per square foot together with market concessions, including but not limited to, free rent, tenant improvement allowance, brokerage commissions and other economic inducements and Landlord costs that then exist, which a landlord would receive or provide by then renting the space in question

 

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assuming the landlord to be a prudent person willing to lease but being under no compulsion to do so, assuming the tenant to be a prudent person willing to renew the lease but being under no compulsion to do so, assuming a lease term equal to the term in question in the Building, such concessions, if any, that a renewing tenant would receive in the market place in a similar class building in the Denver CBD, and assuming a lease containing the same terms and provisions, including Occupancy Costs as those contained in this Lease as affected by the terms of such renewal. Market Rent shall be paid as Annual Rent under this Lease, in addition to all other sums payable as Rent by Tenant under this Lease. For purposes of determining the Market Rent, the value of any improvements installed at Tenant’s cost and expense shall not be considered as a factor

 

24.2         Determination on Market Rent . Whenever Annual Rent under this Lease is based on Market Rent, Landlord shall initially determine the Market Rent and provide Tenant written notice of such determination (“ Landlord’s Market Rent Notice ”) within thirty (30) days after receipt of Tenant’s Option Notice.

 

24.3         Disagreement on Market Rent .

 

(a)            In the event that Tenant disagrees with Landlord’s determination of Market Rent, Tenant shall deliver to Landlord written notice of such disagreement (“ Disagreement Notice ”) within ten (10) business days of Tenant’s receipt of Landlord’s Market Rent Notice. In the event that Tenant fails to deliver its Disagreement Notice, Tenant shall be deemed to have accepted Landlord’s determination of Market Rent. If Tenant timely delivers its Disagreement Notice, the parties thereafter shall negotiate in good faith the Market Rent for the Extended Term. In the event that the parties cannot agree to the Market Rent for the Extended Term within sixty (60) days after Landlord’s receipt of Tenant’s Option Notice (or such earlier time if elected by either party), then Market Rent will be determined in the manner described hereafter. If the parties cannot mutually agree to the Market Rent, but in no event later than 60 days after Landlord’s receipt of Tenant’s Option Notice, each party will choose a real estate licensed broker with at least ten (10) years’ office leasing experience, who has negotiated at least two (2) office leases of at least fifty thousand (50,000) rentable square feet in Class A office buildings located in the Central Business District of Denver, Colorado within the prior thirty-six (36) months, who shall not have represented Landlord or Tenant within the prior thirty-six (36) months. Each party will give the other written notice of the name and address of the broker selected by it within thirty (30) days of receipt of the Market Rent Determination Notice. Within ten (10) business days after receipt of the final designation of the last broker, those two (2) brokers shall select a third broker with the qualifications stated above. The three (3) brokers (singularly, the “ Expert ” and collectively, the “ Experts ”) shall make a determination of Market Rent as expeditiously as possible thereafter and in any event within thirty (30) days after the selection of the third Expert. The determination of the Experts shall be made as follows:

 

(i)             Each Expert will independently determine the Market Rent and then all will meet and contemporaneously disclose to the others their respective determinations.

 

(ii)            If neither the highest nor the lowest determination differs from the middle determination by more than ten percent (10%) of such middle determination, then the Market Rent shall be the average of all three determinations.

 

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(iii)          If subparagraph (ii) does not apply, then the Market Rent shall be the average of the two determinations closest by dollar amount.

 

(iv)           The Experts shall promptly notify Landlord and Tenant of each of their separate determinations and the resulting Market Rent. The determination of Market Rent by the Experts shall be final, binding and conclusive upon Landlord and Tenant and may be confirmed by either party by application to any Court having jurisdiction thereof.

 

(b)            From and after the determination of Market Rent based on this Section 24.3, Tenant shall pay Annual Rent for the Extended Term at the rate applicable under this Section 24.3, and within thirty (30) days after Landlord and Tenant receive notice of such determination of Market Rent, Tenant shall pay to Landlord the amount of any underpayment, or Landlord shall refund to Tenant the amount of any overpayment (or credit the same to the next Rent payments due, at Landlord’s option), as the case may be, of Annual Rent theretofore made.

 

(c)            Each party will pay any and all fees and expenses incurred in connection with such party’s Expert and the fees and expenses for the third Expert will be borne equally by the parties.

 

ARTICLE 25

 

RIGHT OF FIRST REFUSAL

 

25.1         Notice of Availability . Subject to the Kleinfelder, West, Inc.’s; Envestnet Asset Management’s; and Kutak Rock, LLP’s superior rights as of the Effective Date, Tenant will have a right of first refusal on any and all of the available space on the 6th floor of the Building (“ Refusal Space ”). Landlord shall give Tenant notice of the availability of all or a portion of the Refusal Space, at such time as Landlord is prepared to accept a third party offer for the Refusal Space from a “bona fide” third-party tenant. The notice to Tenant shall set forth the economic terms and conditions (including “rent”, “tenant improvement allowance” and “term”) that Landlord is prepared to accept from a third party tenant to lease the Refusal Space (the “ ROFR Proposal ”), prorated to Tenant’s existing Term.

 

25.2         Right of First Refusal . Tenant may lease Refusal Space upon the terms and conditions set out in this Article 25, only if

 

(a)            Tenant delivers to Landlord notice exercising its right to lease the Refusal Space within five (5) business days of Landlord’s delivery to Tenant of the ROFR Proposal; and

 

(b)            an Event of Default is not then continuing beyond any applicable notice or cure period or Tenant has not subleased more than twenty (20%) of the Premises (other than a Permitted Transferee as defined in Sections 11.1).

 

In the event that Tenant fails to exercise its right of first refusal on the Refusal Space within such five (5) business day period, Landlord shall have the right to enter into a lease with the third party tenant upon substantially similar terms and conditions contained in the ROFR Proposal. (calculated on a net effective basis based on the proposed annualized Annual Rent, less any allowances, free rent, commissions or other concessions amortized over the term of the

 

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Refusal Space), and Tenant shall have no further right to the Refusal Space thereafter, except as provided below. For purposes of this Section a third party offer will be substantially similar if the economic terms and conditions are within 10% of the net effective basis of the Refusal Proposal. In the event that such third party offer is more than 10% favorable to the third party, Landlord shalt be obligated to re-offer the Refusal Space to Tenant on the more favorable terms, and Tenant shall have five (5) business days to either accept or reject the offer. Notwithstanding anything in this Section to the contrary, if the Refusal Space described in the Refusal Offer is for less than the entire remaining space on the 6th floor, Tenant shall retain the its Right of First Refusal on any remaining vacant space subject to the terms and conditions of this Section.

 

25.3         Terms . A lease of space under this Article 25 shall contain the following:

 

(a)            Annual Rent shall be equal to the annual rent rate set forth in the ROFR Proposal;

 

(b)            Occupancy Costs as determined in the manner set out forth in Exhibit 13:

 

(c)            Tenant shall take all of the Offer Space in the Offer Proposal, even if the Offer Space includes space not located on the 5th floor;

 

(d)            The term for the Refusal Space (“ ROFR Term ”) shall begin on the date Landlord delivers possession of the Refusal Space to Tenant and shall be for the “ Term ” provided in the ROFR proposal; provided if less than thirty-six (36) months remain on the initial Term as of the commencement date of the ROFR Term, and the term for the Refusal Space (including any rights to renew) extends beyond the then current Term of the Lease, and Tenant elects to exercise its right to the Refusal Space, Tenant shall be required to simultaneously exercise its Extension Option (as described in Article 23 above). For purposes of determining Annual Rent during the Extended Term exercised pursuant to this subsection (c), the Annual Rent for the Refusal Space shall be the average Annual Rent as set forth in the ROFR Proposal for the remainder of the Term and any Extended Term, and the Annual Rent for the Extended Term on the remainder of the Premises shall be determined pursuant to Article 24 above;

 

(e)            Tenant shall take the Refusal Space in an “as-is” condition, and all improvements to the Refusal Space shall be Tenant’s responsibility at Tenant’s cost, subject to any tenant allowance and other applicable economic provisions provided in the ROFR Proposal calculated on a prorated basis based on the remaining ROFR Term, including any Extended Term; and the other terms and conditions shall be as set out in this Lease.

 

25.4         Documentation . Within ten (10) business days of receipt from Landlord, Tenant shall deliver to Landlord an executed amendment to this Lease to evidence any lease of space under this Article 25; provided that such amendment contains only those terms consistent with the provisions of this Article 25.

 

25.5         Non-Severability . The rights of Tenant under this Article 25 shall not be severed from this Lease or separately sold, assigned, or otherwise transferred, except to any Permitted Transferee(s), and shall expire on the expiration or earlier termination of this Lease.

 

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ARTICLE 26

 

TERMINATION OPTION

 

26.1         Grant . Provided Tenant has not exercised its (i) Extension Option (as described in Article 23 above); or (ii) its Right of the First Refusal (as described in Article 25,00 above) within the thirty six (36) months prior to Tenant’s delivery of its “ Termination Notice ” (as provided herein), then Tenant shall have the one-time right to terminate (‘Termination Option”) this Lease at any time after the last day of the seventy second (72’) full calendar month after the Commencement Date (“Termination Effective Date”), if

 

(a)            Tenant is not in default beyond any applicable cure period at the time Tenant exercises its Termination Option or on the Termination Effective Date;

 

(b)            Tenant delivers to Landlord written notice (“ Termination Notice ”) exercising its Termination Option at least twelve (12) months prior to the Termination Effective Date;

 

(c)            Tenant shall be obligated to surrender the Premises in the condition required by the Lease;

 

(d)            Tenant pays to Landlord with its Termination Notice a termination fee in certified funds equal to five (5) months of gross Rent due on date of Tenant’s Termination Notice date; and

 

(e)            In the event that the terms and conditions of this Section are not satisfied (expressly including the timely delivery of the Termination Notice), Tenant’s right of termination shall lapse and be of no further force and effect, and the Lease shall remain in effect throughout the remainder of the Term.

 

26.2         Survival . If Tenant timely exercises the Termination Option, this Lease shall be deemed terminated as though it had expired according to its terms, and Landlord and Tenant shall be relieved of any and all further obligations thereunder, except that the respective rights and obligations of Landlord and Tenant with respect to the Lease and the Premises shall be preserved and shall survive the termination of this Lease as to all matters arising or accruing prior to the date of termination.

 

26.3         Documentation . Landlord and Tenant shall execute and deliver mutually agreeable and appropriate documentation to evidence the termination of this Lease.

 

26.4         Non-Severability . The rights of Tenant under this Article shall not be severed from the Lease or separately sold, assigned, or otherwise transferred (except with respect to any Permitted Transferee), and shall expire on the expiration or earlier termination of this Lease.

 

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ARTICLE 27

 

MISCELLANEOUS

 

27.1                         Relationship of Parties . Nothing contained in this Lease shall create any relationship between the parties hereto other than that of landlord and tenant, and it is acknowledged and agreed that Landlord does not in any way or for any purpose become a partner of Tenant in the conduct of its business, or a joint venturer or a member of a joint or common enterprise with Tenant.

 

27.2                         Consent Not Unreasonably Withheld . Except as otherwise specifically provided, whenever consent or approval of Landlord or Tenant is required under the terms of this Lease, such consent or approval shall not be unreasonably withheld. conditioned or delayed. Landlord’s or Tenant’s sole remedy, if the non-consenting party unreasonably withholds or delays consent or approval, shall be an action for specific performance, and neither party shall be liable for damages. If either party withholds any consent or approval, such party shall on written request deliver to the other party a written statement giving the reasons therefore.

 

27.3                         Name of Building and Project . Landlord shall have the right in its sole discretion after thirty (30) days’ notice to Tenant, to change the name, number or designation of the Building or the Project (if any), or both, during the Term without liability to Tenant.

 

27.4                         Applicable Law and Construction . This Lease shall be governed by and construed under the laws of the jurisdiction in which the Building is located, and its provisions shall be construed as a whole according to their common meaning and, because this Lease has been negotiated by both Landlord and Tenant, shall not be interpreted strictly for or against Landlord or Tenant. The words Landlord and Tenant shall include the plural as well as the singular. If this Lease is executed by more than one tenant or landlord, Tenant’s and Landlord’s obligations, as the case may be, shall be joint and several obligations of such executing tenants and landlords. Time is of the essence of this Lease and each of its provisions. The captions of the Articles are included for convenience only, and shall have no effect upon the construction or interpretation of this Lease.

 

27.5                         Entire Agreement . This Lease, including its Exhibits, contains the entire agreement between the parties hereto with respect to the subject matter of this Lease and shall supersede all prior agreements or understandings between Landlord and Tenant with respect to the subject matter hereof. Tenant acknowledges and agrees that it has not relied upon any statement, representation, agreement or warranty except such as is set out in this Lease including its Exhibits.

 

27.6                         Offer Irrevocable . Tenant hereby offers to lease from Landlord the Premises under the terms and conditions of this Lease. Landlord shall not be deemed to have made an offer to Tenant by preparing this Lease and no agreement respecting the Premises shall arise or exist between the parties except through the making of this offer by Tenant and the acceptance by Landlord by delivering to Tenant a copy hereof which has been executed by Landlord. This offer shall be irrevocable and open for acceptance by Landlord until 5:00 p.m. on the fifteenth

 

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(15”) business day after execution hereof by Tenant, and if not accepted by then may be withdrawn.

 

27.7                         Amendment or Modification . Except to the extent as may otherwise specifically be provided in this Lease, no amendment, modification, or supplement to this Lease shall be valid or binding unless set out in writing and executed by the parties hereto in the same manner as the execution of this Lease.

 

27.8                         Construed Covenants and Severability . All of the provisions of this Lease are to be construed as covenants and agreements as though the words imparting such covenants and agreements were used in each separate Article hereof. Should any provision of this Lease be or become invalid, void, illegal or not enforceable, it shall be considered separate and severable from the Lease and the remaining provisions shall remain in force and be binding upon the parties hereto as though such provision had not been included.

 

27.9                         No Implied Surrender or Waiver . No provisions of this Lease shall be deemed to have been waived by either party unless such waiver is in writing signed by such respective party. Either party’s waiver of a breach of any term or condition of this Lease shall not prevent a subsequent act, which would have originally constituted a breach, from having all the force and effect of any original breach. Landlord’s receipt of Rent with knowledge of a breach by Tenant of any term or condition of this Lease shall not be deemed a waiver of such breach. Landlord’s failure to enforce against Tenant or any other tenant in the Building any of the Rules and Regulations made under Article 14 shall not be deemed a waiver of such Rules and Regulations. No act or thing done by Landlord, its agents or employees during the Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid, unless in writing signed by Landlord. Neither the delivery of keys to nor the acceptance thereof by any of the Landlord’s agents or employees, nor the taking possession of the Premises by Landlord after any vacation thereof by Tenant, shall operate as a termination of this Lease or a surrender of the Premises. No payment by Tenant, or receipt by Landlord, of a lesser amount than the Rent due hereunder shall be deemed to be other than on account of the earliest stipulated Rent, nor shall any endorsement or statement on any check or any letter accompanying any check, or payment as Rent, be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy available to Landlord.

 

27.10                  Successors Bound . Except as otherwise specifically provided, the covenants, terms and conditions contained in this Lease shall apply to and bind the heirs, successors, executors, administrators and assigns of the parties hereto.

 

27.11                  Letter of Credit . Within forty five (45) days of the Effective Date, Tenant shall deliver to Landlord a letter of credit (“ Letter of Credit ”) in a form reasonably acceptable to Landlord in the amount of One Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00), issued by a national bank reasonably acceptable to Landlord, naming Landlord as beneficiary and allowing Landlord to draw the Letter of Credit for an Event of Default (that is continuing beyond any applicable notice and cure period) as described in Article 19 of the Lease. The Letter of Credit shall expressly state that it will be (I) in an evergreen form and automatically renew without any action or notice by Landlord required, (ii) be honored by the

 

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issuer without inquiry into the accuracy of any such notice or statement made by Landlord; (iii) permit multiple or partial draws up to the stated amount of the Letter of Credit; and (iv) expressly provide that it is transferable to any successor of Landlord or Landlord’s lenders (at no cost to Landlord or its lender). The Letter of Credit shall stand as security for all of Tenant’s obligations under the Lease.

 

Provided an Event of Default has not occurred (beyond any applicable notice and cure period), the Letter of Credit shall decline annually by Two Hundred Forty Thousand and no/100 Dollars ($240,000.00) on the first anniversary of the Rent Commencement Date, and each annual anniversary thereafter, until such time as the amount of the Letter of Credit is reduced to zero ($0.00), after which the Letter of Credit shall terminate and no Letter of Credit or other security shall be required in connection with this Lease.

 

If an Event of Default has occurred (beyond any applicable notice and cure period) the Letter of Credit shall not be reduced, and the remaining balance of the Letter of Credit shall stand as security for Landlord for the remainder of the Term. If there is an Event of Default under the Lease by Tenant beyond any applicable notice and cure period, then Landlord, in addition to any other remedy it may have under the Lease, may draw upon the Letter of Credit in an amount necessary to cure any non-monetary Event of Default under the Lease, or a monetary default of any obligation under the Lease beyond any applicable notice or cure period; provided nothing herein shall limit Landlord’s right to draw upon the entire full face value of the Letter of Credit in the event that Landlord exercises its right to terminate Tenant’s possession of the Premises or the Lease as provided under Section 19.3, expressly including any condition expressed in Subsection 19.2 (c) or (d). A draw under the Letter of Credit of less than the full face amount thereof shall not preclude subsequent additional draws thereunder, nor shall one (1) or more draws under the Letter of Credit preclude the exercise, either simultaneously or subsequently, of any rights or remedies of Landlord under the Lease.

 

27.12                  Lease Approval . Landlord and Tenant represent to the other that each has all the necessary approvals required to execute this Lease.

 

27.13                  Nondiscrimination . Tenant covenants that this Lease is made and accepted upon and subject to the condition that there shall be no discrimination by Tenant against or segregation of any person or group of persons on account of sex, marital status, race, color, creed, religion, national origin or ancestry in the leasing, subleasing, transferring, use or enjoyment of the Premises.

 

27.14                  Personal Liability . The obligations of Tenant or Landlord under this Lease do not constitute personal obligations of Landlord’s or Tenant’s individual partners, members, directors, officers, agents, employees or shareholders of Tenant or Landlord, disclosed or undisclosed. Tenant shall look solely to Landlord’s estate in the Land and Building, personal property and equipment used in the operation of the Project and Building, insurance proceeds, and rents and accounts receivable for satisfaction of any liability under or in respect of this Lease or for the satisfaction of Tenant’s remedies for the collection of a judgment (or other legal process) requiring the payment of money by Landlord and no other property and assets of such Landlord or any partner, member, officer, director, agent or shareholder, disclosed or undisclosed, shall be subject to levy, execution or other enforcement procedure for the

 

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satisfaction of Tenant’s remedies under or in respect of this Lease, the relationship of Landlord and Tenant under this Lease or Tenant’s use of the Land or Building or the use or occupancy of the Premises.

 

27.15                  Brokerage Commission . Landlord and Tenant each agree to indemnify and hold the other harmless from and against all broker’s or other real estate commissions or fees incurred by the indemnifying party or arising out of its activities with respect to this Lease except as documented herein. Landlord is represented by Nick Pavlakovich of Cushman & Wakefield, Inc. and Tenant is represented by Chris Boston of Gibbons White, Inc. (collectively the “ Brokers ”). Landlord and Tenant each hereby represent and warrant to the other that it does not recognize and has not used any broker other than the Brokers with respect to this Lease and the negotiation hereof. Landlord hereby agrees to pay Brokers a commission per a separate agreement between Landlord and Brokers.

 

27.16                  Unavoidable Delay . As used in this Lease, ‘Unavoidable Delay” means fire, explosion and other casualties; war, invasion, insurrection, riot, sabotage, and malicious mischief; strikes, work stoppages or slowdowns and lockouts; condemnation; rules, regulations or orders of civil or military or naval authorities adopted after the date hereof; impossibility of or delay in obtaining materials or reasonable substitutes from suppliers for reasons other than unavailability of funds (excluding any special materials selected by Tenant which are not generally available or for which there are not reasonable substitutes); or any other cause, the occurrence of which, or the extent and duration of the occurrence of which, is not within the reasonable control of the party in question. An Unavoidable Delay shall exist only for the period in which it is not within the reasonable control of the party in question to prevent, control or correct such event. Except as otherwise provided in this Lease, (a) if Landlord or Tenant shall, due to Unavoidable Delay, fail punctually to perform any obligation on its part to be performed under this Lease, then such failure shall be excused and not be a breach of this Lease by the party in question, but only to the extent caused by Unavoidable Delay; or (b) if any right or option of either party to take any action under or with respect to this Lease is conditioned upon the same being exercised within any prescribed period of time or some specified date, then such prescribed period of time and such specified date shall be deemed to be extended or delayed, as the case may be, for a period equal to the period of the Unavoidable Delay. Notwithstanding the foregoing, Unavoidable Delay shall not be applicable to determining the date of commencement of, or the continuance of, Tenant’s obligation to pay Rent or its obligations to pay any other sums, moneys, costs, charges or expenses required to be paid by Tenant hereunder (whether or not Tenant’s Work is thereby delayed beyond the Construction Period) or to the date by which Tenant must exercise any right or option under this Lease, including without limitation to terminate this Lease or to extend the Term.

 

27.17                  Hazardous Materials . Tenant shall not (either with or without negligence) cause or permit the escape, disposal or release of any biologically or chemically active or other hazardous substances, or materials on or about the Premises or any other portion of the Project, nor shall Tenant allow the storage or use of such substances or materials on or about the Premises or any other portion of the Project, nor allow to be brought into the Premises or any other portion of the Project any such materials or substances in violation of applicable laws. Without limitation, hazardous substances and materials shall include those described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource

 

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Conservation and Recovery Act, the Superfund Amendments and Re-authorization Act of 1986, the Occupational Safety and Health Act, the Clean Water Act, any amendments to such Acts, and any federal, state or municipal laws, ordinances, regulations or common law which may now or hereafter impose liability on Landlord with respect to hazardous substances (“ Hazardous Substances ”). Hazardous Substances shall not include, and this Lease will not be construed to prohibit, Tenant’s use or storage of incidental quantities or supplies or products which are commonly used in offices or Tenant’s business, such as copier fluid and ordinary cleanings supplies, provided any such product is disposed of properly. Tenant will be solely responsible for and will defend, indemnify and hold Landlord, its agents and employees harmless from and against all claims, costs and liabilities, including attorneys’ fees, court costs, and other expenses of litigation (i) arising out of or in connection with any breach of this Section, or (ii) arising out of or in connection with the removal, clean-up and restoration work and materials necessary to return the Premises and the Project and any other property of whatever nature located therein to their condition existing prior to the introduction of Hazardous Substances in or about the Premises or Project by Tenant. if any lender or governmental agency shall ever require testing to ascertain whether or not there has been any hazardous materials on or about the Premises (or, as a result of Tenant’s actions, on or about other portions of the Project) based upon reasonable cause attributable to Tenant, then the costs thereof to the extent that Tenant is finally determined to be responsible shall be reimbursed by Tenant to Landlord upon demand. In addition, Tenant shall execute affidavits, representations and the like from time to time at Landlord’s request concerning Tenant’s knowledge and belief regarding the presence of Hazardous Substances on the Premises. The within covenants and indemnity shall survive the expiration or earlier termination of the Term. Landlord will be solely responsible for and will defend, indemnify and hold Tenant, its agents and employees harmless from and against all claims, costs and liabilities, including attorneys’ fees, court costs, and other expenses of litigation arising out of or in connection with the non-compliance of any Hazardous Substances, and the removal, clean-up and restoration work and materials necessary to related thereto; provided that such non-compliance is not the result of Tenant, its employees’, contractor’s or agent’s actions. The within covenants and indemnity shall survive the expiration or earlier termination of the Term. Notwithstanding the foregoing, Landlord represents that to best of Landlord’s actual knowledge, Landlord has not received any notification of non-compliance of any laws applicable to Hazardous Substances in the Building or the Project.

 

27.18                  Authorization . Each party represents and warrants to the other party that the individual executing this Lease on behalf of such party is duly authorized and empowered to do so, and that all corporate action necessary thereto has been duly taken.

 

27.19                  No Air Rights . This Lease does not grant any easements or rights for light, air or view. Any diminution or blockage of light, air or view by any structure or condition now or later erected will not affect this Lease or impose any liability on Landlord.

 

27.20                  Recording; Confidentiality . Tenant will not record this Lease, or a short form memorandum. Landlord and Tenant agree to keep the Lease terms, provisions and conditions confidential and will not disclose them to any other person. However, Landlord or Tenant may disclose Lease terms, provisions and conditions to Tenant’s accountants, attorneys, managing employees, lenders, merger candidates, Permitted Transferees, assignees, purchasers, partners and partner candidates and others in privity with Tenant or Landlord, as reasonably necessary

 

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For Tenant’s or Landlord’s business purposes. Notwithstanding the foregoing, no earlier than 30 days after the Effective Date (or such earlier time as consented to by the non-disclosing party), either party shall have the right to provide the other party written notice of its intent to publish a tombstone or other public announcement of this Lease without releasing any of the terms or conditions other than size and Term.

 

27.21                  Alternate Electricity Provider . Tenant shall not have the right to utilize services of an alternative electricity provider other than the public utility that is servicing the Building as of the date of Tenant’s execution of this Lease unless Landlord makes an alternative electricity provider available to any other tenants of the Project.

 

27.22                  Non-Severability . The rights of Tenant under this Lease shall not be severed from this Lease or separately sold, assigned, or otherwise transferred, and shall expire on the expiration or earlier termination of this Lease.

 

27.23                  Prohibited Persons and Transactions . Tenant and Landlord (each, a ‘‘Representing Party”) each represents and warrants to the other (I) that neither the Representing Party nor any person or entity that directly owns a ten percent (10%) or greater equity interest in it nor any of its officers, directors or managing members is a person or entity (each, a “Prohibited Person”) with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including Executive Order 13224 (the “Executive Order”) signed on September 24, 2001 and entitled “Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism”), or other governmental action, (ii) that the Representing Party’s activities do not violate the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 or the regulations or orders promulgated thereunder (as amended from time to time, the “Money Laundering Act”), and (iii) that throughout the term of the Lease the Representing Party shall comply with the Executive Order and with the Money Laundering Act.

 

27.24                  Taxable REIT Subsidiary . if Landlord or any affiliate of Landlord has elected to qualify as a real estate investment trust (“ REIT ”), any service required or permitted to be performed by Landlord pursuant to this Lease, the charge or cost of which may be treated as impermissible tenant service income under the laws governing a REIT, may be performed by an independent contractor of Landlord, Landlord’s property manager, or a taxable REIT subsidiary that is affiliated with either Landlord or Landlord’s property manager (each, a “ Service Provider ”). If Tenant is subject to a charge under this Lease for any such service, then, at Landlord’s direction, Tenant will pay such charge either to Landlord for further payment to the Service Provider or directly to the Service Provider, and, in either case, (i) Landlord will credit such payment against any charge for such service made by Landlord to Tenant under this Lease, and (ii) such payment to the Service Provider will not relieve Landlord from any obligation under the Lease concerning the provisions of such service.

 

27.25                  Parking . Not less than sixty (60) days prior to the Commencement Date, or more than thirty (30) days after the Commencement Date, Tenant shall have the option to rent a number of parking spaces at the “ Parking Garage ” (as further described in subsection 1.1(e) of

 

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Exhibit B ) based upon a ratio of one (1) unreserved parking space for each 1,200 rentable square feet of space in the Premises, at then current market rates established by Landlord from time to time. The current monthly rate is $200.00 per unreserved parking space and $300.00 per reserved un-posted space. In the event Tenant does not rent such parking spaces during the time provided above, or discontinues the payment for any of the above referenced parking spaces for a period of thirty (30) days or more, such spaces shall be deemed surrendered and will be returned to Landlord as available inventory. Included in Tenant’s parking ratio is the right to use five (5) of its allocated spaces to park Tenant owned vehicles overnight in the Parking Garage. Thereafter, by written notice, Tenant may lease additional spaces (up to the maximum number of reserved and unreserved spaces set forth in this Section 27.25) by notice to Landlord in the event such additional spaces have not been committed or leased to other tenants or prospective tenant, provided Landlord has no obligation to terminate any other tenant’s parking. In addition, the Parking Garage has up to 54 parking spaces for the Building tenants’ invitees on a first come — first serve basis at the current daily rate of $12.00 for the first hour with a maximum daily rate of $20.00, which rate is subject to change.

 

Landlord represents that during the Term, Landlord will not permanently demolish the Parking Garage (other than as a result of casualty) for any other purpose, or materially and adversely affect Tenant’s use of the Parking Garage, other than for scheduled maintenance, repair or restoration. In the event that the Parking Garage is permanently demolished, or Tenant’s use is interrupted, as described herein, Landlord will use reasonable efforts to find Tenant alternative parking in an area within 2 blocks of the Building.

 

27.26                  Rooftop Space . Provided that Tenant is occupying the Premises and no uncured Event of Default exists, Tenant shall have the right to lease space on the roof of the Building on a non-exclusive basis, to install one (1) satellite dish or antenna within a mutually agreed upon location (“ Rooftop Space ”) at any time during the Term of this Lease, including any extension thereof. If Tenant elects to lease the Rooftop Space, Landlord and Tenant shall enter into a separate rooftop agreement on Landlord’s standard form based upon mutually agreed upon terms as follows:

 

(a)                                  Tenant shall pay the current rooftop rental rate equal to $200.00 per month per diameter foot; provided nothing herein shall limit Landlord’s right to increase the rate in the future based on the rate charged to any new tenant;

 

(b)                                  installation and review of Tenant’s plans for the satellite dish or antenna by Landlord shall be at Tenant’s sole cost and expense; and

 

(c)                                   upon expiration of the Term, Tenant shall be obligated to remove all equipment and materials installed on the rooftop servicing the Rooftop Space, and shall be responsible for all repair to the Rooftop Space arising from such removal.

 

27.27                  Back-up Generator . At any time during the Term, Tenant shall have the right to install in the Parking Garage (as defined in Exhibit B ), in a location reasonably designated by Landlord, and maintain and exclusively use for Tenant’s own benefit, a diesel backup generator, the size and location to be consented to by Landlord (the generator and any substitutions and replacements thereof being the “ Backup Generator ”); provided, Tenant shall:

 

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(i)                                     be solely responsible for the installation of the Backup Generator and connection to the Premises pursuant to plans and specifications approved by Landlord;

 

(ii)                                 be solely responsible for the maintenance, replacement (if necessary) and repair, and appearance of the Backup Generator, in a manner consistent with a Class A building and Parking Garage, and insuring it in the manner required by this Lease;

 

(iii)                             disconnect the Backup Generator from the Premises and remove it from the Parking Garage on or prior to the expiration of the Term, and such removal will be performed outside of Normal Business Hours and on weekends;

 

(iv)                              be responsible for the payment of a Parking Space rate for each Parking Space occupied by the Backup Generator in accordance with Section 27.25 above;

 

(v)                                  be responsible for any utility costs arising from the use of such Backup Generator;

 

(vi)                              be responsible for taking reasonable steps to secure the Backup Generator from the general public, and for providing Landlord access to the Backup Generator in the event of an emergency affecting the Backup Generator;

 

(vii)                          indemnify and hold harmless Landlord from any damage or liability arising from the Backup Generator (expressly including any spills of generator fuel), except to the extent such damage or liability is caused by the gross negligence or willful misconduct of Landlord or its employees, agents, contractors or representatives.

 

Notwithstanding anything in this Lease to the contrary, the Backup Generator shall not be deemed a part of the Improvements subject to the Allowance described in Article 22 above.

 

27.28                  Relocation/Redevelopment . Landlord shall have no right to substitute different space in the Project or elsewhere for the Premises or relocate Tenant during the Term, as extended if applicable, nor to terminate this Lease by reason of the renovation or redevelopment of the Project.

 

27.29                  Legal Proceedings . This Lease shall be governed exclusively by the provisions hereof and by the laws of the State of Colorado as the same may from time to time exist. Any dispute resulting in litigation hereunder shall be resolved in court proceedings instituted in the City and County of Denver, Colorado, and in no other jurisdiction. If either Landlord or Tenant commences any litigation or judicial action to determine or enforce any of the provisions of this Lease, the prevailing party in any such litigation or judicial action, after a final and binding determination, shall be awarded all of its costs and expenses (including, but not limited to, reasonable attorneys’ fees, costs and expenditures) from the non-prevailing party.

 

27.30                  Counterparts . This Lease may be executed in multiple counterparts, and initially electronically, and each of which when so executed when taken together shall constitute one and the same agreement. Electronic signatures shall be treated as original for purposes of the Effective Date, provided each party shall thereafter forward to the other original signatures.

 

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IN WITNESS OF THIS LEASE , Landlord and Tenant have properly executed it as of the date set out on page one.

 

 

LANDLORD:

 

 

 

BOP 1801 California Street LLC and

 

BOP 1801 California Street II LLC

 

 

 

 

 

 

 

By:

/s/ David Stemberg

 

Name:

David Stemberg

 

Title:

Executive Vice President

 

 

 

 

 

 

 

TENANT:

 

 

 

 

 

SendGrid, Inc.

 

 

 

 

 

 

 

By:

/s/ Michael Tognetti

 

Name:

Michael Tognetti

 

Title:

SVP & General Counsel

 

 

 

 

Actual date of Tenant’s execution:

 

 

 

March 25, 2016

 

Note:                   The names and titles of the persons executing or witnessing the execution of tis Lease should be typewritten or legibly printed on the lines indicated above.

 

SIGNATURE PAGE TO LEASE OF OFFICE SPACE

 


 

EXHIBIT A

 

GRAPHIC

 

A- 1



 

EXHIBIT A

(continued)

 

GRAPHIC

 

A- 2



 

EXHIBIT B

 

1801 CALIFORNIA STREET
DENVER, COLORADO

 

SECTION 1                             WORDS AND PHRASES

 

1.1                                Definitions . In the Lease, including this Exhibit:

 

(a)                                  “Building” means the building in which the Premises are located currently known as 1801 California Street, being the fifty-four (54) story office tower located on the Land and forming part of the Project (except entrance lobbies, elevator cores and stairwells, vertical duct work and mechanical systems, and structural supports), including street and below street level space leased or designated for lease by Landlord to tenants for retail or service stores and for storage, and support.

 

(b)                                  “Common Areas” means at any time those portions of the Project not leased or designated for lease to tenants that Landlord provides for use in common by (or by the sublessees, agents, employees, customers, or licensees of), Landlord, Tenant, and any other tenants of the Project, whether or not those areas are open to the general public, and includes any fixtures, chattels, systems, decor, signs, facilities, or landscaping contained, maintained, or used in connection with those areas, and is deemed to include any city sidewalks adjacent to the Land and any pedestrian walkway system, whether above or below grade, park, or other facility open to the general public for which Landlord is subject to obligations arising from the Land and Project.

 

(c)                                   “Delivery Facilities” means those portions of the Common Areas on or below street level from time to time designated by Landlord as facilities to be used in common by Landlord, tenants of the Project, and others for purposes of loading, unloading, delivery, dispatch, and holding of merchandise, goods, and materials entering or leaving the Project, and giving vehicular access to the Project.

 

(d)                                  “Land” means those lands in the City and County of Denver, State of Colorado, legally described as:

 

PARCEL A: A PARCEL OF LAND BEING ALL OF LOTS 10 TO 23 AND A PORTION OF LOTS 7 TO 9, 24, 25 AND 26, AND A PORTION OF ADJACENT VACATED ALLEY, ALL IN BLOCK 142, EAST DENVER, THE PLAT OF WHICH IS RECORDED IN PLAT BOOK 1, PAGE 1.

 

PARCEL B: A PORTION OF LOTS 25 AND 26, BLOCK 142, EAST DENVER, THE PLAT OF WHICH IS RECORDED IN PLAT BOOK 1, PAGE 1, LYING BELOW DENVER DATUM ELEVATION 60.3.

 

B- 1



 

PARCEL C A PORTION OF LOTS 7 AND 8, BLOCK 142, EAST DENVER, THE PLAT OF WHICH IS RECORDED IN PLAT BOOK 1, PAGE ‘1, LYING BELOW DENVER DATUM ELEVATION 46.8.

 

AND TOGETHER WITH all rights in and to any licenses, permits, or easements granted in favor of the development and use of the Land; and shall be deemed to include additional [and in which Landlord has an interest from time to time which is contiguous to the Land (or contiguous to a public street that is contiguous to the Land) and which Landlord has improved for use in connection with the Land, and shall be deemed to exclude any parts of the Land which are transferred from time to time.

 

(e)                                   “Parking Garage” means the parking garage adjacent to the Building and located at 1847 California Street, Denver, Colorado.

 

(f)                                    “Project” means the Land, Parking Garage, Building, and those developments and improvements in which Landlord has an interest from time to time and which are located on the Land, Parking Garage, and/or the Building.

 

(g)                                   “Section” means a section of this Exhibit B.

 

1.2                                Normal Business Hours . Except as otherwise specifically provided in the Lease, normal business hours for the Building shall be from 7:00 a.m. to 6:00 p.m., Monday through Friday of each week, and 9:00 a.m. to 1:00 p.m. on Saturday, excluding days which are legal or statutory holidays in the jurisdiction in which the Building is located, subject to change by Landlord, provided that the Landlord shall not reduce the hours of operation.

 

SECTION 2                             DETERMINATION OF OCCUPANCY COSTS

 

2.1                                Definitions . In this Section 2:

 

(a)                                  “Taxes” means the aggregate of all taxes, rates, charges, levies, and assessments imposed by any governmental or quasi-governmental or other taxing authority upon or in respect to the real property interest in the Project or any tax imposed on the capital invested in the Project. In determining Taxes, any income, profits, or excess profits tax imposed upon the income of Landlord and any other tax of a personal nature charged or levied against the Landlord shall be excluded, except to the extent that such is levied in lieu of taxes, rates, charges, or assessments in respect of the Land or improvements on the Land.

 

(b)                                  “Tax Cost” means that portion of Taxes accruing in respect of the calendar year in which the Fiscal Year begins as it relates to the Project.

 

(c)                                   “HVAC Cost” means a percentage of the costs attributable to the Building in the Fiscal Year for the operation, repair, and maintenance of the systems for heating, ventilating, and air conditioning the Project, as established by Landlord from time to time on a fair and equitable basis which reflects load and hours of operation.

 

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(d)                                  “General Project Expense” means all costs, charges, and expenses in respect of a Fiscal Year directly attributable to the operation, repair, and maintenance of the Project.

 

(e)                                   “Common Areas Expense” means all costs, charges, and expenses in respect of a Fiscal Year attributable to the operation, repair, and maintenance of the Common Areas.

 

(f)                                    “Square Feet in the Building” means the aggregate of the rentable areas of the Building calculated on a single tenancy floor basis, provided that if, from time to time, there is a material change in the rentable space in the Building, Square Feet in the Building shall, from the effective date of the change until any further change, mean the number of square feet in the Building determined on completion of that change on the basis set out in Section 3.00, provided that in no event will a change in the Square Feet of the Building increase Tenant’s proportionate share of Occupancy Costs, as determined pursuant to in Section 2.02 below; or the amount of Rent then due and payable by Tenant at the time of remeasurement.

 

(9)                                  “Square Feet in the Premises” means the aggregate of the numbers of square feet set out in the definition of Premises under Article 1.01 of the Lease.

 

2.2                                “Occupancy Costs.” Occupancy Costs for any Fiscal Year is an amount equal to Operating Cost (as defined in Section 2.03) in respect of that Fiscal Year multiplied by the Square Feet in the Premises.

 

2.3                                Determination of Operating Cost . “Operating Cost” means a per square foot amount in respect of a Fiscal Year established in accordance with generally accepted accounting principles and confirmed in a certificate of Landlord, and equal to the sum of the following costs, divided by the Square Feet in the Building:

 

(a)                                  all costs, charges, and expenses directly attributable to the provision of the services required to be provided by Landlord under the Lease, and the operation, repair, and maintenance of the Project, including, without limitation, Tax Cost and HVAC Cost, and all indirect costs that are reasonably attributable to the operation, repair, and maintenance of the Building, including, without limitation, accounting, administrative, and legal costs; and

 

(b)                                  a portion of Common Areas Expense and General Project Expense as established by Landlord from time to time on a fair and equitable basis; and

 

(c)                                   a charge for property management services no greater than three percent (3%) of Landlord’s gross revenue from the Building in such Fiscal Year, excluding revenues under this Section 2.03(c). For purposes of this Section 2.03(d), Rent shall be deemed to be paid for not less than ninety-five percent (95%) of the Square Feet in the Building at a rate equal to the average Rent of the leases in place during the Fiscal Year; and

 

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(d)                                  all expenses properly allocable to the Fiscal Year for any capital improvement or structural repair incurred to reduce or limit increases in Operating Cost, or required by Landlord’s insurance carrier or by any change in the laws, rules, regulations or orders of any governmental or quasi-governmental authority having jurisdiction, or capital expenses resulting from repair, replacement, or maintenance, which expenses shall be repaid in equal monthly installments together with interest at the prime rate plus two and one-half percent (2.5%) amortized over the lesser of the useful capital life of the capital improvement or structural repair or the operational savings payback period.

 

2.4                                Limitation on Operating Cost . Notwithstanding the foregoing, in determining Operating Cost, the cost (if any) of the following shall be excluded:

 

(a)                                  Leasing commissions;

 

(b)                                  The cost of tenant finish improvements including without limitation permit, license and inspection cost provided for the benefit of other tenants or proposed tenants in the Building;

 

(c)                                   Depreciation of the Building;

 

(d)                                  The cost of services separately charged to and paid by another tenant in the Building;

 

(e)                                   Interest payments and financing costs associated with Building financing;

 

(f)                                    Legal fees associated with the preparation, interpretation and/or enforcement of leases;

 

(g)                                   Repairs and replacements for which and to the extent that Landlord has been reimbursed by insurance or condemnation proceeds and/or paid pursuant to warranties or paid by third parties;

 

(h)                                  Advertising and promotional expenses for the purposes of leasing space in the Building;

 

(i)                                      Costs representing amounts paid to an affiliate of Landlord for services or materials which are in excess of the commercially competitive rates which would have been paid in the absence of such relationship;

 

(j)                                     Ground lease rent, and interest, points and fees on debt or amortization on or for any mortgage or mortgages encumbering the Building or the Project or any part thereof, and all principal, escrow deposits and other sums paid on or in respect to any indebtedness (whether or not secured by a mortgage lien) and on any equity participation of any lender or lessor, and all costs incurred in connection with any financing, refinancing or syndication of the Project, Building or any part thereof;

 

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(k)                                  All items and services for which Tenant or any other tenant in the Building reimburses Landlord with the exception of any reimbursement for Operating Cost, or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement and all other expenditures for which Landlord is, or has the right to be, reimbursed or indemnified;

 

(l)                                      Electric power and other utility costs for which any tenant or occupant of the Building directly contracts with the local public service company, or directly reimburses Landlord outside of Operating Costs;

 

(m)                              Taxes and assessments attributable to the property of any tenant;

 

(n)                                  Any costs of artwork or improvements which are in excess of those typically provided in first class office buildings;

 

(o)                                  Dues, fees, and contributions paid to civic and philanthropic organizations;

 

(p)                                  Any franchise fees;

 

(q)                                  Costs incurred in removing other tenant’s entity’s or individual’s property from the Building;

 

(r)                                     Auditors and accountant fees associated with the Building;

 

(s)                                    Land acquisition costs;

 

(t)                                     Costs incurred due to Landlord’s or any tenant’s violation of the terms and conditions of any lease or rental agreement in the Building or Project;

 

(u)                                  Costs associated with operating the entity or entities which constitutes Landlord, as the same are distinguished from the costs of operation of the Building or Project, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee, costs (including attorneys’ fees and costs of settlement judgments and payments in lieu thereof) arising from claims, disputes or potential disputes in connection with potential or actual claims, litigation or arbitration pertaining to Landlord’s ownership of the Building or Project (expressly excluding any tax dispute or insurance claim);

 

(v)                                  Costs, including attorneys’ fees and settlement judgments and/or payments in lieu thereof, arising from actual or potential claims, disputes, litigation or arbitration pertaining to Landlord and/or the Building or Project, as it relates to any other tenant;

 

(w)                                Tax penalties and interest incurred as a result of Landlord’s negligent or willful failure to make payments and/or to file any income tax or informational return(s) when due;

 

(x)                                  Any charitable or political contributions;

 

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(y)                                  Costs of repairs which would have been covered by casualty insurance but for Landlord’s failure to maintain casualty insurance to cover the replacement value of the Building or Project as required by this Lease;

 

(z)                                   Capital expenditures not otherwise permitted hereunder;

 

(aa)                           The assessment or billing of operating expenses that results in Landlord being reimbursed more than one hundred percent (100%) of the total Operating Cost for the Fiscal Year in question;

 

(bb)                           Any compensation paid or expenses reimbursed to clerks, attendants or other persons working in any commercial concession(s) operated by Landlord;

 

(cc)                             Rentals for items (except when needed in connection with normal repairs and maintenance of permanent systems) which if purchased, rather than rented, would constitute a capital expenditure which is specifically excluded in (z) above (excluding, however, equipment not affixed to the Building which is used in providing janitorial or similar services; or equipment in the fitness center);

 

(dd)                           Costs arising from defects in the original construction of the Building or Project;

 

(ee)                             Landlord’s general corporate overhead and general and administrative expenses;

 

(ff)                               Any and all costs arising from the presence and non-compliance of Hazardous Substances (as defined in this Lease) in or about the Premises, the Building, the Land, and the Project, expressly excluding any non-compliance of Hazardous Substances which arise out of an act by Tenant, its agents or employees; and

 

(gg)                             Wages, salaries, fees, fringe benefits, and any other form of compensation paid to any executive employee of Landlord and/or Landlord’s managing agent (other than Patrick Hilleary, who oversees the property management and construction projects in the Building), and pro-rated in the event said person(s) manage more than one office building.

 

Landlord shall (i) not make a profit by charging items to Operating Costs that are otherwise also charged separately to others, and (ii) Landlord shall not collect and retain Operating Costs from Tenant and all other tenants/occupants in the Building in an amount in excess of what Landlord incurred for the items included in such costs; provided nothing herein shall exclude any management fee otherwise permitted hereunder. Any net refunds or discounts actually received by Landlord for any category of Operating Costs shall reduce Operating Costs in the applicable Fiscal Year (pertaining to such category of Operating Costs).

 

2.5                                When Services Are Not Provided . Notwithstanding Section 2_03, when and if any service (such as janitorial service) which is normally provided by Landlord to tenants of the Building in their premises:

 

(a)                                  is not provided by Landlord in the Premises under the specific terms of this Lease, then in determining Occupancy Costs for Tenant, the cost of that service (except

 

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as it relates to Common Areas, and to those areas of the Building from time to time not designated for leasing or designated by Landlord for use by or for the benefit of Tenant [or by or for the benefit of the sublessees, agents, employees, customers, or licensees of Tenant] in common with all other tenants and other persons in the Building) shall be excluded, and

 

(b)                                  is not provided by Landlord in a significant portion of the Building, then in determining Occupancy Costs (excluding Tax Cost) for Tenant, the cost of that service shall be divided by the difference between the Square Feet in the Building and the number of square feet in the Building in which Landlord does not provide such service, determined on the basis set out in Section 3.01.

 

2.6                                Partial Fiscal Year . If the Term commences after the beginning of or terminates before the end of a Fiscal Year, any amount payable by Tenant or Landlord under Section 2.02 shall be adjusted proportionately.

 

2.7                                Shared Facilities, Services, and Utilities . If any facilities, services, or utilities:

 

(a)                                  for the operation, repair, and maintenance of the Project are provided from another building or other buildings owned or operated by Landlord or any affiliate of Landlord or any agent of Landlord, or

 

(b)                                  for the operation, repair, and maintenance of another building or other buildings owned or operated by Landlord or any affiliate of Landlord, or any agent of Landlord are provided from the Project,

 

the net costs, charges, and expenses therefor shall, for the purposes of Section 2.03, be allocated by Landlord between the Project and the other building or buildings on a fair and equitable basis.

 

2.8                                Separate Assessment of Taxes . Notwithstanding Sections 2.02 and 2.03, if Taxes for the Premises and all other portions of the Land and Building leased or designated for lease to tenants are assessed separately for each tenant by any competent authority:

 

(a)                                  the amount payable in respect of the Premises shall be included in Occupancy Costs, and

 

(b)                                  the amount payable in respect of the Premises and on all other portions of the Land and Building leased or designated for lease to tenants shall be excluded from Taxes for the purpose of determining Operating Cost.

 

SECTION 3                             DETERMINATION OF SQUARE FEET IN THE PREMISES (AS APPLICABLE)

 

3.1                                Office Space - Single Tenancy Floors . In accordance with BOMA standards, the number of square feet of office space in the Premises on a single tenancy floor in the Building (if any) shall be calculated from dimensioned Architect’s drawings to the inside face of the outside pane of the glass in the permanent exterior building walls (whether or

 

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not the glass extends to the floor) or to the inside finish of those walls if they contain no glass. It shall include all space within exterior building walls, except for stairs (other than stairs exclusively serving a tenant occupying offices on more than one floor), elevator shafts, flues, pipe shafts, vertical ducts, and other vertical risers which penetrate the floor, and shall include a portion of unallocated space in the Building as reasonably determined by Landlord. No deduction shall be made for washrooms, janitorial closets, air conditioning rooms, fan closets, or for electrical or telephone cupboards within and servicing only that floor or servicing a single tenant on more than one floor, or for any other rooms, corridors, or areas available to the tenant on that floor for its use, furnishings, or personnel, or for any columns located wholly or partially within the space or for any enclosures around the periphery of the Building used for the purpose of heating, ventilating, or cooling.

 

3.2                                Office Space - Multiple Tenancy Floors . The number of square feet of office space in the Premises on a multiple tenancy floor in the Building (if any) shall be calculated from dimensioned Architect’s drawings to the inside face of the outside pane of the glass as described in Section 3.01 for a single tenancy floor, to the face of permanent interior walls and to the center line of demising partitions and shall include a portion of unallocated space in the Building as determined by Landlord. No deduction shall be made for washrooms, janitorial closets, air conditioning rooms, fan closets, or for electrical or telephone cupboards within and servicing only that floor, or for any other rooms, corridors, or areas available to the tenants on that floor for their use, furnishings, or personnel, or for any columns located wholly or partially within the space, or for any enclosures around the periphery of the Building used for the purpose of heating, ventilating, or cooling.

 

3.3                                Re-measurement Rights . At any time during the Term, Landlord shall have the right to re-measure the Building pursuant to the measurement standards described as follows (or the then-current measurement standards):

 

Square Feet . The number of Square Feet in the Building or any part of the Building, including the Premises, shall be calculated in accordance with the then current ANSI/BOMA Z65 standards or such replacement standard.

 

Notwithstanding the foregoing, Landlord represents that Tenant’s Occupancy Costs shall not be increased as a result of the re-measurement, nor shall Tenant’s then current Rent due and payable under the Lease be increased as a result of such re-measurement.

 

SECTION 4                             LOADING AND DELIVERY

 

4.1                                The delivery and shipping of merchandise, supplies, fixtures, and other materials or goods of whatsoever nature to or from the Premises and all loading, unloading, and handling thereof shall be done only at such times, in such areas, by such means, and through such docks, entrances, malls, elevators, and corridors, as are reasonably designated by Landlord.

 

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4.2                                Unless caused by the gross negligence or willful misconduct of the Landlord, its employees, contractors or agents, Landlord accepts no liability and is hereby relieved and released by Tenant in respect of the operation of the Delivery Facilities, or the adequacy thereof, or of the acts or omissions of any person or persons engaged in the operation thereof, or in the acceptance, holding, handling, delivery, or dispatch, or failure of any acceptance, holding, handling, or dispatch, or any error, negligence, or delay therein.

 

4.3                                In acting reasonably, Landlord may from time to time make and amend regulations for the orderly and efficient operation of the Delivery Facilities, and may require the payment of reasonable and equitable charges for delivery services provided by Landlord.

 

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EXHIBIT C

 

RULES AND REGULATIONS

 

1.                                       Security . Landlord may from time to time adopt appropriate systems and procedures for the security or safety of the Building, any persons occupying, using or entering the same, or any equipment, finishings or contents thereof, and Tenant shall comply with Landlord’s reasonable requirements relative thereto.

 

2.                                       Locks . Landlord may from time to time install and change locking mechanisms on entrances to the Building, common areas thereof, and the Premises, and (unless 24-hour security is provided by the Building) shall provide to Tenant a reasonable number of keys and replacements therefor to meet the bona fide requirements of Tenant. In these rules, keys include any device serving the same purpose. Tenant shall not add to or change existing locking mechanisms on any door in or to the Premises without Landlord’s prior written consent. If with Landlord’s consent, Tenant installs lock(s) incompatible with the Building master locking system:

 

(a)                                  Landlord, without abatement of Rent, shall be relieved of any obligation under the Lease to provide any service to the affected areas which require access thereto,

 

(b)                                  Tenant shall indemnify Landlord against any expense as a result of forced entry thereto which may be required in an emergency, and

 

(c)                                   Tenant shall at the end of the Term and at Landlord’s request remove such lock(s) at Tenant’s expense and repair any resulting damage.

 

3.                                       Return of Brass Keys and Card Keys . At the end of the Term, Tenant shall promptly return to Landlord all keys for the Building and Premises which are in possession of Tenant, its employees, agents or invitees. Landlord may charge Tenant a reasonable fee for all keys and card keys not returned to Landlord at the end of the Term.

 

4.                                       Windows . Tenant shall observe Landlord’s rules with respect to maintaining window coverings at all windows in the Premises so that the Building presents a uniform exterior appearance, and shall not install any window shades, screens, drapes, covers or other materials on or at any window in the Premises without Landlord’s prior written consent. Tenant shall ensure that window coverings are closed on all windows in the Premises while they are exposed to the direct rays of the sun.

 

5.                                       Repair, Maintenance, Alterations and Improvements . Tenant shall carry out Tenant’s repair, maintenance, alterations and improvements in the Premises only during times agreed to in advance by Landlord in a manner which will not interfere with the rights of other tenants in the Building, and in accordance with Landlord’s construction and contractor rules and regulations.

 

6.                                       Water/Restroom Fixtures . Tenant shall not use water or restroom fixtures for any purpose for which they are not intended, nor shall water be wasted by tampering with

 

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such fixtures. Any cost or damage resulting from such misuse by Tenant shall be paid for by Tenant.

 

7.                                       Personal Use of Premises . The Premises shall not be used or permitted to be used for residential, lodging or sleeping purposes or for the storage of personal effects or property not required for business purposes.

 

8.                                       Heavy Articles . Tenant shall not place in or move about the Premises without Landlord’s prior written consent any safe or other heavy article which in Landlord’s reasonable opinion may damage the Building or the Premises, and Landlord may designate the location of any heavy articles in the Premises. Tenant is responsible for all costs, if any, incurred by Landlord for structural engineering review.

 

9.                                       Carpet Pads . In those portions of the Premises where carpet has been provided directly or indirectly by Landlord, Tenant shall at its own expense install and maintain pads to protect the carpet under all furniture having casters other than carpet casters.

 

10.                                Bicycles, Animals . Tenant shall not bring any animals, including mammals, reptiles, fish, etc., with the exception of working animals to assist the disabled, into the Building without Landlord’s prior written consent and shall not permit bicycles or other vehicles inside or on the sidewalks outside the Building except in areas designated from time to time by Landlord for such purposes.

 

11.                                Deliveries . Tenant shall ensure that deliveries of materials and supplies to the Premises are made through such entrances, elevators and corridors and at such times as may from time to time be designated by Landlord, and shall promptly pay or cause to be paid to Landlord the cost of repairing any damage in the Building caused by any person making such deliveries.

 

12.                                Furniture and Equipment . Tenant shall ensure that furniture and equipment being moved into or out of the Premises is moved through such entrances, elevators and corridors and at such times as may from time to time be designated by Landlord, and by movers or a moving company approved by Landlord, and shall promptly pay or cause to be paid to Landlord the cost for repairing any damage in the Building caused thereby.

 

13.                                Solicitations . Landlord reserves the right to restrict or prohibit canvassing, soliciting or peddling in the Building.

 

14.                                Food and Beverages . Only persons approved from time to time by Landlord may prepare, solicit orders for, sell, serve or distribute foods or beverages in the Building, or use the elevators, corridors or common areas for any such purpose. Except with Landlord’s prior written consent and in accordance with arrangements approved by Landlord, Tenant shall not permit on the Premises the use of equipment for dispensing food or beverages or for the preparation, solicitation of orders for, sale, serving or distribution of food or beverages. Tenant shall not permit cooking within the Premises, Microwave ovens may be used by employees, agents or invitees only for the purposes of reheating food or drinks .

 

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15.                                Refuse . Tenant shall place all refuse in proper receptacles provided by Tenant at its expense in the Premises or in receptacles (if any) provided by Landlord for the Building, and shall keep sidewalks and driveways outside the Building, and lobbies, corridors, stairwells, elevator vestibules, ducts and shafts of the Building, free of all refuse. Tenant shall not utilize Landlord-provided receptacles for the disposal of hazardous materials, including but not limited to paint and computer equipment, including video display monitors.

 

16.                                Obstructions . Tenant shall not obstruct or place anything in or on the sidewalks or driveways outside the Building or in the lobbies, corridors, stairwells or other common areas of the Building, or use such locations for any purpose except access to and egress from the Premises without Landlord’s prior written consent. Landlord may remove at Tenant’s expense any such obstruction or thing (unauthorized by Landlord) without notice or obligation to Tenant.

 

17.                                Dangerous, Immoral or Illegal Activities . Tenant shall not make use of the Premises which involves the danger or injury to any person, nor shall the same be used for any immoral or illegal purpose.

 

18.                                Proper Conduct . Tenant shall not conduct itself in any manner, including but not limited to gestures, language, noise, and attire, that is inconsistent with the character of the Building as a first quality building or which will impair the comfort and convenience of other tenants in the Building.

 

19.                                Employees, Agents and Invitees . In these Rules and Regulations, the term “Tenant” includes the employees, agents, invitees and licenses of Tenant and others permitted by Tenant to use or occupy the Premises.

 

20.                                Housekeeping . Tenant shall prevent paper, books, magazines, and other obstructions from blocking heating, ventilating and air conditioning diffusers, or from being stacked within 18 inches of the ceiling, or from causing any other interference with the fire/life safety, security, elevator, heating, ventilating and/or air conditioning systems within the Premises.

 

21.                                Energy Conservation . Tenant shall make every effort to practice energy conservation within the Premises including turning off lights and equipment, etc. at the end of the day, and will cooperate with Landlord in establishing and implementing such conservation programs as Landlord may from time to time develop_

 

22.                                Weapons and Explosives . Tenant, its employees, agents and invitees shall not bring any weapons and/or explosives of any size or type into the Project for any reason.

 

23.                                Tenant’s Telecommunications Equipment . Tenant may utilize the telephone closet located in the Building core for the necessary connections to the Riser system. All of Tenant’s telecommunications equipment shall be located in Tenant’s Premises. Tenant shall not utilize the telephone closet for its equipment.

 

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24.                                Tobacco Use . The smoking or other use of tobacco products in the Building, the Plazas and Building Entries is prohibited.

 

25.                                Building Stairwells . Unless previously approved in writing by Landlord, Tenant shall use building stairwells only for emergency relocation or evacuation.

 

26.                                Candles, Incense, Etc. Tenant shall not use materials in the Building that in Landlord’s sole opinion, cause a hazard or irritation to other persons, including but not limited to burning candles or incense or utilizing real holiday decorations (trees, garlands, etc.), and air fresheners, or other activities that create noxious or offensive odors.

 

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EXHIBIT D

 

Tenant Coordinated

 

CONSTRUCTION PROCEDURES
1801 CALIFORNIA STREET

 

ARTICLE 1                            WORDS AND PHRASES

 

1.1                                Definitions . In this Exhibit D:

 

(a)                                  “Building Standard” means the quantity and quality of materials, equipment, finishing, workmanship, and other elements from time to time specified by Landlord for the Building as described on the attached D-1.

 

(b)                                  “Space Plan” means the preliminary conceptual layout of the Premises for use in evaluation of space utilization in the Premises dated March 8, 2016, prepared by Tenant’s architect, Hampton Architecture, Inc.

 

(c)                                   “Construction Drawings” means the plans and specifications (including structural, architectural, mechanical, and electrical working drawings stamped by a licensed professional engineer) suitable for the construction, supply, installation, and finishings in the Premises of partitions; doors and hardware; ceilings; wiring; lights and switches; heating, cooling, and ventilation equipment and controls; telephone and electrical outlets and floor covering; drapes; built-ins; plumbing and fixtures; fire protection, fire warning, and security systems; and other equipment and facilities attached to and forming part of the Building.

 

(d)                                  “Drawings” are comprised of the Space Plan and/or the Construction Drawings.

 

(e)                                   “Tenant’s Space Planner” means professional architect(s) and/or engineer(s) from time to time engaged by Tenant at Tenant’s expense and approved by Landlord for preparation of a Space Plan and the Construction Drawings.

 

(f)                                    “Landlord’s Work” means the items supplied, installed, and finished by Landlord at no cost to Tenant under Article 5.00.

 

(g)                                   “Tenant’s Work” means the items supplied, installed, and finished by Tenant at no cost to Landlord under Article 6.00 (except for Landlord’s obligation to pay the Allowance).

 

(h)                                  “Landlord’s Contractor” means the contractor(s) from time to time engaged by Landlord to carry out Landlord’s Work.

 

(i)                                      “Tenant’s Contractor” means the contractor(s) from time to time engaged by Tenant to carry out Tenant’s Work and approved by Landlord.

 

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(j)                                     “As-Built Drawings” means the most current drawings available to Landlord depicting the existing condition in the Premises.

 

ARTICLE 2                            GENERAL DESIGN AND CONSTRUCTION CRITERIA

 

2.1                                Space planners, contractors, and subcontractors engaged by Tenant from time to time to carry out Tenant’s Work shall be subject to Landlord’s prior approval and shall be selected from among those included in Landlord’s Approved Designers and Contractors list, which may be amended from time to time. Restrictions on mechanical and electrical connections by Tenant will be imposed to ensure the integrity of the Building and that no warranty or guarantee pertaining to the Project is lost or compromised. Landlord approves of Hampton Architecture, Inc. and Catalyst Planning Group.

 

2.2                                Tenant is responsible for preparation of all Drawings relating to completion of the Premises for occupation by Tenant, calling of tenders and letting contracts relating to Tenant’s Work, supervision and completion of Tenant’s Work and payment thereof (subject to Landlord’s payment of the Allowance), procurement of all permits and permissions related to Tenant’s Work, compliance with the requirements of all authorities having jurisdiction and with conditions contained herein, and payment of all fees and charges thereby incurred (subject to Landlord’s payment of the Allowance).

 

2.3                                Tenant shall impose and enforce all terms hereof on any designer, contractor, and workmen engaged by Tenant, including, but not limited to, the Tenant’s Space Planner and Tenant’s Contractor(s).

 

2.4                                The provisions of the Exhibit D shall apply to the build-out of any additional space in the Building leased by Tenant during the Lease Term, as extended if applicable.

 

ARTICLE 3                            AS-BUILT DRAWINGS AND TENANT CONSTRUCTION MANUAL

 

3.1                                As soon as practicable after execution of the Lease Agreement, Landlord shall deliver to Tenant “CAD” Drawings of the Premises, a Tenant Construction Manual, Contractors and Space Planners List, Tenant Contractor Rules and Regulations, and Building Standard requirements containing basic information pertinent to the Premises as set out in Article 3.02.

 

3.2                                The lease CAD Drawings will contain some or all of the following information about the Premises:

 

(a)                                  A dimensioned outlined floor plan and reflected ceiling plan or plans at a minimum scale of one eighth inch equals one foot (1/8” = 110”), showing the building module.

 

(b)                                  Dimensioned structural drawing showing the size and layout of the framing for the floor and the floor immediately above.

 

(c)                                   Dimensioned mechanical drawings showing the location of:

 

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(1)                                  primary duct work, including terminal boxes and controls;

 

(2)                                  sprinkler system (if any) for an open floor plan;

 

(3)                                  heating, cooling, ventilation units (if any) and controls;

 

(4)                                  water supply and drainage systems, and access for tenant connections;

 

(5)                                  fire hose cabinets (if any);

 

(6)                                  location of kitchen exhausts duct (if any);

 

(7)                                  access to general exhaust system (if any);

 

(8)                                  life safety systems;

 

(9)                                  security systems; and

 

(10)                           fire protection systems.

 

(d)                                  Dimensioned electrical drawings showing the location of:

 

(1)                                  fire protection and fire notification systems (if any); and

 

(2)                                  electrical panels.

 

3.3                                The Tenant Construction Manual will contain the following information and guidelines relative to the manner in which the Premises are to be designed and constructed:

 

(a)                                  Building Standard information outlining Drywall Partitions, Carpet, Wall Base, Doors, Frames and Hardware, Lighting Fixtures, Window Coverings, and Ceiling Systems.

 

(b)                                  Design Criteria information outlining:

 

(1)                                  Interior Architecture, specifying partitions, and ceiling systems;

 

(2)                                  Mechanical Engineering, specifying HVAC controls;

 

(3)                                  Electrical Engineering, specifying power budget;

 

(4)                                  Structural Engineering, specifying floor loads; and

 

(5)                                  Fire Protection Systems, specifying alarms and communications, emergency lighting, and sprinkler coverage.

 

3.4                                Tenant shall cause Tenant’s Space Planner and Tenant’s Contractor to become familiar with Landlord’s requirements for performing construction in the Building and Project.

 

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ARTICLE 4                            TENANT’S SPACE PLAN AND PREMISES PLAN

 

4.01                         Standards . The layout, design, materials, finishes, installation, and disposal of materials related to the construction of the Premises, shall be performed at a uniformly high-quality, but in no event less than Building Standard, including any requirements necessary to maintain the Building’s LEED certification, in accordance and consistent with the standards of practice found in Class A buildings in the Denver Central Business District and any governing codes or regulations, and subject to Landlord’s approval.

 

4.2                                Space Plan . Tenant shall deliver to Landlord two (2) hard copies and an electronic version of the Space Plan.

 

4.3                                Approval of Space Plan . As of the Effective Date, Landlord will have approved the Space Plan.

 

4.4                                Construction Drawings . As soon as practical after the Effective Date, Tenant shall deliver to Landlord two (2) copies of the Construction Drawings prepared by Tenant’s Space Planner. The preparation of that portion of the Construction Drawings (including any amendments thereto) that relates to Tenant’s Work to be performed by Landlord’s Contractor(s) shall be at Tenant’s expense (except for Landlord’s obligation to pay the Allowance).

 

4.5                                Approval of Construction Drawings . Not more than ten (10) business days after receipt by Landlord of the Construction Drawings, Landlord shall notify Tenant either of its approval thereof, or of the changes required. If Landlord notifies Tenant that changes are required, Tenant shall, within five (5) business days, submit to Landlord, for its approval, Construction Drawings amended by Tenant and Tenant’s Space Planner in accordance with the changes so required. Landlord shall have five (5) business days to review the changes and advise Tenant of acceptability of the changes or require further changes. If further changes are required by Landlord, each party shall continue to have five (5) business days for responses. Upon Landlord’s notification to Tenant of approval by Landlord of the Construction Drawings, or the amended Construction Drawings (as the case may be), Tenant shall promptly submit the Construction Drawings to Tenant’s Contractor for pricing and to appropriate authorities for the issuance of a building permit. Landlord shall not unreasonably withhold or condition its approval of the Construction Drawings. In the event that Landlord fails to provide Tenant its approval or disapproval of the Construction Drawings within the prescribed periods above, then Tenant shall provide Landlord written notice thereof, and if Landlord fails to either approve or disapprove the Construction Drawings within two (2) business days after Landlord’s receipt of Tenant’s notice, then the Construction Drawings shall be deemed approved.

 

4.6                                Tenant Construction Pricing and Contracts . Tenant shall provide Landlord with copies of all cost estimates and construction contracts with Tenant’s Contractor for work in the Premises.

 

4.7                                Landlord’s Expenses . Landlord shall deduct from the Allowance, its one percent (1%) supervisory fee as provided in Article 22.00 of the Lease.

 

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ARTICLE 5                            LANDLORD’S WORK

 

5.1                                Landlord will perform “Landlord’s Work” as described in Section 22.02 of the Lease at its sole cost and expense without application of the Allowance. Other than Landlord’s Work, Landlord shall supply the Premises broom clean in the current “as-is” condition.

 

5.2                                At Tenant’s expense (except for Landlord’s obligation to pay the Allowance), Landlord shall complete those connections and other items (if any) included in Tenant’s Work but which must be done by Landlord’s Contractors to preserve related base building warranties and guarantees, and the integrity of the Building, and may also perform such other work for Tenant at Tenant’s expense as is agreed to in writing by Landlord and Tenant.

 

ARTICLE 6                            TENANTS WORK

 

6.1                                Other than Landlord’s Work, all work required to complete the Premises for occupancy in accordance with the Construction Drawings which is not set out in Article 5.00 shall be performed by Tenant at no cost to Landlord (except for the Allowance).

 

6.2                                At its own expense (except for Landlord’s obligation to pay the Allowance) , Tenant shall provide all design, permits, fees, work, and materials required to complete the Premises for occupancy in accordance with the Construction Drawings, except as set out in Article 5.00, including, but not limited to, the following:

 

(a)

Ceilings

Modification of ceiling suspension system as required, and installation of ceiling tiles.

 

 

 

(b)

Lights

Supply and installation of supplementary lights (which shall require Landlord approval) and all light switching. Panel breakers are not acceptable for switching.

 

 

 

(c)

Walls, Doors, and Decorating

Supply, installation, and finishing of all interior partitions, doors (including in the case of full tenancies, doors to elevator lobby), fixtures, and furnishings, and decoration and finishing of all surfaces and perimeter radiation units (if any) within the Premises.

 

 

 

(d)

Floors

Supply and installation of floor covering and base.

 

 

 

(e)

Heating, Cooling, and Ventilation

Supply and installation of any approved modification to the existing Base Building Systems, including additional controls, and special ventilation, cooling, and exhaust requirements, provided Landlord shall be required to provide the Premises new direct digital controls on VAV boxes in place as of the Delivery Date.

 

 

 

(f)

Water & Drainage

Supply and installation of any plumbing services to and in the Premises (e.g., private washrooms, kitchens, etc.) all from the point of access identified by Landlord.

 

 

 

(g)

Security System

Any security lock-off system approved by Landlord and compliant

 

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with all codes, laws, etc.

 

 

 

(h)

Power

Supply and installation of electrical distribution systems for power and supplementary lighting to and in the Premises from the electrical room, including any special electrical systems, (e.g., for reproduction equipment, computer, etc.). Any power consumption for special electrical systems (i.e., computer rooms, non-standard lighting, supplemental air conditioning, telephone equipment, etc.) that is disproportionate to other tenants as set forth in the Lease shall be metered at Tenant’s expense and Tenant shall be responsible for the additional cost of this power.

 

 

 

(i)

Fire Protection and Sprinklers

Supply and installation of any approved modifications to the Building’s and Premises’ fire detection and fire warning systems, and the sprinkler system (if any). Supply and installation of safety and emergency equipment and lighting as required by Tenant’s Space Layout or any regulatory authority having jurisdiction which is additional to the existing base building systems which is required because of Tenant’s use of the Premises.

 

 

 

(j)

Telephones

Supply and installation of telephone and communication systems to and in the Premises from the electrical or telephone room, in accordance with the Lease.

 

 

 

(k)

Window Coverings

Installed on all exterior windows; no variation from Building Standard is allowed except as mutually agreed to by Landlord and Tenant.

 

 

 

(l)

Special Services

Supply and installation of any special services required by Tenant and approved by Landlord, (e.g., compressed air, auxiliary condenser water systems, auxiliary exhaust system, etc.).

 

 

 

(m)

Work to be Performed by Landlord’s Contractor

The following shall be carried out at Tenant’s expense and by Landlord’s Contractor:

 

(1)          Patching of Building Standard fireproofing;

 

(2)          any drilling, cutting, coring, and patching in the floors, main Building chases and shafts, or roofs of the Building which have been approved by Landlord; and

 

(3)          installation of approved modifications to the Building fire alarm system.

 

6.3                                Modifications to the base Building systems and special requirements of Tenant can be considered by Landlord only if applied for at the time the Construction Drawings are submitted to Landlord for approval and if they are compatible with the capacity and character of the Building. Any such approved modifications shall be made at Tenant’s expense (except for Landlord’s obligation to pay the Allowance) by, at Landlord’s option, either Landlord’s or Tenant’s Contractor.

 

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6.4                                No construction work shall be undertaken or commenced by Tenant in the Building or Project until:

 

(a)                                  the Construction Drawings have been submitted to and approved by Landlord under Article 4.00;

 

(b)                                  all necessary building permits and all insurance coverages have been obtained by Tenant and its contractor and copies provided to Landlord;

 

(c)                                   proper provision has been made by Tenant for payment in full for the cost of the work in excess of the Allowance; and

 

(d)                                  copies of all cost estimates and construction contracts have been submitted to Landlord under Article 4.00.

 

6.5                                Subject only to circumstances over which Tenant has no control and which could not have been avoided by Tenant by the exercise of due diligence, Tenant shall proceed with its work expeditiously, continuously, and efficiently.

 

6.6                                Tenant shall ensure that all materials and workmanship in Tenant’s Work shall be uniformly high quality, not less than Building Standard, and in accordance and consistent with standards of practice found in Class A office towers in the Denver Central Business District and any governing code or regulations. Tenant’s Contractors shall comply with Landlord’s Contractor Rules and Regulations; provided neither Tenant nor its Contractors will be required to provide demolition payment or performance bonds.

 

ARTICLE 7                            TENANT’S ACCESS FOR COMPLETION OF WORK

 

7.1                                Subject to compliance with applicable rules referred to in Article 6.00, Tenant and Tenant’s Space Planner, Contractors, and workmen employed by Tenant shall have access to and non-exclusive use of the Premises to perform Tenant’s Work and such other work approved by Landlord as Tenant may desire. Tenant has selected, and Landlord approves, Interior Alterations, inc., d/b/a IAI Construction Company Ltd, as Tenant’s general contractor for Tenant’s Work.

 

7.2                                In order to ensure that work proceeds efficiently in the Building, Landlord may from time to time make rules for coordination of all construction work, provided such rules are uniformly applied. Tenant shall ensure that Tenant’s Space Planner and Tenant’s Contractor and workmen employed by Tenant are informed of and observe such rules, and prior to commencement of any construction work make appropriate arrangements with Landlord, particularly with respect to:

 

(a)                                  material handling and hoisting facilities,

 

(b)                                  material and equipment storage,

 

(c)                                   time and place of deliveries,

 

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(d)                                  hours of work and coordination of work,

 

(e)                                   power, heating, and washroom facilities,

 

(f)                                    scheduling,

 

(g)                                   security, and

 

(h)                                  cleanup.

 

7.3                                On any multi-tenant floor, Landlord may require that neat screens or hoardings, as designed or prescribed by Landlord, be erected at Tenant’s expense around the work and the Premises, and that all work be conducted and all tools and materials be kept behind such hoardings. Landlord requires all cutting, drilling, and other work of a noisy, malodorous, or vibrant nature be conducted outside the normal business hours of other tenants in the Building.

 

7.4                                Tenant shall at all times keep the Premises and adjacent areas reasonably free from accumulations of waste material or rubbish caused by his suppliers, contractors, or workmen. Landlord may require reasonable cleanup on a daily basis and reserves the right, after notice (which may be verbal) and the opportunity for Tenant to cure (unless such failure would result in a dangerous condition), to do cleanup at the expense of the Tenant if Landlord’s reasonable requirements in this regard are not complied with. At the completion of the work Tenant’s Contractor shall forthwith remove all rubbish and all tools, equipment, and surplus materials from and about the Premises and shall leave the Premises clean to the reasonable satisfaction of Landlord. This final cleanup shall include the cleaning of light fixtures, windows, perimeter radiation units (if any), entries, and public space affected by the work.

 

7.5                                Any damage caused by Tenant’s Contractor (or sub-trades to any work of Landlord’s Contractor) and/or to any property of Landlord or other tenants shall be repaired forthwith to the satisfaction of Landlord by Tenant at Tenant’s expense, which expense may be paid from the Allowance.

 

7.6                                If Tenant’s Contractor does not execute Tenant’s Work properly in accordance with the approved plans and specifications, Landlord, after five (5) days’ written notice to Tenant and Tenant’s Contractor, and without prejudice to any other right or remedy Landlord may have, may remedy the default or make good any deficiencies, and recover the costs incurred therein from Tenant, which recovery may be paid from the Allowance.

 

ARTICLE 8                            PERFORMANCE OF TENANT’S WORK BY LANDLORD

 

8.1                                If Landlord performs any of Tenant’s Work hereunder, whether at the request of Tenant or as provided herein to be performed by Landlord at Tenant’s cost (except for Landlord’s obligation to pay the Allowance), or if Landlord performs other work or supplies materials or equipment on the Premises or in the Building by agreement in writing with Tenant, Tenant shall pay to Landlord within ten (10) days of receipt of

 

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invoice the direct cost thereof to Landlord, which payment may be made from the Allowance.

 

8.2                                Landlord shall deduct from the Allowance a fee equal to five percent (5%) of the cost of any work performed by Landlord under Section 8.01 above as a fee for general coordination.

 

8.3                                Landlord shall deduct from the Allowance any amount payable under Article 8.02 effective at the time Landlord commences such work or orders material or equipment for such work.

 

ARTICLE 9                            NON-COMPLIANCE

 

9.1                                In the event of non-compliance by Tenant with any of the provisions of this Exhibit, Landlord, in addition to and not in lieu of any other right or remedy, may and shall have the right in its discretion to declare and treat Tenant’s non-compliance as a default or breach of covenant under the Lease and exercise any right available under the provisions of the Lease, including the right of termination.

 

9.2                                In any event of termination pursuant to Article 9.01, Landlord may further elect, relative to any work done by Tenant to date of such termination, to either:

 

(a)                                  retain for its own use, without payment therefor, all or any portion of the Tenant Work which has been commenced, installed, or completed, or

 

(b)                                  forthwith demolish or remove all or any work and restore the Premises to the condition in which the same were prior to the commencement, installation, or completion of all or any portion of the Tenant’s Work and recover the cost of so doing from Tenant.

 

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EXHIBIT D-1

 

1801 CALIFORNIA STREET

 

TENANT IMPROVEMENT
BUILDING STANDARD INTERIOR FINISHES

 

Partitions:

In the event Tenant utilizes drywall partitions, such interior drywall partitions will constructed of minimum 2 1/2” 25 gauge metal studs at 24” o.c. , with 5/8” gypsum board each side and a level 4 finish. Partitions will be ceiling height, speckled and taped. Partitions terminating at the exterior wall will meet with a column centerline.

 

 

 

Pony Wall — Is a slab to grid then a pony wall attached to underside of structure above. This partition assembly enables ceiling grid and tile to pass-through the wall structure and supports sound attenuation. Partition assembly is made up of 25 Gauge metal “c” studs at 24” o.c. Runner track is located at ceiling grid and tile that is suspended from structure above with deep runner track at structure.

 

 

 

Demising wall / Sound wall — Metal frame assembly with 25 Gauge metal, with “C” studs at 24” o.c. This assembly is framed deck to deck which intersects grid and tile. Similar condition at underside of structure with deep ceiling runner track. Wall assembly will have 2 W’ foil faced insulation fiberglass batts (foil side up) extend at a minimum 24” batts on either side of wall assembly.

 

 

Ceiling:

Armstrong 1775 Dune 2x2 Regular — LEED Certified. Color selection: WH White.

 

 

Ceiling Suspension System:

Armstrong 9/16” Suprafine Grid Components: 7500 Intermediate / Cross Tees - XL7540 (24”) & XL7540 (48”) / Wall Moldings #7804. Grid systems are not to be intermixed. Color selection: WH White

 

 

Lighting:

The Building Standard fixture is a Philips Ledalite 2 X 2 LED fixture, Model 3622-Al-ST-L-A-36-S-7-2-E with return air slots and flex, for Standard T-Grid, 4000K, dimming, 277 volt. The same fixture is available with a Daylight Response feature. LED fixtures are not to be mixed with fluorescent fixtures. Supply air diffusers will be required where LED fixtures are used, unless the fixtures are capable of being equipped with supply troffers.

 

 

Door and Frames:

If Tenant utilizes traditional dry wall construction Tenant will use full height doors and frames of its choice. If Tenant utilizes a demountable partition system such as DIRTT or equivalent, Tenant will utilize the doors and frames that are part of the system. The Building Standard is Hollow Metal frames and Maple Veneer doors.

 

 

Door Hardware:

Tenant may select door hardware of its choice. Tenant will specify Corbin Russwin locksets and will coordinate keying with building engineer.

 

 

Blinds:

Exterior window blinds are Mechoshade Systems EuroTwill Reversible Weave Manual Drive system. Color 6462 Light Charcoal. 6450 Series 3% open; dark side faces outside/lighter side faces inside. Use with Mecho 5 bracket. Valance

 

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Options: White or Quaker Bronze.

 

 

Light Switches:

Light switches shall have cover plates selected by Tenant, mounted vertically, 42” from finish floor. Tenant will install light switches per code and as dictated by Tenant design.

 

 

Electrical Receptacles:

Electrical receptacles are 120 volt duplex type, mounted per code, horizontally at 15” from finish floor. Cover plate shall be selected by Tenant.

 

 

Telephone Outlets:

Telephone outlets shall be installed and located per code, 15” AFF,

 

 

Exit Signs:

Dual Lite #LE-C-D-G-W-W, per Denver Building Code, suspended from ceiling. Note that the model number reflects a double faced fixture, directional arrow not referenced. LX Series is for Tenant Spaces.

 

 

Emergency Lighting:

An emergency/standby power generator is connected to designated light fixtures and exit lights as required per code.

 

 

Sprinkler System:

Sprinkler heads shall be flush mounted with white cover plates, located as required per code.

 

 

Floor Covering:

Tenant may select floor coverings and base molding of its choice.

 

 

Floor Base:

Cove or straight base shall be per Tenant design.

 

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EXHIBIT E

 

GENERAL CLEANING SPECIFICATIONS FOR TENANT SPACE

 

Nightly

 

1.                                       Empty all trash/recycle containers and replace liner if provided. Trash/recycle containers are to be placed back in their proper place.

 

2.                                       Remove other boxes and trash/recycle that is clearly marked TRASH or RECYCLE.

 

3.                                       Dust all wood, metal, glass or laminated office furniture and cleared desk surfaces. Clean each surface with its proper solution, where necessary.

 

4.                                       Clean and sanitize all drinking fountains.

 

5.                                       Remove spills, fingerprints and smudges from walls, woodwork and light switch plates.

 

6.                                       Dust mop tiled surfaces with treated dust mop. Damp mop all spots and spills.

 

7.                                       Clean all counter tops in kitchen area. (No dishes or cups will be cleaned or removed from sinks.)

 

8.                                       Vacuum main traffic area carpeted floor surfaces picking up all debris from the floor as needed.

 

9.                                       Replace all objects on desks in a neat and orderly manner after cleaning. (No books, papers, files, etc. will be moved. The cleaner will dust around them.)

 

Weekly

 

1.                                       Dust all picture frames, charts, glass covers on pictures, and similar hangings,

 

2.                                       Dust all chair legs, bases of all furniture, door frames and sills.

 

3.                                       Move, vacuum and clean underneath all furniture that can be moved. This does not include desks or other large furniture items. Vacuum available floor areas under the desks without moving them.

 

4.                                       Wet mop all tiled floor surfaces and spray buff if needed.

 

5.                                       Dust ventilating and convector covers.

 

6.                                       Remove dirt and lint from upholstered furniture with a lint brush.

 

Monthly

 

1.                                       Spot clean all partition glass.

 

2.                                       Dust the tops of door frames, sides of desks, cabinets, high shelving, tops of partitions and all other high areas.

 

3.                                       Vacuum upholstered furniture, chair cushions and under chair cushions.

 

4.                                       Remove plastic mats, wash and vacuum underneath (if accessible.)

 

Semi-Annually

 

1.                                       Mop, strip and refinish resilient floor tile semi-annually or if needed.

 

DAY PORTER SERVICE AND SPECIAL SERVICES

 

In addition to the nightly cleaning, day porters will be present during the weekdays to perform the following services:

 

1.                                       All restrooms will be serviced once daily, or more often when necessary.

 

2.                                       Public areas will be serviced and patrolled; emergency services will be performed as required, and upon request.

 

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3.                                       Special services, for example. cleaning of partition glass and carpet shampooing available upon request at tenant cost.

 

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EXHIBIT F

 

RECORDING REQUESTED BY AND
AFTER RECORDING, RETURN TO:

 

Hunton & Williams LLP

200 Park Avenue

New York, New York 10166

Attention:                                          Brett L. Gross, Esq.

 

SPACE ABOVE THIS LINE RESERVED FOR RECORDER’S USE

 

SUBORDINATION, NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

 

This Subordination, Non-Disturbance and Attornment Agreement (“ Agreement ”), is made as of this day of , 2016 among ROYAL BANK OF CANADA , as administrative agent for (and for the benefit of) itself and one or more co-lenders (together with its successors, assigns and/or affiliates in such capacity as administrative agent, “ Administrative Agent ”), BOP 1801 CALIFORNIA STREET LLC and BOP 1801 CALIFORNIA STREET II LLC , both Delaware limited liability companies (“ Landlord ”), and SENDGRID, INC., a Delaware limited liability company (“ Tenant ”).

 

Background

 

A.                                     Royal Bank of Canada and/or one or more co-lenders has made or will make a loan to Landlord in the maximum principal amount of $206,500,000 (“ Loan ”), which is secured by a mortgage, deed of trust or similar security instrument (as the same may be amended, supplemented, extended, renewed, restated, replaced, substituted or otherwise modified from time to time, including without limitation, modifications which increase the principal amount secured thereby, the “ Security Instrument ”) on Landlord’s property described more particularly on Exhibit 1 attached hereto (“ Property ”).

 

B.                                     Tenant is the present lessee under that certain lease agreement between Landlord and Tenant dated                 , 2016, as thereafter modified and supplemented (“ Lease ”), demising a portion of the Property described more particularly in the Lease (“ Leased Space ”).

 

C.                                     A requirement of the Loan is that Tenant’s Lease be subordinated to the Security Instrument. Landlord has requested Tenant to so subordinate the Lease in exchange for Administrative Agent’s agreement not to disturb Tenant’s possession of the Leased Space upon the conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises of this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:

 

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1.                                       Subordination . Tenant agrees that the Lease and all of the terms, covenants and provisions thereof, and all estates, options and rights created under the Lease, hereby are subordinated and made subject to the lien and effect of the Security Instrument (including, without limitation, all renewals, increases, modifications, spreaders, consolidations, replacements and extensions thereof), as if the Security Instrument had been executed and recorded prior to the Lease.

 

2.                                       Nondisturbance . Administrative Agent agrees that no foreclosure (whether judicial or nonjudicial), deed-in-lieu of foreclosure, or other sale of the Property in connection with enforcement of the Security Instrument or otherwise in satisfaction of the Loan shall operate to terminate the Lease or Tenant’s rights thereunder to possess and use the Leased Space provided, however, that (a) the term of the Lease has commenced, (b) Tenant is in possession of the Leased Space, and (c) the Lease is in full force and effect and no uncured default by Tenant exists under the Lease. In addition, Tenant shall not be named or joined as a party in any suit, action or proceeding for the foreclosure of the Security Instrument or the enforcement of any rights under the Security Instrument, unless Tenant is a necessary party under applicable law.

 

3.                                       Attornment . Tenant agrees to attorn to and recognize as its landlord under the Lease each party acquiring legal title to the Property by foreclosure (whether judicial or nonjudicial) of the Security Instrument, deed-in-lieu of foreclosure, or other sale in connection with enforcement of the Security Instrument or otherwise in satisfaction of the Loan (“Successor Owner”). Provided that the conditions set forth in Section 2 above arc met at the time Successor Owner becomes owner of the Property, Successor Owner shall perform all obligations of the landlord under the Lease arising from and after the date title to the Property is transferred to Successor Owner. In no event, however, will any Successor Owner be: (a) liable for any default, act or omission of any prior landlord under the Lease, except to the extent the same constitutes a continuing default by Landlord under the Lease and the Administrative Agent was given notice thereof in accordance with Section 5 below prior to the date the Successor Owner acquired legal title to the Property (“Attornment Date”); (b) subject to any offset or defense which Tenant may have against any prior landlord under the Lease, unless such offset or defense is expressly provided under the Lease and Tenant shall have, prior to the Attornment Date, provided Administrative Agent with written notice of the Landlord’s default that gave rise to such offset or defense, and the opportunity to cure the same, all in accordance with the terms of Section 5 below; (c) bound by any payment of rent or additional rent made by Tenant to Landlord more than one (1) month in advance, except to the extent that any payment by Tenant of estimated operating expenses exceeds actual operating expenses for the applicable period of time; (d) bound by any modification or supplement to the Lease, or waiver of Lease terms, made without Administrative Agent’s written consent thereto, except to the extent that Administrative Agent’s consent is not required; (e) liable for the return of any security deposit or other prepaid charge paid by Tenant under the Lease, except to the extent such amounts were actually received by Administrative Agent; (f) liable or bound by any right of first refusal or option to purchase all or any portion of the Property; or (g) liable for construction or completion of any improvements to the Property or as required under the Lease for Tenant’s use and occupancy (whenever arising). Although the foregoing provisions of this Agreement arc self-operative, Tenant agrees to execute and deliver to Administrative Agent or any Successor Owner such further commercially reasonable instruments as Administrative Agent or a Successor Owner may from time to time request in order to confirm this Agreement. If any liability of Successor Owner does arise

 

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pursuant to this Agreement, such liability shall be limited to Successor Owner’s interest in the Property.

 

The Administrative Agent’s consent shall not be required for any Lease amendments or modifications (i) that do not materially increase Landlord’s obligations or liabilities under the Lease, or materially reduce Tenant’s obligations, liabilities, or security held by Landlord for Tenant’s performance, under the Lease, or (ii) of a ministerial nature pursuant to the express terms of the Lease (e.g., to confirm the measurement of the Leased Space, to memorialize Tenant’s exercise of term extensions provided in the Lease, to memorialize rent abatement after a casualty, to memorialize a permitted assignment or sublease, etc.).

 

4.                                       Prior Assignment; Rent Payments; Notice to Tenant Regarding Rent Payments . Tenant has no knowledge of any prior assignment or pledge of the rents accruing under the Lease by Landlord. Tenant hereby acknowledges and consents to that certain Assignment of Leases and Rents from Landlord to Administrative Agent executed in connection with the Loan. Tenant acknowledges that the interest of the Landlord under the Lease is to be assigned to Administrative Agent solely as security for the purposes specified in said assignment, and Administrative Agent shall have no duty, liability or obligation whatsoever under the Lease or any extension or renewal thereof, either by virtue of said assignments or by any subsequent receipt or collection of rents thereunder, unless Administrative Agent shall specifically undertake such liability in writing. Tenant agrees not to pay rent more than one (1) month in advance unless otherwise specified in the Lease. After notice is given to Tenant by Administrative Agent that Landlord is in default under the Security Instrument and that the rentals under the Lease are to be paid to Administrative Agent directly pursuant to the assignment of leases and rents granted by Landlord to Administrative Agent in connection therewith, Tenant shall thereafter pay to Administrative Agent all rent and all other amounts due or to become due to Landlord under the Lease. Landlord hereby expressly authorizes Tenant to make such payments to Administrative Agent upon reliance on Administrative Agent’s written notice (without any inquiry into the factual basis for such notice or any prior notice to or consent from Landlord) and hereby releases Tenant from all liability to Landlord in connection with Tenant’s compliance with Administrative Agent’s written instructions.

 

5.                                       Administrative Agent Opportunity to Cure Landlord Defaults . Tenant agrees that, until the Security Instrument is released by Administrative Agent, it will not exercise any remedies under the Lease following a Landlord default without having first given to Administrative Agent (a) written notice of the alleged Landlord default and (b) the opportunity to cure such default within the longer of (i) 30 days after the cure period provided under the Lease to Landlord, (ii) 30 days from Landlord’s receipt of Tenant’s notice to Administrative Agent of a Landlord default, or (iii) if the cure of such default requires possession of the Property, 30 days after Administrative Agent has obtained possession of the Property; provided that, in each case, if such default cannot reasonably be cured within such 30-day period and Administrative Agent has diligently commenced to cure such default promptly within the time contemplated by this Agreement, such 30-day period shall be extended for so long as it shall require Administrative Agent, in the exercise of due diligence, to cure such default, but, unless the parties otherwise agree, in no event shall the entire cure period be more than 120 days. Notwithstanding the foregoing, Tenant’s express abatement and/or offset rights under the Lease shall not be adversely affected by this Agreement. Tenant acknowledges that Administrative Agent is not obligated to

 

F- 3



 

cure any Landlord default, but if Administrative Agent elects to do so, Tenant agrees to accept cure by Administrative Agent as that of Landlord under the Lease and will not exercise any right or remedy under the Lease for a Landlord default. Performance rendered by Administrative Agent on Landlord’s behalf is without prejudice to Administrative Agent’s rights against Landlord under the Security Instrument or any other documents executed by Landlord in favor of Administrative Agent in connection with the Loan.

 

6.                                       Right to Purchase . Tenant covenants and acknowledges that it has no right or option of any nature whatsoever, whether pursuant to the Lease or otherwise, to purchase the Property or the real property of which the Property is a part, or any portion thereof or any interest therein and to the extent that Tenant has had, or hereafter acquires any such right or option, the same is hereby acknowledged to be subject and subordinate to the Security Instrument and is hereby waived and released as against Administrative Agent.

 

7.                                       Miscellaneous .

 

(a)                                  Notices . All notices and other communications under this Agreement are to be in writing and addressed as set forth below such party’s signature hereto. Default or demand notices shall be deemed to have been duly given upon the earlier of: (1) actual receipt; (ii) one (1) business day after having been timely deposited for overnight delivery, fee prepaid, with a reputable overnight courier service, having a reliable tracking system; (iii) one (1) business day after having been sent by telecopier (with answer back acknowledged) provided an additional notice is given pursuant to (ii); or (iv) three (3) business days after having been deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by certified mail, postage prepaid, return receipt requested, and in the case of clause (ii) and (iv) irrespective of whether delivery is accepted. A new address for notice may be established by written notice to the other parties; provided, however, that no address change will be effective until written notice thereof actually is received by the party to whom such address change is sent.

 

(b)                                  Entire Agreement Modification . This Agreement is the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes and replaces all prior discussions, representations, communications and agreements (oral or written). This Agreement shall not be modified, supplemented, or terminated, nor any provision hereof waived, except by a written instrument signed by the party against whom enforcement thereof is sought, and then only to the extent expressly set forth in such writing.

 

(c)                                   Binding Effect; Joint and Several Obligations . This Agreement is binding upon and inures to the benefit of the parties hereto and their respective heirs, executors, legal representatives, successors, and assigns, whether by voluntary action of the parties or by operation of law. No Indemnitor may delegate or transfer its obligations under this Agreement.

 

(d)                                  Unenforceable Provisions . Any provision of this Agreement which is determined by a court of competent jurisdiction or government body to be invalid, unenforceable or illegal shall be ineffective only to the extent of such determination and shall not affect the validity, enforceability or legality of any other provision, nor shall such determination apply in any circumstance or to any party not controlled by such determination.

 

F- 4



 

(e)                                   Duplicate Originals; Counterparts . This Agreement may be executed in any number of duplicate originals, and each duplicate original shall be deemed to be an original. This Agreement (and each duplicate original) also may be executed in any number of counterparts, each of which shall be deemed an original and all of which together constitute a fully executed Agreement even though all signatures do not appear on the same document.

 

(f)                                    Construction of Certain Terms . Defined terms used in this Agreement may be used interchangeably in singular or plural form, and pronouns shall be construed to cover all genders. Article and section headings are for convenience only and shall not be used in interpretation of this Agreement. The words “herein,” “hereof’ and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or other subdivision; and the word “section” refers to the entire section and not to any particular subsection, paragraph of other subdivision; and “Agreement” and each of the Loan Documents referred to herein mean the agreement as originally executed and as hereafter modified, supplemented, extended, consolidated, or restated from time to time.

 

(g)                                   Governing Law . This Agreement shall be interpreted and enforced according to the laws of the State where the Property is located (without giving effect to its rules governing conflict of laws).

 

(h)                                  Consent to Jurisdiction . Each party hereto irrevocably consents and submits to the exclusive jurisdiction and venue of any state or federal court sitting in the county and state where the Property is located with respect to any legal action arising with respect to this Agreement and waives all objections which it may have to such jurisdiction and venue.

 

(i)                                      WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY HERETO WAIVES AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS AGREEMENT.

 

[NO FURTHER TEXT ON THIS PAGE]

 

F- 5



 

IN WITNESS WHEREOF, this Agreement is executed this        day of             , 2016.

 

TENANT:

 

SendGrid, Inc.

 

By:

 

 

 

Name:

 

 

Title:

 

 

Tenant Notice Address Prior to September 1, 2016:

1451 Larimer Street, 2nd Floor

Denver, CO 80202

Attn: Michael Tognetti

 

Tenant Notice Address On and After September 1, 2016:

1801 California Street, Suite 500

Denver, CO 80202

Attn: Michael Tognetti

 

[Signatures continue on next page”

 

F- 6



 

LANDLORD:

BOP 1801 CALIFORNIA STREET LLC

BOP 1801 CALIFORNIA STREET H LLC

 

By:

 

 

 

Name:

 

 

Title:

 

 

Landlord Notice Address:

 

BOP 1801 California Street LLC

BOP 1801 California Street II LLC

1801 California Street, Suite 280

Denver, Colorado 80202

Attn: Vice President of Operations

 

[Signatures continue on next page]

 

F- 7



 

ADMINISTRATIVE AGENT:

 

ROYAL BANK OF CANADA

 

By:

 

 

 

Name:

 

 

Title:

 

 

[TO BE CONFIRMED]

 

Administrative Agent Notice Address:

 

Royal Bank of Canada

20 King Street West, 4th Floor

Toronto, Ontario M5H 1C4

Attn: Manager, Agency Services Group

Fax: (416) 842-4023

 

With copies to:

 

Royal Bank of Canada

200 Bay Street — Royal Bank Plaza

South Tower, 12th Floor

Toronto, Ontario M5.1 2W7

Attn: Hogan Mak

Facsimile No.: (416) 842-4020

 

and

 

Royal Bank of Canada

Three World Financial Center, 12th Floor

New York, New York 10166

Attn: Joshua Freedman

Facsimile No.: (212) 428-6460

 

and

 

Hunton & Williams LLP

200 Park Avenue

New York, New York 10166

Attention:                                          Brett L. Gross, Esq.

Facsimile No.: (212) 954-5103

 

F- 8



 

Notary Acknowledgement for Tenant:

 

STATE OF

)

 

 

)

ss.:

COUNTY OF

)

 

 

On this, the         day of                  , 2013, before me, the undersigned Notary Public, personally appeared                                        known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and who acknowledged to me that he/she is an officer of                                    in the capacity stated and that he/she executed the within instrument in such capacity for the purposes therein contained.

 

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

 

 

 

 

Notary Public

 

F- 9



 

Notary Acknowledgement for Landlord:

 

STATE OF

)

 

 

)

ss.:

COUNTY OF

)

 

 

On this, the         day of                  , 2013, before me, the undersigned Notary Public, personally appeared                                        known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and who acknowledged to me that he/she is an officer of BOP 1801 California Street LLC and BOP 1801 California Street II LLC in the capacity stated and that he/she executed the within instrument in such capacity for the purposes therein contained.

 

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

 

 

 

 

Notary Public

 

F- 10



 

Notary Acknowledgement for Administrative Agent:

 

STATE OF

)

 

 

)

ss.:

COUNTY OF

)

 

 

On this, the         day of                  , 2013, before me, the undersigned Notary Public, personally appeared                                        known to me (or satisfactorily proven) to be the person whose name is subscribed to the within instrument and who acknowledged to me that he/she is an officer of ROYAL BANK OF CANADA in the capacity stated and that he/she executed the within instrument in such capacity for the purposes therein contained.

 

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

 

 

 

 

Notary Public

 

F- 11



 

EXHIBIT 1

 

Legal Description

 

PARCEL A:

 

A PARCEL OF LAND BEING ALL OF LOTS 10 TO 23 AND A PORTION OF LOTS 7 TO 9, 24, 25 AND 26, AND A PORTION OF ADJACENT VACATED ALLEY, ALL IN BLOCK 142, EAST DENVER, THE PLAT OF WHICH IS RECORDED IN FLAT BOOK 1, PAGE 1, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

BEGINNING AT THE MOST EASTERLY CORNER OF SAID BLOCK 142; ‘THENCE SOUTHWESTERLY ALONG THE SOUTHEASTERLY LINE OF SAID BLOCK 142, A DISTANCE OF 192.91 FEET TO THE TRUE POINT OF BEGINNING; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00” FROM PREVIOUSLY MENTIONED COURSE, A DISTANCE OF 0.59 FEET: THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45°00’00”, A DISTANCE OF 13.46 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 22.05 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 45°00’00”, A DISTANCE OF 14.95 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 37.45 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 45°00’00”, A DISTANCE OF 2.23 FEET; THENCE ON A DEFLECTION ANGLE TO. THE LEFT OF 45°00’00”, A DISTANCE OF 31.36 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45°00’00”, A DISTANCE OF 2.12 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 45’00’00”, A DISTANCE OF 78.13 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90000’00”, A DISTANCE OF 1.00 FOOT; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 3.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90’00’00”, A DISTANCE OF 1.00 FOOT; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90’00’00”, A DISTANCE OF 20.95 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 1.00 FOOT; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 3.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 1.00 FOOT; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90’00’00”, A DISTANCE OF 19.42 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 1.00 FOOT; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 3.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45°00’00”, A DISTANCE OF 27.11 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90’00’00, A DISTANCE OF 1.00 FOOT; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 2.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90’00’00”, A DISTANCE OF 1.00 FOOT; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 19.60 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90’00’00”, A DISTANCE OF 9.16 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45°00’00”, A DISTANCE OF 0.50 FEET TO A POINT ON THE NORTHWESTERLY LINE OF SAID BLOCK 142; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, ALONG SAID NORTHWESTERLY LINE, A DISTANCE OF 200.53 FEET TO THE WESTERLY

 

F- 12


 

CORNER OF SAID BLOCK 142; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’17”, ALONG THE SOUTHWESTERLY LINE OF SAID BLOCK 142, A DISTANCE OF 266.50 FEET TO THE SOUTHERLY CORNER OF SAID BLOCK 142; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 89°59’43”, ALONG SAID SOUTHEASTERLY LINE OF BLOCK 142, A DISTANCE OF 208.37 FEET TO THE TRUE POINT OF BEGINNING; TOGETHER WITH THE

 

FOLLOWING DESCRIBED PARCEL:

 

PARCEL B:

 

A PORTION OF LOTS 25 AND 26, BLOCK 142, EAST DENVER, THE PLAT WHICH IS RECORDED IN PLAT BOOK 1, PAGE 1, LYING BELOW DENVER DATUM ELEVATION 60.3, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

BEGINNING AT THE MOST EASTERLY CORNER OF SAID BLOCK 142; THENCE SOUTHWESTERLY ALONG THE SOUTHEASTERLY LINE OF SAID BLOCK 142, A DISTANCE OF 192.91 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90’00’00”, A DISTANCE OF 0.59 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45°00’00”, A DISTANCE OF 13.46 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 22.05 FEET TO THE TRUE POINT OF BEGINNING; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, FROM PREVIOUSLY MENTIONED COURSE, A DISTANCE OF 10.75 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45°00’00”, A DISTANCE OF 7.35 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 7.60 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 14.95 FEET TO THE TRUE POINT OF BEGINNING;

 

TOGETHER WITH THE FOLLOWING DESCRIBED PARCEL:

 

PARCEL C:

 

A PORTION OF LOTS 7 AND 8, BLOCK 142, EAST DENVER, THE PLAT OF WHICH IS RECORDED IN PLAT BOOK 1, PAGE 1, LYING BELOW DENVER DATUM ELEVATION 46.8, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST EASTERLY CORNER OF SAID BLOCK 142; THENCE SOUTHWESTERLY ALONG THE SOUTHEASTERLY LINE OF SAID BLOCK 142, A DISTANCE OF 192.91 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 0.59 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45’00’00”, A DISTANCE OF 13.46 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 22.05 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 45°00’00”, A DISTANCE OF 14.95 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 37.45 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 45’00’00”, A DISTANCE OF 2.23 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45°00’00”, A DISTANCE OF 31.36 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45°00’00”, A DISTANCE OF 2.12 FEET; THENCE ON A DEFLECTION ANGLE TO THE

 

F- 13



 

RIGHT OF 45°00’00”, A DISTANCE OF 56.46 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG THE PREVIOUSLY MENTIONED COURSE, A DISTANCE OF 21.67 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90’00’00”, A DISTANCE OF 2.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 3.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 2.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 20.95 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00’, A DISTANCE OF 2.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 3.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 2.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 19.42 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 2.00 ‘Tn.; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 3.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 3.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 459)0’00”, A DISTANCE OF 23.81 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 135°00’00”, A DISTANCE OF 31.34 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 12.67 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 45°00’00”, A DISTANCE OF 13.20 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 90°00’00”, A DISTANCE OF 5.47 FEET; THENCE ON A DEFLECTION ANGLE TO THE LEFT OF 45’00’00”, A DISTANCE OF 7.46 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 62.00 FEET; THENCE ON A DEFLECTION ANGLE TO THE RIGHT OF 90°00’00”, A DISTANCE OF 15.50 FEET TO THE TRUE POINT OF BEGINNING.

 

PARCEL D:

 

UNIT II, BLOCK 142, MARRIOD PARKING GARAGE, ACCORDING TO THE CONDOMINIUM DECLARATION RECORDED DECEMBER 23, 1981 IN BOOK 2504 AT PAGE 275 AND THE CONDOMINIUM MAP RECORDED DECEMBER 23,1981 IN MAP BOOK 20 AT PAGE 56.

 

PARCEL E:

 

THE BENEFICIAL INTEREST GRANTED BY REVOCABLE PERMIT OR LICENSE ALL WITHIN THE AREAS PERMIDED BY ORDINANCE NO. 120, SERIES OF 1981, OF THE CITY AND COUNTY OF DENVER, RECORDED JULY 13, 1981 IN BOOK 2409 AT PAGE 634.

 

PARCEL F:

 

THE EASEMENTS AND RIGHTS APPURTENANT TO THE BENEFITING PARCELS A, B AND C, AND THE EASEMENTS AND RIGHTS APPURTENANT TO THE BENEFITING PARCEL D, AS GRANTED BY EASEMENT AND COMMON WALL AGREEMENT RECORDED DECEMBER 23, 1981 IN BOOK 2504 AT PAGE 258 AND RE-RECORDED DECEMBER 29, 1981 IN BOOK 2506 AT PAGE 191 AND AS AMENDED BY INSTRUMENT RECORDED MAY 25, 1982 IN BOOK 2589 AT PAGE 491.

 

F- 14




Exhibit 10.9.1

 

FIRST AMENDMENT OF LEASE

 

BETWEEN:

BOP 1801 CALIFORNIA STREET LLC , and

 

BOP 1801 CALIFORNIA STREET II LLC

 

both a Delaware limited liability company,

 

1801 California Street, Suite 200

 

Denver, Colorado 80202

(collectively “ Landlord ”)

 

 

AND:

SendGrid, Inc.

 

a Delaware corporation

 

1801 California Street, Suite 500

 

Denver, Colorado 80202

(“ Tenant ”)

 

 

FOR PREMISES IN:

1801 CALIFORNIA STREET

 

Denver, Colorado 80202

(“ Building ”)

 

 

 

DATE:

July 25, 2016

(to be dated upon Landlord’s execution)

 

LANDLORD AND TENANT , in consideration of the covenants herein contained, hereby agree as follows:

 

1.                                       Definitions . In this First Amendment of Lease (“ Amendment ”):

 

(a)                                  Lease ” means the Lease of Office Space between Landlord and Tenant dated March 25, 2016, and this Amendment dated of even date hereof, including all Exhibits attached to the foregoing.

 

(b)                                  Current Premises ” means 52,124 rentable square feet on the entire 5 th  floor and a portion of the 6 th  floor of the Building as generally indicated on EXHIBIT A of the Lease.

 

(c)                                   Sixth Floor Expansion Premises ” means 19,638 rentable square feet on the 6 th  Floor of the Building as further described in Paragraph 3 below and as shown on the attached EXHIBIT A-1 , and subject to the following terms and conditions:

 

(i)                                     Sixth Floor Expansion Premises Allowance ” shall mean One Million One Hundred Seventy-Eight Thousand Two Hundred Eighty and no/100 Dollars ($1,178,280.00) based upon Sixty Dollars ($60.00) per rentable square foot contained in the Additional Premises.

 

(ii)                                 Sixth Floor Expansion Premises Commencement Date ” means the earlier of (i) the date that Tenant commences business from the Sixth Floor Expansion Space; or (ii) February 1, 2017.

 

(iii)                             Sixth Floor Expansion Premises Delivery Date ” means on the Effective Date whereupon Landlord will deliver the Premises to Tenant for the commencement of Tenant’s Sixth Floor Expansion Premises Work, as defined hereafter.

 

(iv)                              Sixth Floor Expansion Premises Rent Concession Period ” means a period equal to eight (8) months commencing from the Sixth Floor Premises Commencement Date and continuing until the eighth month anniversary date thereof (assuming a February 1, 2017, Commencement Date then through September 30, 2017), during which Tenant shall have no obligation for the payment of Annual Rent or Occupancy Costs on the Sixth Floor Expansion Premises.

 

(v)                                  Sixth Expansion Premises Rent Commencement Date ” means the day following expiration of the Sixth Floor Expansion Premises Rent Concession Period.

 

(vi)                              Sixth Floor Expansion Premises Rent Reduction Period ” shall collectively mean:

 

1



 

(A)                                from the Sixth Floor Expansion Premises Rent Commencement Date through the fourth month anniversary date thereafter, Tenant shall be obligated to pay Annual Rent and Occupancy Cost on only 9,819 rentable square feet of the Sixth Floor Expansion Premises (“ Rent Reduction Period 1 ”); and thereafter,

 

(B)                                commencing upon the expiration of the Rent Reduction Period 1 and continuing through the seventh month anniversary date of the Sixth Floor Expansion Premises Rent Commencement Date, Tenant shall be obligated to pay Annual Rent and Occupancy Cost on only 14,729 rentable square feet of the Sixth Floor Expansion Premises (“ Rent Reduction Period 2 ”); and thereafter,

 

(C)                                upon expiration of Reduction Period 2 and continuing through the remainder of the Term, Tenant shall be obligated for the full payment of Annual Rent and Occupancy Costs on the Sixth Floor Expansion Premises as described in Paragraph 4 below.

 

(vii)                          Sixth Floor Expansion Premises Term ” means a period beginning on the Sixth Floor Expansion Premises Commencement Date and shall be coterminous with the Term of the Lease.

 

(d)                                  Seventh Floor Expansion Premises ” means 35,819 rentable square feet on the 7 th  Floor of the Building as further described in Paragraph 3 below and as shown on the attached EXHIBIT A-2 , and subject to the following terms and conditions:

 

(i)                                     Seventh Floor Expansion Premises Allowance ” shall mean Two Million Three Hundred Twenty-Eight Thousand Two Hundred Thirty-Five and no/100 Dollars ($2,328,235.00) based upon Sixty-Five Dollars ($65.00) per rentable square foot contained in the Seventh Floor Expansion Premises.

 

(ii)                                 Seventh Floor Expansion Premises Commencement Date ” means the earlier of (i) the date that Tenant commences business from the Seventh Floor Expansion Premises; or (ii) September 1, 2017.

 

(iii)                             Seventh Floor Expansion Premises Delivery Date ” means May 1, 2017, whereupon Landlord will deliver the Premises to Tenant for the commencement of Tenant’s Seventh Floor Expansion Premises Work, as defined hereafter. Notwithstanding the foregoing, Tenant shall have the right to access the Seventh Floor Expansion Premises on the Sixth Floor Expansion Premises Delivery Date for purposes of installing the internal staircase between the 6 th  and 7 th  floors.

 

(iv)                              Seventh Floor Expansion Premises Rent Concession Period ” means a period equal to four (4) months from the Seventh Floor Expansion Premises Commencement Date and continuing until the fourth month anniversary thereof (assuming a September 1, 2017, Seventh Floor Expansion Premises Rent Commencement Date, then through December 31, 2017), during which Tenant shall have no obligation for the payment of Annual Rent or Occupancy Costs.

 

(v)                                  Seventh Floor Expansion Premises Rent Commencement Date ” means the day following expiration of the Seventh Floor Expansion Premises Rent Concession Period.

 

(vi)                              Seventh Floor Expansion Premises Term ” means a period beginning on the Seventh Floor Expansion Premises Commencement Date and shall be coterminous with the Term of the Lease

 

(e)                                   Sixth and Seventh Floor Expansion Premises ” means for purposes of convenience the Sixth Floor Expansion Premises and the Seventh Floor Expansion Premises and the rights thereunder.

 

(f)                                    Premises ” as that term is previously defined in Subsection 1.01(t) of the Lease is deleted and substituted upon the Effective Date hereof with the following:

 

Premises ” means

 

2



 

(i)                                     Upon the Sixth Floor Expansion Premises Commencement Date, 71,762 rentable square feet consisting of the entire 5 th  Floor and 6 th  Floor of the Building (which includes the Sixth Floor Expansion Premises) as shown on EXHIBIT A to the Lease and EXHIBIT A-1 attached to this Amendment; and

 

(ii)                                 Upon the Seventh Floor Expansion Premises Commencement Date, 107,581 rentable square feet consisting of the entire 5 th , 6 th , and 7 th  Floor of the Building (which includes the Seventh Floor Expansion Premises) as shown on EXHIBIT A to the Lease and EXHIBITS A-1 and A-2 attached to this Amendment.

 

(g)                                  Effective Date ” means the date upon which the last of Landlord and Tenant executes this Amendment, and on which the terms and conditions, and obligations related thereto, shall become binding upon Landlord and Tenant.

 

All other words and phrases, unless otherwise defined herein, shall have the meaning attributed to them in the Lease.

 

2.                                       Premises . On the Effective Date, and for all purposes of the Lease, the Premises shall have the meaning set forth above, and the second page of EXHIBIT A to the Lease shall be replaced with and substituted for EXHIBIT A-1 attached hereto, and EXHIBIT A-2 related to the Seventh Floor Expansion Premises is attached hereto and made a part hereof.

 

3.                                       Expansion Premises . On the Sixth Floor and Seventh Floor Expansion Premises Delivery Dates, and subject to Landlord’s obligation to provide Tenant the Sixth Floor and Seventh Floor Expansion Premises Allowance, and perform “ Landlord’s Work ” as described below, Tenant shall be deemed to have accepted the Sixth and Seventh Floor Expansion Premises in their “as-is” condition. Tenant accepts the Sixth Floor and Seventh Floor Expansion Premises to hold during the Sixth Floor and Seventh Floor Premises Expansion Term on the same terms and conditions as are contained in the Lease except as otherwise provided herein. The foregoing notwithstanding, Landlord represents and warrants that as of the Sixth Floor and the Seventh Floor Expansion Premises Commencement Date respectively that all HVAC, electrical and mechanical systems serving the Sixth Floor and Seventh Floor Expansion Premises are in good working order and repair.

 

4.                                       Expansion Premises Annual Rent . In addition to the Annual Rent required under Section 4.01 of the Lease, Tenant shall pay to Landlord in the manner required by Section 4.01, the following Annual Rent:

 

(a)                                  for the Sixth Floor Expansion Premises:

 

Time Period (full month)

 

Rate Per RSF

 

Expansion
Premises
Annual Rent

 

Expansion
Premises
Monthly
Installments

 

Sixth Floor Expansion Premises Rent Concession Period

 

$

00.00

 

$

00.00

 

$

00.00

 

Sixth Floor Expansion Premises Rent Commencement Date through Rent Reduction Period 1

 

$

21.00

 

$

206,199.00

 

$

17,183.25

 

Expiration of Rent Reduction Period 1 through Rent Reduction Period 2

 

$

21.00

 

$

309,309.00

 

$

25,775.75

 

Expiration of Rent Reduction Period 2 through 09/30/18

 

$

21.00

 

$

412,398.00

 

$

34,366.50

 

10/01/18 through 04/30/19

 

$

21.50

 

$

422,217.00

 

$

35,184.75

 

05/01/19 through 04/30/20

 

$

22.00

 

$

432,036.00

 

$

36,003.00

 

05/01/20 through 04/30/21

 

$

22.50

 

$

441,855.00

 

$

36,821.25

 

05/01/21 through 04/30/22

 

$

23.00

 

$

451,674.00

 

$

37,639.50

 

05/01/22 through 04/30/23

 

$

23.50

 

$

461,493.00

 

$

38,457.75

 

05/01/23 through 04/30/24

 

$

24.00

 

$

471,312.00

 

$

39,276.00

 

 

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(b)                                  for the Seventh Floor Expansion Premises:

 

Time Period (full month)

 

Rate Per RSF

 

Expansion
Premises
Annual Rent

 

Expansion
Premises
Monthly
Installments

 

Seventh Floor Expansion Premises Rent Concession Period

 

$

00.00

 

$

00.00

 

$

00.00

 

Seventh Floor Expansion Premises Rent Commencement Date through 09/30/18

 

$

21.00

 

$

752,199.00

 

$

62,683.25

 

10/01/18 through 04/30/19

 

$

21.50

 

$

770,108.52

 

$

64,175.71

 

05/01/19 through 04/30/20

 

$

22.00

 

$

788,018.04

 

$

65,668.17

 

05/01/20 through 04/30/21

 

$

22.50

 

$

805,927.56

 

$

67,160.63

 

05/01/21 through 04/30/22

 

$

23.00

 

$

823,836.96

 

$

68,653.08

 

05/01/22 through 04/30/23

 

$

23.50

 

$

841,746.48

 

$

70,145.54

 

05/01/23 through 04/30/24

 

$

24.00

 

$

859,656.00

 

$

71,638.00

 

 

Notwithstanding the Sixth Floor Expansion Premises Rent Concession Period, the Sixth Floor Expansion Premises Rent Reduction Period, and the Seventh Floor Expansion Premises Rent Concession Period, Tenant agrees that its obligation to pay the Annual Rent and Occupancy Costs (as described hereafter) payments abated (or reduced, as applicable) hereunder during such periods shall continue throughout the Term of the Lease; provided, however, that such amounts shall only become due and payable if Tenant commits an Event of Default and Landlord commences and is successful in an action to recover Rent and/or possession of the Premises. If an Event of Default exists hereunder pursuant to Article 19.00 of the Lease, after any cure period and Landlord commences an action to recover Rent and/or possession of the Premises, then the unamortized portion of abated Annual Rent and Occupancy Costs payments for the Sixth Floor and Seventh Floor Expansion Premises Rent Concession Periods, and the reduced Rent during the Sixth Floor Expansion Premises Rent Reduction Period, as of the date of such Event of Default, shall become immediately due and payable with interest on such sums at the lesser of one and one-half percent (1.5%) per month or the maximum rate permitted by law from the date of the Event of Default. Annual Rent during the Sixth Floor and Seventh Floor Expansion Premises Rent Concession Periods shall be calculated at $21.00 per rentable square foot of space in the Sixth Floor Expansion Premises and Seventh Floor Expansion Premises, as applicable. Occupancy Costs during the Sixth Floor and Seventh Floor Expansion Premises Rent Concession Periods shall be calculated in accordance with the Lease. Tenant’s obligation for the unamortized portion of abated Annual Rent and Occupancy Costs not collected during the Sixth and Seventh Expansion Premises Rent Concession Periods, and the reduced Rent during the Sixth Floor Expansion Premises Rent Reduction Period shall be independent of and in addition to Landlord’s other damages pursuant to Article 19.00 of the Lease. Abated Annual Rent and Occupancy Costs during the Sixth and Seventh Expansion Premises Rent Concession Periods, and the reduced Rent during the Sixth Floor Expansion Premises Rent Reduction Period shall be amortized using an 8% interest factor on a straight-line basis over the initial Term of the Lease.

 

If the Sixth or Seventh Expansion Premises Rent Commencement Date is other than the first day of a calendar month, the monthly installment of Annual Rent for the month in which the applicable Rent Commencement Date occurs shall be prorated on a daily basis in accordance with the procedure set forth in Section 4.05 of the Lease.

 

5.                                       Occupancy Costs . Subject to the Sixth Floor and Seventh Floor Rent Concession Periods, and Rent Reduction Period 1 and Rent Reduction Period 2, Tenant shall pay its share of Occupancy Costs for the Sixth Floor Expansion Premises and the Seventh Floor Expansion Premises, as applicable, at the times and in the manner as payments of Occupancy Costs are to be made pursuant to Section 4.02 of the Lease.

 

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6.                                       Improvement Allowance.

 

(a)                                  Sixth Floor Expansion Premises Allowance . Tenant will be responsible for completing the Tenant’s Work and Improvements (as such terms are defined in Section 22.01 of the Lease) with respect to the Sixth Floor Expansion Premises (the “ Sixth Floor Expansion Premises Work ”). Landlord shall provide to Tenant the Sixth Floor Expansion Premises Allowance for completion of the Sixth Floor Expansion Premises Work, and pay the same pursuant to the provisions of Section 22.01 of the Lease. Tenant shall have the right to apply a portion of the Sixth Floor Expansion Premises Allowance up to One Hundred Ninety-Six Thousand Three Hundred Eighty and no/100 Dollars ($196,380.00), based on Ten and no/100 Dollars ($10.00) per rentable square foot in the Sixth Floor Expansion Premises, towards fixturing, security system, data and telecommunication cabling and equipment, data systems, demountable walls, and approved moving expenses and shall have the right to apply any remaining portion of the $10.00 per rentable square foot to Annual Rent and Occupancy Costs due and payable upon the expiration of the Sixth Floor Expansion Premises Rent Concession Period until any remaining portion of the Sixth Floor Expansion Premises Allowance is credited in full. In addition to the Sixth Floor Expansion Premises Allowance, within ninety (90) days after the execution of this Amendment, and the receipt of an invoice, Landlord shall pay Tenant a Sixth Floor Expansion Premises Space Plan allowance prepared by the Tenant’s architect in an amount equal to Two Thousand Three Hundred Fifty-Six and 56/100 Dollars ($2,356.56) based on Twelve/100 Dollars ($0.12) per rentable square foot of space in the Sixth Floor Expansion Premises.

 

(b)                                  Seventh Floor Expansion Premises Allowance . Tenant will be responsible for completing the Tenant’s Work and Improvements (as such terms are defined in Section 22.01 of the Lease) with respect to the Seventh Floor Expansion Premises (the “ Seventh Floor Expansion Premises Work ”). Landlord shall provide to Tenant the Seventh Floor Expansion Premises Allowance for completion of the Seventh Floor Expansion Premises Work, and pay the same pursuant to the provisions of Section 22.01 of the Lease. Tenant shall have the right to apply a portion of the Seventh Floor Expansion Premises Allowance up to Three Hundred Fifty-Eight Thousand One Hundred Ninety and no/100 Dollars ($358,190.00), based on Ten and no/100 Dollars ($10.00) per rentable square foot in the Seventh Floor Expansion Premises, towards fixturing, security system, data and telecommunication cabling and equipment, data systems, demountable walls, and approved moving expenses and shall have the right to apply any remaining portion of the $10.00 per rentable square foot to Annual Rent and Occupancy Costs due and payable upon the expiration of the Seventh Floor Expansion Premises Rent Concession Period until any remaining portion of the Seventh Floor Expansion Premises Allowance is credited in full. In addition to the Seventh Floor Expansion Premises Allowance, within ninety (90) days after the execution of this Amendment, and the receipt of an invoice, Landlord shall pay Tenant a Seventh Floor Expansion Premises Space Plan allowance prepared by the Tenant’s architect in an amount equal to Four Thousand Two Hundred Ninety-Eight and 28/100 Dollars ($4,298.28) based on Twelve/100 Dollars ($0.12) per rentable square foot of space in the Seventh Floor Expansion Premises.

 

(c)                                   Landlord’s Work . Landlord will perform “ Landlord’s Work ” as defined in Section 22.02 of the Lease as follows:

 

(i)                                     Sixth Floor Expansion Premises. Section 22.02 of the Lease relating to Landlord’s Work shall be modified to delete any obligation by Landlord to construct the multi-tenant corridor. Except as modified herein, Landlord has completed Landlord’s Work described in Section 22.02 of the Lease for the Sixth Floor Expansion Premises as of the Effective Date, and Tenant acknowledges that the Landlord’s Work in the Sixth Floor Expansion Premises is complete.

 

(ii)                                 Seventh Floor Expansion Premises. At Landlord’s sole cost and expense, Landlord shall be responsible for (i) renovating the women’s and men’s restrooms in the Seventh Floor Expansion Premises with Landlord’s new Building standard and fully ADA and other applicable laws and code compliant restrooms; and (ii) installing direct digital controls on the existing VAV boxes within the Premises in place as of the Delivery Date; provided Landlord shall have the right to perform Landlord’s Work during such time as Tenant is performing the Seventh Floor Expansion Premises Work; and, provided further, that Landlord and Tenant and their respective contractors will coordinate with each other to minimize any interference to the other resulting from the performance of their respective “ Work ” required under Article 22.00 of the Lease. Landlord’s Work shall be completed within one hundred and twenty (120) days following the Seventh Floor Expansion Delivery Date.

 

5



 

7.                                       Refusal Space . Article 25.00, Right of First Refusal, is deleted in its entirety and is of no further force or effect.

 

8.                                       Brokerage Commission . Landlord and Tenant each agree to indemnify and hold the other harmless from and against all broker’s or other real estate commissions or fees incurred by the indemnifying party or arising out of its activities with respect to this Amendment. Landlord is represented by Nicholas Pavlakovich of Cushman & Wakefield, Inc. and Tenant is represented by Chris Boston of Gibbons White, Inc. (collectively the “ Brokers ”). Landlord and Tenant each hereby represent and warrant to the other that it does not recognize and has not used any broker other than the Brokers with respect to this Amendment and the negotiation hereof. Landlord hereby agrees to pay Brokers a commission per a separate agreement between Landlord and Brokers.

 

9.                                       Conflicting Terms . In the event any term or condition of this Amendment conflicts with any term or condition of the Lease, including all amendments thereto, the terms of this Amendment shall control.

 

10.                                Confirmation of Existing Terms . Except as specifically provided herein, the terms and conditions of the Lease are confirmed and continue in full force and effect. For purposes of avoidance of doubt, Tenant’s Renewal Option, as provided in Article 23.00 of the Lease, and Tenant’s Termination Option, as provided in Article 26.00 of the Lease, shall apply to the Sixth Floor and Seventh Floor Expansion Premises. Tenant shall also be provided its pro-rata share of the Building’s riser space as provided in Section 21.02 based upon the total number of rentable square feet in the Premises as of the Seventh Floor Expansion Premises Commencement Date. Tenant will also have the right and option to rent its pro-rata share (based upon a ratio of one parking space per 1,200 rentable square feet in the Premises as of the Seventh Floor Expansion Premises Commencement Date) of parking spaces in the Parking Garage; provided that the deadline for Tenant to exercise such right with respect to the spaces applicable to the Sixth Floor Expansion Premises shall be thirty (30) days after the Sixth Floor Expansion Premises Commencement Date; and provided further, that the deadline for Tenant to exercise such right with respect to the spaces applicable to the Seventh Floor Expansion Premises shall be thirty (30) days after the Seventh Floor Expansion Premises Commencement Date.

 

11.                                Lender Approval . This Amendment is subject to lender approval.

 

12.                                Binding Effect . This Amendment shall be binding on the heirs, administrators, successors and assigns of the parties hereto.

 

13.                                Counterparts . This Amendment may be executed in multiple counterparts, and initially electronically, and each of which when so executed and taken together shall constitute one and the same agreement. Electronic signatures shall be treated as original for purposes of the Effective Date, provided each party shall thereafter forward to the other original signatures.

 

IN WITNESS OF THIS FIRST AMENDMENT OF LEASE , each of Landlord and Tenant has properly executed it as of the date set out underneath its signature below.

 

LANDLORD:

TENANT:

 

 

BOP 1801 CALIFRONIA STREET LLC, and BOP 1801 CALIFORNIA STREET II LLC

SendGrid, Inc.

 

 

By:

/s/ David Sternberg

 

By:

/s/ Michael Tognetti

Name:

David Sternberg

 

Name:

Michael Tognetti

Title:

Executive Vice President

Title:

SVP and General Counsel

 

 

 

 

Date:

July 25, 2016

Date:

July 21, 2016

 

6



 

EXHIBIT A-1
TO FIRST AMENDMENT OF LEASE

 

SIXTH FLOOR EXPANSION PREMISES

 

 



 

EXHIBIT A-2
TO FIRST AMENDMENT OF LEASE

 

SEVENTH FLOOR EXPANSION PREMISES

 

 




Exhibit 10.9.2

 

Brookfield

Brookfield Property Partners

Tel 303.383.1801

 

1801 California St., Suite 200

Fax 303.382.8437

 

Denver, CO 80202-5695

www.brookfleldofficepropertles.com

 

April 4, 2017

 

VIA EMAIL AND US MAIL

 

SendGrid Inc.

Attention: Michael Tognetti, SVP and General Counsel

1801 California Street, Suite 500

Denver, Colorado 80202

michael.tognetti@sendgrid.com

 

Re:                              Lease dated March 25, 2016 and First Amendment of Lease dated July 25, 2016,
between Brookfield BOP 1801 California Street LLC, and BOP 1801 California Street II
LLC (“Landlord”) and SendGrid Inc. (“Tenant’’)

 

Dear Michael:

 

In acknowledgement of your February 23, 2017 email, Tenant has requested that Landlord extend Tenant’s right to its final draw on the “Seventh Floor Expansion Premises Allowance”, as defined in Subparagraph 1 (d) of the First Amendment, until December 1, 2018. Landlord hereby agrees to extend the time period for purposes of Tenant’s final draw of the Seventh Floor Expansion Premises Allowance, as described in Paragraph 6(b) of the First Amendment, from 180 days after the Commencement Date until December 1, 2018. Except a provided herein, nothing shall modify any other term or condition contained in the First Amendment.

 

Sincerely,

BOP 1801 California Street LLC

 

/s/ David Sternberg

 

David Sternberg

 

Executive Vice President

 

 

 

 

cc:

Pat Hilleary

 

 

Myra Napoli

 

 

Joel Tauer

 

 

Paul Mitchell

 

 




Exhibit 10.10

 

SENDGRID, INC.

 

LOAN AND SECURITY AGREEMENT

 



 

THIS LOAN AND SECURITY AGREEMENT (the “Agreement” ) is entered into as of June 27, 2013, by and between SQUARE 1 BANK ( “Bank” ) and SENDGRID, INC . ( “Borrower” ).

 

RECITALS

 

Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower.  This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.

 

AGREEMENT

 

The parties agree as follows:

 

1.              DEFINITIONS AND CONSTRUCTION .

 

1.1           Definitions .  As used in this Agreement, all capitalized terms shall have the definitions set forth on Exhibit A .  Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.

 

1.2           Accounting Terms .  Any accounting term not specifically defined on Exhibit A shall be construed in accordance with GAAP and all calculations shall be made in accordance with GAAP (except for non-compliance with FAS 123R in monthly reporting).  The term “financial statements” shall include the accompanying notes and schedules.

 

2.              LOAN AND TERMS OF PAYMENT .

 

2.1           Credit Extensions .

 

(a)            Promise to Pay .  Borrower promises to pay to Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower, together with interest on the unpaid principal amount of such Credit Extensions at rates in accordance with the terms hereof.

 

(b)            Advances Under Formula Revolving Line .

 

(i)             Amount .  Subject to and upon the terms and conditions of this Agreement, Borrower may request Formula Advances in an aggregate outstanding principal amount not to exceed the lesser of: (A) the Formula Revolving Line; or (B) the Borrowing Base, less any amounts outstanding under the Ancillary Services Sublimit. Amounts borrowed pursuant to this Section 2.1(b)  may be repaid and reborrowed at any time prior to the Formula Revolving Maturity Date, at which time all Formula Advances under this Section 2.1(b)  shall be immediately due and payable.  Borrower may prepay any Formula Advances without penalty or premium.

 

(ii)            Form of Request .  Whenever Borrower desires a Formula Advance, Borrower will notify Bank by facsimile transmission, telephone or email no later than 3:30 p.m. Eastern time (2:30 p.m. Eastern time for wire transfers), on the Business Day that the Formula Advance is to be made.  Each such notification shall be promptly confirmed by a Loan

 

1



 

Advance/Paydown Request Form in substantially the form of Exhibit C .  Bank is authorized to make Formula Advances under this Agreement, based upon instructions received from an Authorized Officer, or without instructions if in Bank’s discretion such Formula Advances are necessary to meet Obligations which have become due and remain unpaid.  Bank shall be entitled to rely on any telephonic or email notice given by a person whom Bank reasonably believes to be an Authorized Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for any damages, loss, costs and expenses suffered by Bank as a result of such reliance.  Bank will credit the amount of Formula Advances made under this Section 2.1(b)  to Borrower’s deposit account.

 

(iii)          Ancillary Services Sublimit .  Subject to the availability under the Formula Revolving Line, at any time and from time to time from the date hereof through the Business Day immediately prior to the Formula Revolving Maturity Date, Borrower may request the provision of Ancillary Services from Bank.  The aggregate limit of the Ancillary Services shall not exceed the Ancillary Services Sublimit, provided that availability under the Formula Revolving Line shall be reduced by the aggregate limits of (i) corporate credit card services provided to Borrower, (ii) the total amount of any Automated Clearing House processing reserves, (iii) the applicable Foreign Exchange Reserve Percentage, and (iv) any other reserves taken by Bank in connection with other treasury management services requested by Borrower and approved by Bank.  In addition, Bank may, in its sole discretion, charge as Formula Advances any amounts for which Bank becomes liable to third parties in connection with the provision of the Ancillary Services.  The terms and conditions (including repayment and fees) of such Ancillary Services shall be subject to the terms and conditions of Bank’s standard forms of application and agreement for the applicable Ancillary Services, which Borrower hereby agrees to execute.

 

(iv)           Collateralization of Obligations Extending Beyond Maturity .  If Borrower has not secured to Bank’s satisfaction its obligations with respect to any Ancillary Services by the Formula Revolving Maturity Date, then, effective as of such date, the balance in any deposit accounts held by Bank and the certificates of deposit or time deposit accounts issued by Bank in Borrower’s name (and any interest paid thereon or proceeds thereof, including any amounts payable upon the maturity or liquidation of such certificates or accounts), shall automatically secure such obligations to the extent of the then continuing or outstanding Ancillary Services.  Borrower authorizes Bank to hold such balances in pledge and to decline to honor any drafts thereon or any requests by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the applicable Ancillary Services are outstanding or continue.

 

2.2           Overadvances . If the aggregate amount of the outstanding Formula Advances exceeds the lesser of the Formula Revolving Line or the Borrowing Base at any time, Borrower shall immediately pay to Bank, in Cash, the amount of such excess.

 

2.3           Interest Rates, Payments, and Calculations .

 

(a)            Interest Rates .

 

(i)             Formula Advances .

 

2



 

(A)           If Borrower’s Cash at Bank is greater than $8,000,000, then, except as set forth in Section 2.3(b) , the Formula Advances shall bear interest, on the outstanding daily balance thereof, at a variable annual rate equal to the greater of: (A) 0.75% above the Prime Rate then in effect; or (B) 4.00%.

 

(B)           If Borrower’s Cash at Bank is not greater than $8,000,000, then, except as set forth in Section 2.3(b) , the Formula Advances shall bear interest, on the outstanding daily balance thereof, at a variable annual rate equal to the greater of: (A) 1.50% above the Prime Rate then in effect; or (B) 4.75%.

 

(b)            Late Fee; Default Rate .  If any payment is not made within 15 days after the date such payment is due, Borrower shall pay Bank a late fee equal to the lesser of (i) 3% of the amount of such unpaid amount or (ii) the maximum amount permitted to be charged under applicable law.  All Obligations shall bear interest, from and after the occurrence and during the continuance of an Event of Default, at a rate equal to 5 percentage points above the interest rate applicable immediately prior to the occurrence of the Event of Default.

 

(c)            Payments . Interest under the Formula Revolving Line shall be due and payable on the first calendar day of each month during the term hereof.  Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrower’s deposit accounts or against the Formula Revolving Line, in which case those amounts shall thereafter accrue interest at the rate then applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder.

 

(d)            Computation .  In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate.  All interest chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed.

 

2.4           Crediting Payments .  When no Event of Default has occurred and is continuing, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Borrower specifies.  After the occurrence and during the continuance of an Event of Default, Bank shall have the right, in its sole discretion, to immediately apply any wire transfer of funds, check, or other item of payment Bank may receive to conditionally reduce Obligations, but such applications of funds shall not be considered a payment on account unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment.  Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 5:30 p.m. Eastern time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day.  Whenever any payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension.

 

3



 

2.5           Fees .  Borrower shall pay to Bank the following:

 

(a)            Facility Fee .  On or before the Closing Date, a fee equal to $15,000, which shall be nonrefundable;

 

(b)            Bank Expenses .  On the Closing Date, all Bank Expenses incurred through the Closing Date, and, after the Closing Date, all Bank Expenses, as and when they become due.

 

2.6           Term .  This Agreement shall become effective on the Closing Date and, subject to Section 12.7 , shall continue in full force and effect for so long as any Obligations (other than inchoate indemnity obligations remain outstanding or Bank has any obligation to make Credit Extensions under this Agreement.  Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default.  Upon indefeasible payment in full in Cash of the Obligations (other than inchoate indemnity obligations) in their entirety, Borrower may terminate this Agreement upon three (3) Business Days written notice to Bank.  Following such indefeasible payment in full in Cash of the Obligations (other than inchoate indemnity obligations) in their entirety, and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at Borrower’s sole cost and expense, and upon receipt of a written request from Borrower to do so, release its Liens in the Collateral, and all rights therein shall revert to Borrower.

 

3.              CONDITIONS OF LOANS .

 

3.1           Conditions Precedent to Closing .  The agreement of Bank to enter into this Agreement on the Closing Date is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, each of the following items and completed each of the following requirements:

 

(a)            this Agreement;

 

(b)            an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement;

 

(c)            a financing statement (Form UCC-1);

 

(d)            Borrower shall have opened and funded not less than $50,000 in deposit accounts held with Bank;

 

(e)            payment of the fees and Bank Expenses then due specified in Section 2.5, which may be debited from any of Borrower’s accounts with Bank;

 

(f)             current SOS Reports indicating that except for Permitted Liens, there are no other security interests or Liens of record in the Collateral;

 

(g)            current financial statements, including audited statements (or such other level required by the Investment Agreement) for Borrower’s most recently ended fiscal

 

4



 

year, together with an unqualified opinion (or an opinion qualified only for going concern so long as Borrower’s investors provide additional equity as needed), company prepared consolidated and consolidating balance sheets, income statements, and statements of cash flows for the most recently ended month in accordance with Section 6.2 , and such other updated financial information as Bank may reasonably request;

 

(h)            a current Compliance Certificate in accordance with Section 6.2 ;

 

(i)             a warrant ( “Warrant” ), duly executed by Borrower;

 

(j)             a Borrower Information Certificate; and

 

(k)            such other documents or certificates, and completion of such other matters, as Bank may reasonably request.

 

3.2           Conditions Precedent to all Credit Extensions .  The obligation of Bank to make each Credit Extension, including the initial Credit Extension, is contingent upon the Borrower’s compliance with Section 3.1 above, and is further subject to the following conditions:

 

(a)            timely receipt by Bank of the Loan Advance/Paydown Request Form as provided in Section 2.1 ;

 

(b)            except as expressly permitted pursuant to Section 6.6 of this Agreement, Borrower shall have transferred substantially all of its Cash assets into operating accounts held with Bank and otherwise be in compliance with Section 6.6 hereof;

 

(c)            prior to the initial Credit Extension, an audit of the Collateral, the results of which shall be satisfactory to Bank; and

 

(d)            the representations and warranties contained in Section 5 shall be true and correct in all material respects on and as of the date of such Loan Advance/Paydown Request Form and on the effective date of each Credit Extension as though made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit Extension ( provided, however , that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date).  The making of each Credit Extension shall be deemed to be a representation and warranty by Borrower on the date of such Credit Extension as to the accuracy of the facts referred to in this Section 3.2 .

 

4.              CREATION OF SECURITY INTEREST .

 

4.1           Grant of Security Interest .  Borrower grants and pledges to Bank a continuing security interest in the Collateral to secure prompt repayment of any and all Obligations (other than inchoate indemnity obligations) and to secure prompt performance by Borrower of each of its covenants and duties under the Loan Documents.  Except for Permitted Liens or as disclosed in the Schedule, such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority

 

5



 

security interest in later-acquired Collateral.  Borrower also hereby agrees not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its Intellectual Property, except for any Permitted Liens and Permitted Transfers.  Notwithstanding any termination of this Agreement or of any filings undertaken related to Bank’s rights under the Code, Bank’s Lien on the Collateral shall remain in effect for so long as any Obligations (other than inchoate indemnity obligations) are outstanding.

 

4.2           Perfection of Security Interest .  Borrower authorizes Bank to file at any time financing statements, continuation statements, and amendments thereto that (i) either specifically describe the Collateral or describe the Collateral as all assets of Borrower of the kind pledged hereunder, and (ii) contain any other information required by the Code for the sufficiency of filing office acceptance of any financing statement, continuation statement, or amendment, including whether Borrower is an organization, the type of organization and any organizational identification number issued to Borrower, if applicable.  Borrower shall have possession of the Collateral, except where expressly otherwise provided in this Agreement or where Bank chooses to perfect its security interest by possession in addition to the filing of a financing statement.  Where Collateral is in possession of a third party bailee, Borrower shall take such steps as Bank reasonably requests for Bank to (i) subject to Section 7.10 below, obtain an acknowledgment, in form and substance reasonably satisfactory to Bank, of the bailee that the bailee holds such Collateral for the benefit of Bank, and (ii) obtain “control” of any Collateral consisting of investment property, deposit accounts, letter-of-credit rights or electronic chattel paper (as such items and the term “control” are defined in Revised Article 9 of the Code) by causing the securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance satisfactory to Bank.  Borrower will not create any chattel paper without placing a legend on the chattel paper reasonably acceptable to Bank indicating that Bank has a security interest in the chattel paper.  Borrower from time to time may deposit with Bank specific cash collateral to secure specific Obligations; Borrower authorizes Bank to hold such specific balances in pledge and to decline to honor any drafts thereon or any request by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the specific Obligations (other than inchoate indemnity obligations) are outstanding.  Borrower shall take such other actions as Bank requests to perfect its security interests granted under this Agreement.

 

5.              REPRESENTATIONS AND WARRANTIES .

 

Borrower represents and warrants as follows:

 

5.1           Due Organization and Qualification .  Borrower and each Subsidiary is a corporation duly existing under the laws of the state in which it is organized and qualified and licensed to do business in any state in which the conduct of its business or its ownership of property requires that it be so qualified, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.

 

5.2           Due Authorization; No Conflict .  The execution, delivery, and performance of the Loan Documents are within Borrower’s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower’s Certificate of Incorporation or Bylaws, nor will they constitute an event of default under any

 

6



 

material agreement by which Borrower is bound.  Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably be expected to cause a Material Adverse Effect.

 

5.3           Collateral .  Borrower has rights in or the power to transfer the Collateral, and its title to the Collateral is free and clear of Liens, adverse claims, and restrictions on transfer or pledge except for Permitted Liens.  Other than movable items of personal property such as laptop computers, all Collateral having an aggregate book value not in excess of $100,000, is located solely in the Collateral States.  The Accounts included in Recurring Revenue are bona fide existing obligations.  The property or services giving rise to such Accounts has been delivered or rendered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor.  Borrower has not received notice of actual or imminent Insolvency Proceeding of any account debtor whose accounts are included in the calculation of Recurring Revenue.  All Inventory is in all material respects of good and merchantable quality, free from all material defects, except for Inventory for which adequate reserves have been made.  Except as set forth in the Schedule or in accordance with Section 6.6 of this Agreement, none of Borrower’s Cash is maintained or invested with a Person other than Bank or Bank’s affiliates.

 

5.4           Intellectual Property .  Borrower is the sole owner of the intellectual property created or purchased by Borrower, except for licenses granted by Borrower in the ordinary course of business.  To the best of Borrower’s knowledge, each of the Copyrights, Trademarks and Patents created or purchased by Borrower is valid and enforceable, and no part of the intellectual property created or purchased by Borrower has been judged invalid or unenforceable, in whole or in part, and no claim has been made to Borrower that any part of the intellectual property created or purchased by Borrower violates the rights of any third party except to the extent such claim would not reasonably be expected to cause a Material Adverse Effect.

 

5.5           Name; Location of Chief Executive Office .  Except as disclosed in the Schedule and except for changes of which Borrower has given notice in accordance with Section 7.2 , Borrower has not done business under any name other than that specified on the signature page hereof, and its exact legal name is as set forth in the first paragraph of this Agreement.  The chief executive office of Borrower is located at the address indicated in Section 10 hereof except for changes of which Borrower has given notice in accordance with Section 7.2 .

 

5.6           Litigation .  Except as set forth in the Schedule, there are no actions or proceedings pending by or against Borrower or any Subsidiary before any court or administrative agency in which a likely adverse decision would reasonably be expected to have a Material Adverse Effect.

 

5.7           No Material Adverse Change in Financial Statements .  All consolidated and consolidating financial statements related to Borrower and any Subsidiary that are delivered by Borrower to Bank fairly present in all material respects Borrower’s consolidated and consolidating financial condition as of the date thereof and Borrower’s consolidated and consolidating results of operations for the period then ended.  There has not been a material

 

7



 

adverse change in the consolidated or in the consolidating financial condition of Borrower since the date of the most recent of such financial statements submitted to Bank.

 

5.8           Solvency, Payment of Debts .  Borrower is able to pay its debts (including trade debts) as they mature; the fair saleable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrower is not left with unreasonably small capital after the transactions contemplated by this Agreement.

 

5.9           Compliance with Laws and Regulations .  Borrower and each Subsidiary have met the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA.  No event has occurred resulting from Borrower’s failure to comply with ERISA that is reasonably likely to result in Borrower’s incurring any liability that could have a Material Adverse Effect.  Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940.  Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System).  Borrower has not violated any statutes, laws, ordinances or rules applicable to it, the violation of which would reasonably be expected to have a Material Adverse Effect.  Borrower and each Subsidiary have filed or caused to be filed all tax returns required to be filed, and have paid, or have made adequate provision for the payment of, all taxes reflected therein except those being contested in good faith with adequate reserves under GAAP or where the failure to file such returns or pay such taxes would not reasonably be expected to have a Material Adverse Effect.

 

5.10         Subsidiaries .  Borrower does not own any stock, partnership interest or other equity securities of any Person, except for Permitted Investments.

 

5.11         Government Consents .  Borrower and each Subsidiary have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower’s business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse Effect.

 

5.12         Inbound Licenses .  Except as disclosed on the Schedule, Borrower is not a party to, nor is bound by, any material inbound license or other material agreement important for the conduct of Borrower’s business that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property important for the conduct of Borrower’s business, other than this Agreement or the other Loan Documents.

 

5.13         Full Disclosure .  No representation, warranty or other statement made by Borrower in any certificate or written statement furnished to Bank taken together with all such certificates and written statements furnished to Bank contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading in light of the circumstances in which they were made, it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as facts and that actual results

 

8



 

during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results.

 

6.              AFFIRMATIVE COVENANTS .

 

Borrower covenants that, until payment in full of all outstanding Obligations (other than inchoate indemnity obligations), and for so long as Bank may have any commitment to make a Credit Extension hereunder, Borrower shall do all of the following:

 

6.1           Good Standing and Government Compliance .  Borrower shall maintain its and each of its Subsidiaries’ corporate existence and good standing in the respective states of formation, shall maintain qualification and good standing in each other jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect, and shall furnish to Bank the organizational identification number issued to Borrower by the authorities of the state in which Borrower is organized, if applicable.  Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA.  Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, and shall maintain, and shall cause each of its Subsidiaries to maintain, in force all licenses, approvals and agreements, the loss of which or failure to comply with which would reasonably be expected to have a Material Adverse Effect.

 

6.2           Financial Statements, Reports, Certificates .  Borrower shall deliver to Bank:  (i) as soon as available, but in any event within 30 days after the end of each calendar month, a company prepared consolidated and consolidating balance sheet, income statement, and statement of cash flows covering Borrower’s operations during such period, in a form reasonably acceptable to Bank and certified by a Responsible Officer (except that monthly financial statements may omit substantially all footnotes that would normally be required to be included in GAAP financial statements); (ii) as soon as available, but in any event within 180 days after the end of Borrower’s fiscal year, audited (or such other level as is required by the Investment Agreement) consolidated and consolidating financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an opinion which is either unqualified, qualified only for going concern so long as Borrower’s investors provide additional equity as needed or otherwise consented to in writing by Bank on such financial statements of an independent certified public accounting firm reasonably acceptable to Bank; (iii) an annual budget approved by Borrower’s Board of Directors as soon as available but not later than 15 days after the beginning of each fiscal year of Borrower  during the term of this Agreement; (iv) if applicable, copies of all statements, reports and notices sent or made available generally by Borrower to its security holders or to any holders of Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (v) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against Borrower or any Subsidiary that could reasonably be expected to result in damages or costs to Borrower or any Subsidiary of $250,000 or more; (vi) promptly upon receipt, each management letter prepared by Borrower’s independent certified public accounting firm regarding Borrower’s management control systems; and (vii) such budgets, sales projections, operating plans or other financial information generally prepared by Borrower in the ordinary course of business as Bank may reasonably request from time to time.

 

9


 

(a)            Within 30 days after the last day of each month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in substantially the form of Exhibit D hereto, together with (i) aged listings by invoice date of accounts receivable and accounts payable and (ii) a Churn report.

 

(b)            Within 30 days after the last day of each month, Borrower shall deliver to Bank with the monthly financial statements a Compliance Certificate certified as of the last day of the applicable month and signed by a Responsible Officer in substantially the form of Exhibit E hereto.

 

(c)            As soon as possible and in any event within 3 Business Days after becoming aware of the occurrence or existence of an Event of Default hereunder, Borrower shall deliver to Bank a written statement of a Responsible Officer setting forth details of the Event of Default, and the action which Borrower has taken or proposes to take with respect thereto.

 

(d)            Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrower’s usual business hours but no more than once a year (unless an Event of Default has occurred and is continuing), to inspect Borrower’s Books and to make copies thereof and to check, test, inspect, audit and appraise the Collateral at Borrower’s expense in order to verify Borrower’s financial condition or the amount, condition of, or any other matter relating to, the Collateral.  Notwithstanding the above, until Borrower requests its initial Credit Extension, a Collateral Audit shall not be required under this Section 6.2(d) .

 

Borrower may deliver to Bank on an electronic basis any certificates, reports or information required pursuant to this Section 6.2 , and Bank shall be entitled to rely on the information contained in the electronic files, provided that Bank in good faith believes that the files were delivered by a Responsible Officer.  Borrower shall include a submission date on any certificates and reports to be delivered electronically.

 

6.3           Inventory and Equipment; Returns .  Borrower shall keep all Inventory and Equipment in good and merchantable condition, free from all material defects except for Inventory and Equipment (i) sold in the ordinary course of business, and (ii) for which adequate reserves have been made, in all cases in the United States and such other locations as to which Borrower gives prior written notice.  Returns and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with the usual customary practices of Borrower, as they exist on the Closing Date.  Borrower shall promptly notify Bank of all returns and recoveries and of all disputes and claims involving inventory having a book value of more than $100,000.

 

6.4           Taxes .  Borrower shall make, and cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by law, including, but not limited to, those laws concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will execute and deliver to Bank, on demand, proof satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits and any appropriate certificates attesting to the payment or deposit thereof; provided that Borrower or a Subsidiary need not make any payment if the amount or validity of such

 

10



 

payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower or such Subsidiary.

 

6.5           Insurance .  Borrower, at its expense, shall (i) keep the Collateral insured against loss or damage, and (ii) maintain liability and other insurance, in each case as ordinarily insured against by other owners in businesses similar to Borrower’s.  All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank.  All policies of property insurance shall contain a lender’s loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional loss payee, and all liability insurance policies shall show Bank as an additional insured and specify that the insurer must give at least 20 days (10 days for non-payment of premium) notice to Bank before canceling its policy.  Within 30 days of the Closing Date, Borrower shall cause to be furnished to Bank a copy of its policies or certificate of insurance including any endorsements covering Bank or showing Bank as an additional insured.  Upon Bank’s request, Borrower shall deliver to Bank certified copies of the policies of insurance and evidence of all premium payments.  Proceeds payable under any casualty policy will, at Borrower’s option, be payable to Borrower to replace the property subject to the claim, provided that any such replacement property shall be deemed Collateral in which Bank has been granted a first priority security interest (subject to Permitted Liens), provided that if an Event of Default has occurred and is continuing, all proceeds payable under any such policy shall, at Bank’s option, be payable to Bank to be applied on account of the Obligations.

 

6.6           “Primary Depository”. Subject to the provisions of Section 3.1(d)  and 3.2(b), Borrower within 30 days of the Closing Date shall maintain all its depository and operating accounts with Bank and its primary investment accounts with Bank or Bank’s affiliates.

 

6.7           Financial Covenants. At all times during which Borrower’s outstanding Indebtedness to Bank exceeds $3,000,000, Borrower shall maintain at least one of the following financial ratios and covenants:

 

(a)            EBITDA. Measured monthly and calculated on a trailing-three-months basis, Borrower shall achieve EBITDA of at least the amounts shown in the table immediately below for the corresponding reporting periods. For subsequent reporting periods, Bank and Borrower hereby agree that, on or before January 15 of each year during the term of this Agreement, Borrower shall provide Bank with a budget for the upcoming calendar year, which shall be approved by Borrower’s board of directors, and Bank shall use that budget to establish the EBITDA amounts for the upcoming year, with such amounts being incorporated herein by an amendment, which Borrower hereby agrees to execute.

 

Reporting Period Ending

 

Minimum EBITDA

 

May 31, 2013

 

$

(2,540,000

)

June 30, 2013

 

$

(2,424,000

)

July 31, 2013

 

$

(2,355,000

)

August 31, 2013

 

$

(2,390,000

)

 

11



 

September 30, 2013

 

$

(2,410,000

)

October 31, 2013

 

$

(2,540,000

)

November 30, 2013

 

$

(2,375,000

)

December 31, 2013

 

$

(2,174,000

)

January 31, 2014

 

$

(2,020,000

)

February 28, 2014

 

$

(2,140,000

)

March 31, 2014

 

$

(2,300,000

)

April 30, 2014

 

$

(2,070,000

)

 

(b)            Liquidity Ratio .  A Liquidity Ratio of at least 1.20 to 1.00.

 

6.8           Consent of Inbound Licensors .  Prior to entering into or becoming bound by any material inbound license or agreement, Borrower shall: (i) provide written notice to Bank of the material terms of such license or agreement with a description of its likely impact on Borrower’s business or financial condition; and (ii) in good faith use commercially reasonable efforts to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for Borrower’s interest in such licenses or contract rights to be deemed Collateral and for Bank to have a security interest in it that might otherwise be restricted by the terms of the applicable license or agreement, whether now existing or entered into in the future, provided, however , that the failure to obtain any such consent or waiver shall not constitute a default under this Agreement.

 

6.9           Creation/Acquisition of Subsidiaries. In the event any Borrower or any Subsidiary of any Borrower creates or acquires any Subsidiary, Borrower or such Subsidiary shall promptly notify Bank of such creation or acquisition, and Borrower or such Subsidiary shall take all actions reasonably requested by Bank to achieve any of the following with respect to such “New Subsidiary” (defined as a Subsidiary formed after the date hereof during the term of this Agreement):  (i) to cause such New Subsidiary, if such New Subsidiary is organized under the laws of the United States, to become either a co-Borrower hereunder or a secured guarantor with respect to the Obligations; and (ii) to grant and pledge to Bank a perfected security interest in 100% of the stock, units or other evidence of ownership held by Borrower or its Subsidiaries of any such New Subsidiary which is organized under the laws of the United States, and 65% of the stock, units or other evidence of ownership held by Borrower or its Subsidiaries of any such New Subsidiary which is not organized under the laws of the United States.

 

6.10         Further Assurances .  At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement.

 

7.              NEGATIVE COVENANTS .

 

Borrower covenants and agrees that, so long as any credit hereunder shall be available and until the outstanding Obligations (other than inchoate indemnity obligations) are paid in full

 

12



 

or for so long as Bank may have any commitment to make any Credit Extensions, Borrower will not do any of the following without Bank’s prior written consent, which shall not be unreasonably withheld:

 

7.1           Dispositions .  Convey, sell, lease, license, transfer or otherwise dispose of (collectively, to “Transfer” ), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, or move cash balances on deposit with Bank to accounts opened at another financial institution, other than Permitted Transfers and Permitted Investments.

 

7.2           Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control .  Change its name or the state of Borrower’s formation or relocate its chief executive office without 30 days prior written notification to Bank; replace or suffer the departure of its chief executive officer or chief financial officer without delivering written notification to Bank within 10 days; fail to appoint an interim replacement or fill a vacancy in the position of chief executive officer or chief financial officer for more than 90 consecutive days; suffer a change on its board of directors which results in the failure of at least one partner of Foundry or its Affiliates to serve as a voting member, or suffer the resignation of one or more directors from its board of directors in anticipation of Borrower’s insolvency, in each case without the prior written consent of Bank which may be withheld in Bank’s sole discretion; take action to liquidate, wind up, or otherwise cease to conduct business in the ordinary course; engage in any business, or permit any of its Subsidiaries to engage in any business, other than or reasonably related or incidental to the businesses currently engaged in by Borrower; change its fiscal year end; have a Change in Control.

 

7.3           Mergers or Acquisitions.   Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization (other than mergers or consolidations of a Subsidiary into another Subsidiary or into Borrower), or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person except where (a) each of the following conditions is applicable:  (i) the consideration paid in connection with such transactions (including assumption of liabilities) does not in the aggregate exceed $250,000 during any fiscal year, (ii) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in a Change in Control, and (iv) Borrower is the surviving entity; or (b) the Obligations are repaid in full concurrently with the closing of any merger or consolidation of Borrower in which Borrower is not the surviving entity; provided, however , that Borrower shall not, without Bank’s prior written consent, enter into any  binding contractual arrangement with any Person to attempt to facilitate a merger or acquisition of Borrower; provided however, Borrower may enter into any such agreement without Bank’s prior written consent so long as (i) no Event of Default exists when such agreement is entered into by Borrower, (ii)  such agreement does not give such Person the right to claim any fee, payment or damages from any parties, other than from Borrower or Borrower’s investors, in connection with a sale of Borrower’s stock or assets pursuant to or resulting from an assignment for the benefit of creditors, an asset turnover to Borrower’s creditors (including, without limitation, Bank), foreclosure, bankruptcy or similar liquidation, and (iii) Borrower notifies Bank in advance of entering into such an agreement (provided, the failure to give such notification shall not be deemed a material breach of this Agreement).

 

13



 

7.4           Indebtedness .  Create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation to prepay any Indebtedness, except Indebtedness to Bank.

 

7.5           Encumbrances .  Create, incur, assume or allow any Lien with respect to its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens, or covenant to any other Person (other than (i) the licensors of in-licensed property with respect to such property or (ii) the lessors of specific equipment or lenders financing specific equipment with respect to such leased or financed equipment) that Borrower in the future will refrain from creating, incurring, assuming or allowing any Lien with respect to any of Borrower’s property.

 

7.6           Distributions .  Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, except that Borrower may (i) repurchase the stock of former employees, officers, directors and consultants  pursuant to stock repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving effect to such repurchase, (ii) repurchase the stock of former employees, officers, directors and consultants pursuant to stock repurchase agreements by the cancellation of indebtedness owed by such former employees, officers, directors and consultants to Borrower regardless of whether an Event of Default exists; and (iii) Borrower may convert any of its convertible securities into equity securities pursuant to the terms of such convertible securities.

 

7.7           Investments .  Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments, or maintain or invest any of its Investment Property with a Person other than Bank or Bank’s Affiliates or permit any Subsidiary to do so unless such Person has entered into a control agreement with Bank, in form and substance satisfactory to Bank, or suffer or permit any Subsidiary to be a party to, or be bound by, an agreement that restricts such Subsidiary from paying dividends or otherwise distributing property to Borrower.

 

7.8           Transactions with Affiliates .  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except (i) transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person, and (ii) bona-fide equity financings to existing investors provided there is no Change in Control.

 

7.9           Subordinated Debt .  Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated Debt, or amend any provision affecting Bank’s rights contained in any documentation relating to the Subordinated Debt without Bank’s prior written consent.

 

7.10         Inventory and Equipment .  Store the Inventory or the Equipment of a book value in excess of $100,000 with a bailee, warehouseman, collocation facility or similar third party unless the third party has been notified of Bank’s security interest and Bank (a) has

 

14



 

received an acknowledgment from the third party that it is holding or will hold the Inventory or Equipment for Bank’s benefit or (b) is in possession of the warehouse receipt, where negotiable, covering such Inventory or Equipment.  Except for Inventory sold in the ordinary course of business, for worn-out, obsolete or surplus equipment, and for movable items of personal property having an aggregate book value not in excess of $100,000, and except for such other locations as Bank may approve in writing, Borrower shall keep the Inventory and Equipment only at the location set forth in Section 10 and such other locations of which Borrower gives Bank prior written notice and as to which Bank is able to take such actions as may be necessary to perfect its security interest or to obtain a bailee’s acknowledgment of Bank’s rights in the Collateral.

 

7.11         No Investment Company; Margin Regulation .  Become or be controlled by an “investment company,” within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such purpose.

 

8.              EVENTS OF DEFAULT .

 

Any one or more of the following events shall constitute an Event of Default by Borrower under this Agreement:

 

8.1           Payment Default .  If Borrower fails to pay any of the Obligations when due;

 

8.2           Covenant Default .

 

(a)            If Borrower fails to perform any obligation under Sections 6.2 (financial reporting), 6.4 (taxes), 6.5 (insurance), 6.6 (primary accounts) or 6.7 (financial covenants), or violates any of the covenants contained in Article 7 of this Agreement; or

 

(b)            If Borrower fails or neglects to perform or observe any other material term, provision, condition, or covenant contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition or covenant that can be cured, has failed to cure such default within 15 days after Borrower receives notice thereof or any officer of Borrower becomes aware thereof; provided, however , that if the default cannot by its nature be cured within the 15 day period or cannot after diligent attempts by Borrower be cured within such 15 day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed 30 days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made.

 

8.3           Material Adverse Change .  If there occurs any circumstance or any circumstances which would reasonably be expected to have a Material Adverse Effect;

 

8.4           Attachment .  If any material portion of Borrower’s assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of

 

15



 

any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within 10 days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of record with respect to any material portion of Borrower’s assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within ten days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that no Credit Extensions will be made during such cure period);

 

8.5           Insolvency .  If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed within 45 days (provided that no Credit Extensions will be made prior to the dismissal of such Insolvency Proceeding);

 

8.6           Other Agreements .  If there is a default or other failure to perform in any agreement to which Borrower is a party with a third party or parties (a) resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of $750,000, (b) in connection with any lease of real property, or (c) that would reasonably be expected to have a Material Adverse Effect;

 

8.7           Judgments .  If a final, uninsured judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least $750,000 shall be rendered against Borrower and shall remain unsatisfied and unstayed for a period of 10 days (provided that no Credit Extensions will be made prior to the satisfaction or stay of the judgment); or

 

8.8           Misrepresentations .  If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan Document.

 

9.              BANK’S RIGHTS AND REMEDIES .

 

9.1           Rights and Remedies .  Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower:

 

(a)            Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.5 (insolvency), all Obligations shall become immediately due and payable without any action by Bank);

 

(b)            Demand that Borrower (i) deposit cash with Bank in an amount equal to the amount of any Letters of Credit remaining undrawn, as collateral security for the repayment of any future drawings under such Letters of Credit, and (ii) pay in advance all Letter

 

16



 

of Credit fees scheduled to be paid or payable over the remaining term of the Letters of Credit, and Borrower shall promptly deposit and pay such amounts;

 

(c)            Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between Borrower and Bank;

 

(d)            Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable;

 

(e)            Make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral.  Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate.  Borrower authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank’s determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith.  With respect to any of Borrower’s owned premises, Borrower hereby grants Bank a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;

 

(f)             Set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, and (ii) indebtedness at any time owing to or for the credit or the account of Borrower held by Bank;

 

(g)            Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral.  Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1 , to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1 , Borrower’s rights under all licenses and all franchise agreements shall inure to Bank’s benefit;

 

(h)            Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower’s premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations in whatever manner or order Bank deems appropriate.  Bank may sell the Collateral without giving any warranties as to the Collateral.  Bank may specifically disclaim any warranties of title or the like.  This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.  If Bank sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Bank, and applied to the indebtedness of the purchaser.  If the purchaser fails to pay for the Collateral, Bank may resell the Collateral and Borrower shall be credited with the proceeds of the sale;

 

(i)             Bank may credit bid and purchase at any public sale;

 

17



 

(j)             Apply for the appointment of a receiver, trustee, liquidator or conservator of the Collateral, without notice and without regard to the adequacy of the security for the Obligations and without regard to the solvency of Borrower, any guarantor or any other Person liable for any of the Obligations; and

 

(k)            Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower.

 

Bank may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

 

9.2           Power of Attorney .  Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints Bank (and any of Bank’s designated officers, or employees) as Borrower’s true and lawful attorney to:  (a) send requests for verification of Accounts or notify account debtors of Bank’s security interest in the Accounts; (b) endorse Borrower’s name on any checks or other forms of payment or security that may come into Bank’s possession; (c) sign Borrower’s name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims under and decisions with respect to Borrower’s policies of insurance; (f) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; and (g) file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral; provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described in clause (g) above, regardless of whether an Event of Default has occurred.  The appointment of Bank as Borrower’s attorney in fact, and each and every one of Bank’s rights and powers, being coupled with an interest, is irrevocable until all of the Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Bank’s obligation to provide advances hereunder is terminated.

 

9.3           Accounts Collection .  At any time after the occurrence and during the continuation of an Event of Default, (i) Bank may notify any Person owing funds to Borrower of Bank’s security interest in such funds and verify the amount of such Account, and (ii) Borrower shall collect all amounts owing to Borrower for Bank, receive in trust all payments as Bank’s trustee, and immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit.

 

9.4           Bank Expenses .  If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do any or all of the following after reasonable notice to Borrower:  (a) make payment of the same or any part thereof; and/or (b) set up such reserves under the Formula Revolving Line as Bank deems necessary to protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed in Section 6.5 of this Agreement, and take any action with respect to such policies as Bank deems prudent.  Any amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be

 

18



 

secured by the Collateral.  Any payments made by Bank shall not constitute an agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement.

 

9.5           Bank’s Liability for Collateral .  Bank has no obligation to clean up or otherwise prepare the Collateral for sale.  All risk of loss, damage or destruction of the Collateral shall be borne by Borrower.

 

9.6           No Obligation to Pursue Others .  Bank has no obligation to attempt to satisfy the Obligations by collecting them from any other person liable for them and Bank may release, modify or waive any collateral provided by any other Person to secure any of the Obligations, all without affecting Bank’s rights against Borrower.  Borrower waives any right it may have to require Bank to pursue any other Person for any of the Obligations.

 

9.7           Remedies Cumulative .  Bank’s rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative.  Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity.  No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower’s part shall be deemed a continuing waiver.  No delay by Bank shall constitute a waiver, election, or acquiescence by it.  No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given.  Borrower expressly agrees that this Section 9.7 may not be waived or modified by Bank by course of performance, conduct, estoppel or otherwise.

 

9.8           Demand; Protest .  Except as otherwise provided in this Agreement, Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment and any other notices relating to the Obligations.

 

10.           NOTICES .

 

Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements, information provided in accordance with Section 6.2 of this Agreement, and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses set forth below:

 

If to Borrower:

SendGrid, Inc.

 

929 Pearl Street

 

Boulder, CO 80302

 

Attn:

 

 

FAX:

 

 

 

If to Bank:

Square 1 Bank

 

406 Blackwell Street, Suite 240

 

Durham, North Carolina 27701

 

19


 

 

Attn: Loan Operations Manager

 

FAX: (919) 314-3080

 

 

with a copy to:

Square 1 Bank

 

1899 Wynkoop Street Suite 325

 

Denver, CO 80202

 

Attn: Ken Fugate

 

FAX: (303) 938-3099

 

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.

 

11.           CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER .

 

This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of North Carolina, without regard to principles of conflicts of law.  Jurisdiction shall lie in the State of North Carolina.  All disputes, controversies, claims, actions and similar proceedings arising with respect to Borrower’s account or any related agreement or transaction shall be brought in the General Court of Justice of North Carolina sitting in Durham County, North Carolina or the United States District Court for the Middle District of North Carolina, except as provided below with respect to arbitration of such matters.  BANK AND BORROWER EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.  EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM.  THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.  If the jury waiver set forth in this Section 11 is not enforceable, then any dispute, controversy, claim, action or similar proceeding arising out of or relating to this Agreement, the Loan Documents or any of the transactions contemplated therein shall be settled by final and binding arbitration held in Durham County, North Carolina in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed in accordance with those rules.  The arbitrator shall apply North Carolina law to the resolution of any dispute, without reference to rules of conflicts of law or rules of statutory arbitration. Judgment upon any award resulting from arbitration may be entered into and enforced by any state or federal court having jurisdiction thereof.  Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this Section.  The costs and expenses of the arbitration, including without limitation, the arbitrator’s fees and expert witness fees, and reasonable attorneys’ fees, incurred by the parties to the arbitration may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator.  Unless and until the arbitrator decides that one

 

20



 

party is to pay for all (or a share) of such costs and expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator.

 

12.           GENERAL PROVISIONS .

 

12.1         Successors and Assigns .  This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties and shall bind all persons who become bound as a debtor to this Agreement; provided, however , that neither this Agreement nor any rights hereunder may be assigned by Borrower without Bank’s prior written consent, which consent may be granted or withheld in Bank’s sole discretion.  Bank shall have the right without the consent of or notice to Borrower to sell, assign, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits hereunder.

 

12.2         Indemnification .  Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents (each, an “Indemnified Party” ) against:  (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement (each, a “Claim” ); and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank, its officers, employees and agents as a result of or in any way arising out of, following, or consequential to transactions between Bank and Borrower whether under this Agreement, or otherwise (including without limitation reasonable attorneys fees and expenses), except for losses, Claims and Bank Expenses caused by any Indemnified Party’s gross negligence or willful misconduct.

 

12.3         Time of Essence .  Time is of the essence for the performance of all obligations set forth in this Agreement.

 

12.4         Severability of Provisions .  Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

12.5         Amendments in Writing, Integration.  All amendments to or terminations of this Agreement or the other Loan Documents must be in writing.  All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the other Loan Documents, if any, are merged into this Agreement and the Loan Documents.

 

12.6         Counterparts .  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.  Executed copies of the signature pages of this Agreement sent by facsimile or transmitted electronically in Portable Document Format ( “PDF” ), or any similar format, shall be treated as originals, fully binding and with full legal force and effect, and the parties waive any rights they may have to object to such treatment.

 

12.7         Survival .  All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations (other than inchoate indemnity obligations) remain outstanding or Bank has any obligation to make any Credit

 

21



 

Extension to Borrower.  The obligations of Borrower to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.

 

12.8         Confidentiality .  In handling any confidential information, Bank and Borrower and all employees and agents of such party shall exercise the same degree of care that such party exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure of such information may be made (i) in the case of Bank, to the subsidiaries or Affiliates of Bank or Borrower in connection with their present or prospective business relations with Borrower, (ii) in the case of Bank, to prospective transferees or purchasers of any interest in the Credit Extensions, provided that they have entered into a comparable confidentiality agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) in the case of Bank, as may be required in connection with the examination, audit or similar investigation of Bank, and (v) as Bank may determine in connection with the enforcement of any remedies hereunder.  Confidential information hereunder shall not include information that either: (a) is in the public domain or in the knowledge or possession of the receiving party when disclosed to such party, or becomes part of the public domain after disclosure to such receiving party through no fault of such receiving party; or (b) is disclosed to such receiving party by a third party, provided such receiving party does not have actual knowledge that such third party is prohibited from disclosing such information.

 

********

 

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed as of the date first above written.

 

 

SENDGRID, INC.

 

 

 

By:

/s/ James H. Franklin

 

Name:

James H. Franklin

 

Title:

CEO

 

 

 

 

 

 

SQUARE 1 BANK

 

 

 

By:

/s/ Zack Robbins

 

Name:

Zack Robbins

 

Title:

SVP

 

23



 

EXHIBIT A

 

DEFINITIONS

 

“Accounts” means all presently existing and hereafter arising accounts, contract rights, payment intangibles and all other forms of obligations owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrower and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.

 

“Affiliate” means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person’s senior executive officers, directors, and general partners.

 

“Ancillary Services” means any products or services requested by Borrower and approved by Bank under the Formula Revolving Line, including and without limitation, corporate credit card services, Automated Clearing House transactions, FX Contracts, or other treasury management services.

 

“Ancillary Services Sublimit” means a sublimit for Ancillary Services under the Formula Revolving Line not to exceed $2,000,000.

 

“Authorized Officer” means someone designated as such in the corporate resolution provided by Borrower to Bank in which this Agreement and the transactions contemplated hereunder are authorized by Borrower’s board of directors. If Borrower provides subsequent corporate resolutions to Bank after the Closing Date, the individual(s) designated as “Authorized Officer(s)” in the most recently provided resolution shall be the only “Authorized Officers” for purposes of this Agreement.

 

“Bank Expenses” means all reasonable costs or expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit fees; and Bank’s reasonable attorneys’ fees and expenses (whether generated in-house or by outside counsel) incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.

 

“Borrower’s Books” means all of Borrower’s books and records including:  ledgers; records concerning Borrower’s assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information.

 

“Borrowing Base means (i) three (3) (the “ Advance Rate”), multiplied by (ii) the average monthly Recurring Revenue for the trailing 3 months, as determined with reference to the most recent Borrowing Base Certificate delivered by Borrower; provided that, if Borrower’s most recently calculated Churn is greater than or equal to 5.00%, then Bank may change the Advance Rate in its discretion.

 

Exhibit A- 1



 

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks in the State of North Carolina are authorized or required to close.

 

“Cash” means unrestricted cash and cash equivalents.

 

“Change in Control” means a transaction other than a bona fide equity financing or series of financings on terms and from investors reasonably acceptable to Bank in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding of Borrower ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.

 

“Churn” means

 

(a)            the average monthly revenue from customer contracts cancelled during the trailing 3 months, multiplied by 4; divided by

 

(b)            the average monthly revenue for the trailing 3 months, multiplied by 4;

 

all calculated as of the last day of the relevant month and expressed as a percentage.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the North Carolina Uniform Commercial Code as amended or supplemented from time to time.

 

“Collateral” means the property described on Exhibit B attached hereto and all Negotiable Collateral to the extent not described on Exhibit B , except to the extent any such property (i) is non-assignable by its terms without the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, §25-9-406 and §25-9-408 of the Code), (ii) is property for which the granting of a security interest therein is contrary to applicable law, provided that upon the cessation of any such restriction or prohibition, such property shall automatically become part of the Collateral, (iii) constitutes the capital stock of a controlled foreign corporation (as defined in the IRC), in excess of 65% of the voting power of all classes of capital stock of such controlled foreign corporations entitled to vote, or (iv) is property (including any attachments, accessions or replacements) that is subject to a Lien that is permitted pursuant to clause (c) of the definition of Permitted Liens, if the grant of a security interest with respect to such property pursuant to this Agreement would be prohibited by the agreement creating such Permitted Lien or would otherwise constitute a default thereunder, provided, that such property will be deemed “Collateral” hereunder upon the termination and release of such Permitted Lien.

 

“Collateral State” means the state or states where the Collateral is located, which is Colorado.

 

“Consolidated Net Income (or Deficit)” means the consolidated net income (or deficit) of any Person and its Subsidiaries, after deduction of all expenses, taxes, and other proper charges,

 

Exhibit A- 2



 

determined in accordance with GAAP, after eliminating therefrom all extraordinary nonrecurring items of income.

 

“Consolidated Total Interest Expense” means, with respect to any Person for any period, the aggregate amount of interest required to be paid or accrued by a Person and its Subsidiaries during such period on all Indebtedness of such Person and its Subsidiaries outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including payments consisting of interest in respect of any capitalized lease or any synthetic lease, and including commitment fees, agency fees, facility fees, balance deficiency fees and similar fees or expenses in connection with the borrowing of money.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however , that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however , that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement.

 

“Copyrights” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held.

 

“Credit Extension” means each Formula Advance, or any other extension of credit, by Bank to or for the benefit of Borrower hereunder.

 

“EBITDA” means, with respect to any fiscal period, an amount equal to the sum of (a) Consolidated Net Income of Borrower and its Subsidiaries for such fiscal period, plus (b) in each case to the extent deducted in the calculation of Borrower’s Consolidated Net Income and without duplication, (i) depreciation and amortization for such period, plus (ii) income tax expense for such period, plus (iii) Consolidated Total Interest Expense paid or accrued during such period, plus (iv) non-cash expense associated with granting stock options, and minus, to the extent added in computing Consolidated Net Income, and without duplication, all extraordinary and non-recurring revenue and gains (including income tax benefits) for such period, all as determined in accordance with GAAP.

 

Exhibit A- 3



 

“Equipment” means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.

 

“Event of Default” has the meaning assigned in Article 8.

 

“Formula Advance” or “Formula Advances” means a cash advance or cash advances under the Formula Revolving Line.

 

“Formula Revolving Line” means a Credit Extension of up to $8,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit).

 

“Formula Revolving Maturity Date” means June 26, 2014.

 

“Foreign Exchange Reserve Percentage” means a percentage of reserves for FX Contracts as determined by Bank, in its sole discretion from time to time.

 

“FX Contracts” means contracts between Borrower and Bank for foreign exchange transactions.

 

“GAAP” means generally accepted accounting principles, consistently applied, as in effect from time to time in the United States.

 

“Indebtedness” means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations, and (d) all Contingent Obligations, including but not limited to any sublimit contained herein.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

“Inventory” means all present and future inventory in which Borrower has any interest.

 

“Investment” means any beneficial ownership of (including stock, partnership or limited liability company interest or other securities) any Person, or any loan, advance or capital contribution to any Person.

 

“Investment Agreement” means, collectively, Borrower’s stock purchase and other agreement(s) pursuant to which Borrower most recently issued its preferred stock.

 

“IRC” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

 

“Letter of Credit” means a commercial or standby letter of credit or similar undertaking issued

 

Exhibit A- 4



 

by Bank at Borrower’s request.

 

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.

 

“Liquidity” means the sum of: (i) unrestricted Cash held in deposit accounts at Bank, plus (ii) availability under the Formula Revolving Line.

 

“Liquidity Ratio” means the ratio of Liquidity to all Indebtedness to Bank (but excluding any Indebtedness to Bank which is secured by Cash held in a segregated deposit account at Bank).

 

“Loan Documents” means, collectively, this Agreement, any note or notes executed by Borrower, and any other document, instrument or agreement entered into in connection with this Agreement, all as amended or extended from time to time.

 

“Material Adverse Effect” means a material adverse effect on: (i) the operations, business or financial condition of Borrower and its Subsidiaries taken as a whole; (ii) the ability of Borrower to repay the Obligations or otherwise perform its obligations under the Loan Documents; or (iii) Borrower’s interest in, or the value, perfection or priority of Bank’s security interest in the Collateral.

 

“Negotiable Collateral” means all of Borrower’s present and future letters of credit of which it is a beneficiary, drafts, instruments (including promissory notes), securities, documents of title, and chattel paper, and Borrower’s Books relating to any of the foregoing.

 

“Obligations” means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Bank may have obtained by assignment or otherwise. Notwithstanding the foregoing, the “Obligations” shall not include the Warrant.

 

“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

 

“Periodic Payments” means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank.

 

“Permitted Indebtedness” means:

 

(a)            Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan Document;

 

(b)            Indebtedness existing on the Closing Date and disclosed in the Schedule;

 

(c)            Indebtedness not to exceed $4,000,000 in the aggregate secured by a lien

 

Exhibit A- 5



 

described in clause (c) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed at the time it is incurred the lesser of the cost or fair market value of the property financed with such Indebtedness;

 

(d)            Subordinated Debt;

 

(e)            Indebtedness to trade creditors incurred in the ordinary course of business; and

 

(f)             Extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investment” means:

 

(a)            Investments existing on the Closing Date disclosed in the Schedule;

 

(b)            (i) Marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing no more than one year from the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (iii) Bank’s certificates of deposit maturing no more than one year from the date of investment therein, (iv) Bank’s money market accounts, (v) Investments in regular deposit or checking accounts held with Bank or subject to a control agreement in favor of Bank, and (vi) Investments consistent with any investment policy adopted by Borrower’s board of directors;

 

(c)            Repurchases of stock from former employees, officers, consultants or directors of Borrower under the terms of applicable repurchase agreements (i) in an aggregate amount not to exceed $750,000 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist after giving effect to the repurchases, or (ii) in any amount where the consideration for the repurchase is the cancellation of indebtedness owed by such former employees, officers, consultants or directors to Borrower regardless of whether an Event of Default exists;

 

(d)            Investments accepted in connection with Permitted Transfers;

 

(e)            Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to exceed $750,000 in the aggregate in any fiscal year;

 

(f)             Investments not to exceed $750,000 outstanding in the aggregate at any time consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plan agreements approved by Borrower’s board of directors;

 

(g)            Investments in unfinanced capital expenditures in any fiscal year, not to exceed $750,000;

 

Exhibit A- 6


 

(h)            Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’s business;

 

(i)             Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business, provided that this subparagraph (i) shall not apply to Investments of Borrower in any Subsidiary;

 

(j)             Joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrower do not exceed $750,000 in the aggregate in any fiscal year; and

 

(k)            Investments permitted under Section 7.3 .

 

“Permitted Liens” means the following:

 

(a)            Any Liens existing on the Closing Date and disclosed in the Schedule (excluding Liens to be satisfied with the proceeds of the Credit Extensions) or arising under this Agreement, the other Loan Documents, or any other agreement in favor of Bank;

 

(b)            Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings and for which Borrower maintains adequate reserves;

 

(c)            Liens not to exceed $4,000,000 in the aggregate (i) upon or in any Equipment (other than Equipment financed by a Credit Extension) acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, in each case provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;

 

(d)            Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase;

 

(e)            Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Sections 8.4 (attachment) or 8.7 (judgments);

 

(f)             Liens securing Subordinated Debt;

 

(g)            Deposits under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed

 

Exhibit A- 7



 

money) or to secure statutory obligations (other than liens arising under ERISA or environmental liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds, all, in the ordinary course of Borrower’s business;

 

(h)            Liens of materialmen, mechanics, warehousemen, carriers, artisan’s or other similar Liens arising in the ordinary course of Borrower’s business or by operation of law, which are not past due or which are being contested in good faith by appropriate proceedings and for which reserves satisfactory to Bank have been established;

 

(i)             Liens arising from leases, subleases, non-exclusive licenses, or non-exclusive sublicenses granted to others in the ordinary course of Borrower’s business that do not interfere in any material respect with the business of Borrower and its Subsidiaries taken as a whole; and

 

(j)             Liens incurred in connection with Permitted Transfers.

 

“Permitted Transfer” means the conveyance, sale, lease, transfer or disposition by Borrower or any Subsidiary of:

 

(a)            Inventory in the ordinary course of business;

 

(b)            licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business;

 

(c)            worn-out, surplus or obsolete Equipment;

 

(d)            grants of security interests and other Liens that constitute Permitted Liens; and

 

(e)            other assets of Borrower or its Subsidiaries that do not in the aggregate exceed $750,000 during any fiscal year.

 

“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.

 

“Prime Rate” means the variable rate of interest, per annum, most recently announced by Bank, as its “prime rate,” whether or not such announced rate is the lowest rate available from Bank.

 

“Recurring Revenue” means contracted monthly base service fees that are derived from those Accounts that arise in the ordinary course of Borrower’s business and that comply with all of Borrower’s representations and warranties to Bank set forth in Section 5.3 .

 

“Responsible Officer” means each of the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer of Borrower, as well as any other officer or employee identified as an Authorized Officer in the corporate resolution delivered by Borrower to Bank in connection with this Agreement.

 

“Schedule” means the schedule of exceptions attached hereto and approved by Bank, if any.

 

Exhibit A- 8



 

“SOS Reports” means the official reports from the Secretaries of State of each Collateral State, the state where Borrower’s chief executive office is located, the state of Borrower’s formation and other applicable federal, state or local government offices identifying all current security interests filed in the Collateral and Liens of record as of the date of such report.

 

“Subordinated Debt” means any debt incurred by Borrower that is subordinated in writing to the debt owing by Borrower to Bank on terms reasonably acceptable to Bank (and identified as being such by Borrower and Bank).

 

“Subsidiary” means any corporation, partnership or limited liability company or joint venture in which (i) any general partnership interest or (ii) more than 50% of the stock, limited liability company interest or joint venture of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity, at the time as of which any determination is being made, is owned by Borrower, either directly or through an Affiliate.

 

“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

 

Exhibit A- 9



 

DEBTOR:                                             SENDGRID, INC.

 

SECURED PARTY:                            SQUARE 1 BANK

 

EXHIBIT B

 

COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT

 

All personal property of Borrower (herein referred to as “Borrower” or “Debtor” ) whether presently existing or hereafter created or acquired, and wherever located, including, but not limited to:

 

(a)           all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), financial assets, general intangibles (including patents, trademarks, copyrights, goodwill, payment intangibles, domain names, and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all of Debtor’s books and records with respect to any of the foregoing, and the computers and equipment containing said books and records;

 

(b)           any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds, and all supporting obligations and the security therefor or for any right to payment.  All terms above have the meanings given to them in the North Carolina Uniform Commercial Code, as amended or supplemented from time to time, including revised Division 9 of the Uniform Commercial Code-Secured Transactions.

 

Notwithstanding the foregoing, the Collateral shall not include any of the intellectual property, in any medium, of any kind or nature whatsoever, now or hereafter owned or acquired or received by Borrower, or in which Borrower now holds or hereafter acquires or receives any right or interest (collectively, the “Intellectual Property” ); provided, however , that the Collateral shall include all accounts and general intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in, the foregoing (the “Rights to Payment” ).

 

Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral shall automatically, and effective as of June 27, 2013, include the Intellectual Property to the extent and only to the extent necessary to permit perfection of Bank’s security interest in the Rights to Payment, and further provided, however , that Bank’s enforcement rights with respect to any security interest in the Intellectual Property shall be absolutely limited to the Rights to Payment only, and Bank shall have no recourse whatsoever with respect to the underlying Intellectual Property.

 



 

EXHIBIT C

 

LOAN ADVANCE/PAYDOWN REQUEST FORM

 

[Please refer to New Borrower Kit]

 

EXHIBIT D

 

BORROWING BASE CERTIFICATE

 

[Please refer to New Borrower Kit]

 

EXHIBIT E

 

COMPLIANCE CERTIFICATE

 

[Please refer to New Borrower Kit]

 



 

SCHEDULE OF EXCEPTIONS

 

Any information disclosed in one schedule shall be deemed to be disclosed in all such schedules to the extent it is reasonably apparent from the reading of the disclosure that such disclosure clearly would be applicable to such other schedules.  Certain information set forth in the schedules is included solely for informational purposes and may not be required to be disclosed pursuant to the Agreement.  The disclosure of any information shall not be deemed to constitute an acknowledgment that such information is required to be disclosed in connection with the representations and warranties made by Borrower in the Agreement or is material, nor shall such information be deemed to establish a standard of materiality.  No reference to or disclosure of any item or other matter in the schedule shall be construed as an admission or indication that such item or other matter is required to be disclosed, is material, has or would have a Material Adverse Effect on Borrower.

 

Permitted Indebtedness (Exhibit A) — None.

 

Permitted Investments (Exhibit A) — None.

 

Permitted Liens (Exhibit A) — None.

 

Prior Names ( Section 5.5 ) — None.

 

Litigation ( Section 5.6 ) — None.

 

Inbound Licenses ( Section 5.12 ) — None.

 




Exhibit 10.10.1

 

FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “ Amendment ”), is entered into as of May 16, 2014, by and between SQUARE 1 BANK (“ Bank ”) and SENDGRID, INC. (“ Borrower ”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and Security Agreement dated as of June 27, 2013 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

NOW , THEREFORE , the parties agree as follows:

 

1.                                       Section 6.2(iii) of the Agreement is hereby amended and restated, as follows:

 

(iii)          an annual budget approved by Borrower’s Board of Directors as soon as available but not later than February 1 of each year during the term of this Agreement;

 

2.                                       Section 6.6 of the Agreement is hereby amended and restated, as follows:

 

6.6          “ Primary Depository ”. Subject to the provisions of Section 3.1(d) and 3.2(b), Borrower within 30 days of the Closing Date shall maintain all its depository and operating accounts with Bank and its primary investment accounts with Bank or Bank’s affiliates; provided that SendGrid UK Ltd., a Borrower’s UK Subsidiary, may maintain an account in UK for the purpose of funding all existing and future foreign operations, subject to the restriction that the aggregate amount on deposit in such account shall not exceed $100,000 at any time (the “ UK Account ”).

 

3.                                       Section 6.7 of the Agreement is hereby amended and restated, as follows:

 

6.7           Financial Covenants . At all times during which Borrower’s outstanding Indebtedness to Bank exceeds $5,000,000, Borrower shall maintain at all times the following financial ratios and covenants. For the sake of clarity, any covenant violation herein shall constitute an Event of Default and cannot be cured with repayment reducing Borrower’s outstanding Indebtedness to Bank to $5,000,000 or below.

 

(a)            EBITDA . Measured monthly and calculated on: (1) a 1-month basis, for the reporting period ending February 28, 2014, (ii) a trailing-two-months basis, for the reporting period ending March 31, 2014, and (iii) a trailing-three-months basis, for all subsequent reporting periods, Borrower shall achieve EBITDA of at least the amounts shown in the table immediately below for the corresponding reporting periods. For subsequent reporting periods, Bank

 

1



 

and Borrower hereby agree that, on or before February 1 of each as year during the term of this Agreement, Borrower shall provide Bank with a budget for the upcoming calendar year, which shall be approved by Borrower’s board of directors, and Bank shall use that budget to establish the EBITDA amounts for the upcoming year, with such amounts being incorporated herein by an amendment, which Borrower hereby agrees to execute.

 

Reporting Period Ending

 

Minimum EBITDA

 

February 28, 2014

 

$

(1,082,060

)

March 31, 2014

 

$

(2,237,080

)

April 30, 2014

 

$

(3,570,000

)

May 31, 2014

 

$

(3,793,000

)

June 30, 2014

 

$

(3,963,000

)

July 31, 2014

 

$

(3,952,000

)

August 31, 2014

 

$

(3,668,000

)

September 30, 2014

 

$

(3,418,000

)

October 31, 2014

 

$

(3,157,500

)

November 30, 2014

 

$

(2,976,300

)

December 31, 2014

 

$

(2,681,850

)

 

(b)            Unfinanced Capital Expenditures . An unfinanced capital expenditures in the aggregate amount not to exceed $2,000,000 for 2014 fiscal year.

 

4.                                       Subsection (c) of the defined term “ Permitted Indebtedness ” as set forth in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(c)           Indebtedness not to exceed $7,000,000 in the aggregate secured by a lien described in clause (c) of the defined term “ Permitted Liens ,” provided such Indebtedness does not exceed at the time it is incurred the lesser of the cost or fair market value of the property financed with such Indebtedness;

 

5.                                       Subsection (g) of the defined term “ Permitted Investment ” as set forth in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(g)           Investments In unfinanced capital expenditures in any fiscal year, not to exceed $2,000,000;

 

6.                                       Subsection (c) of the defined term “ Permitted Liens ” as set forth in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(c)           Liens not to exceed $7,000,000 in the aggregate (1) upon or in any Equipment (other than Equipment financed by a Credit Extension) acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the

 

2



 

acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, in each case provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;

 

7.                                       A new subsection (f) is hereby added to the defined term “ Permitted Transfers ” as set forth in Exhibit A to the Agreement, as follows:

 

(f)            recurring monthly transfers of Cash balances on deposit with Bank to the UK Account not to exceed a maximum monthly amount equal to $100,000, provided that Borrower shall only be allowed to transfer such $100,000, if at the time of any such transfer, no Event of Default exist hereunder and no Event of Default would exist immediately after giving effect to such transfer.

 

8.                                       The following defined terms in Exhibit A to the Agreement are hereby amended and restated, as follows:

 

“Ancillary Services Sublimit” means a sublimit for Ancillary Services under the Formula Revolving Line not to exceed $3,000,000.

 

“Borrowing Base” means (1) four (4) (the “Advance Rate”), multiplied by (ii) the average monthly Recurring Revenue for the trailing 3 months, as determined with reference to the most recent Borrowing Base Certificate delivered by Borrower; provided that, if Borrower’s most recently calculated Churn is greater than or equal to 5.00%, then Bank may change the Advance Rate in its discretion.

 

“Formula Revolving Line” means a Credit Extension of up to $12,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit).

 

“Formula Revolving Maturity Date” means March 1, 2015.

 

9.                                       The defined terms “Liquidity” and “Liquidity Ratio” and their respective definitions in Exhibit A to the Agreement are hereby deleted.

 

10.                                Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

11.                                Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct in all respects as of the date of this Amendment (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all respects as of such date).

 

3



 

12.                                This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

13.                                As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a)                                  this Amendment, duly executed by Borrower;

 

(b)                                  an amended and restated warrant to purchase stock, duly executed by Borrower;

 

(c)                                   an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment;

 

(d)                                  payment of a $7,500 facility fee, which may be debited from any of Borrower’s accounts;

 

(e)                                   payment of all Bank Expenses, including Bank’s expenses for the documentation of this Amendment and any related documents, and any UCC, good standing and intellectual property search or filing fees, which may be debited from any of Borrower’s accounts; and

 

(f)                                    such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

 

[Signature Page Follows]

 

4



 

IN WITNESS WHEREOF , the undersigned have executed this Amendment as of the first date above written.

 

 

BORROWER:

 

 

 

SENDGRID, INC.

 

 

 

 

 

By:

/s/ Chad T. Varra

 

Name:

Chad T. Varra

 

Title:

CFO

 

 

 

 

 

BANK:

 

 

 

SQUARE 1 BANK

 

 

 

 

 

By:

/s/ Adam Glick

 

Name:

Adam Glick

 

Title:

VP

 

SIGNATURE PAGE TO FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

 




Exhibit 10.10.2

 

SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “ Amendment ”), is entered into as of December 1, 2014, by and between SQUARE 1 BANK (“ Bank ”) and SENDGRID, INC. (“ Borrower ”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and Security Agreement dated as of June 27, 2013 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

NOW , THEREFORE , the parties agree as follows:

 

1.                                       Section 6.7(b) of the Agreement is hereby amended and restated, as follows:

 

(b)                                  Unfinanced Capital Expenditures . An unfinanced capital expenditures in the aggregate amount not to exceed $3,000,000 for 2014 fiscal year.

 

2.                                       Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

3.                                       Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct in all respects as of the date of this Amendment (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all respects as of such date).

 

4.                                       This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

5.                                       As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a)                                  this Amendment, duly executed by Borrower;

 

(b)                                  payment of all Bank Expenses, including Bank’s expenses for the documentation of this Amendment and any related documents, and any UCC, good standing and intellectual property search or filing fees, which may be debited from any of Borrower’s accounts; and

 

1



 

(c)                                   such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

 

[Signature Page Follows]

 

2



 

IN WITNESS WHEREOF , the undersigned have executed this Amendment as of the first date above written.

 

 

BORROWER:

 

 

 

SENDGRID, INC.

 

 

 

 

 

By:

/s/ Michael Tognetti

 

Name:

Michael Tognetti

 

Title:

SVP & General Counsel

 

 

 

 

 

 

BANK:

 

 

 

SQUARE 1 BANK

 

 

 

 

 

 

By:

/s/ Zack Robbins

 

Name:

Zack Robbins

 

Title:

SVP

 

SIGNATURE PAGE TO SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

 




Exhibit 10.10.3

 

THIRD AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “ Amendment ”), is entered into as of April 28, 2015, by and between SQUARE 1 BANK (“ Bank ”) and SENDGRID, INC. (“ Borrower ”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and Security Agreement dated as of June 27, 2013 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

NOW , THEREFORE , the parties agree as follows:

 

1.                                       Section 6.2(d) of the Agreement is hereby amended and restated, as follows:

 

(d)                                  Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrower’s usual business hours but no more than twice a year (unless an Event of Default has occurred and is continuing), to inspect Borrower’s Books and to make copies thereof and to cheek, test, inspect, audit and appraise the Collateral at Borrower’s expense in order to verify Borrower’s financial condition or the amount, condition of, or any other matter relating to, the Collateral. Notwithstanding the above, for so long as outstanding Credit Extensions have not exceeded $12,500,000, Bank shall conduct no more than one Collateral audit per year (unless an Event of Default has occurred and is continuing).

 

2.                                       Section 6.7 of the Agreement is hereby amended and restated, as follows:

 

6.7                                Financial Covenants . At all times during which Borrower’s outstanding Indebtedness to Bank exceeds $5,000,000, Borrower shall maintain at all times the following financial ratios and covenants. For the sake of clarity, any covenant violation herein shall constitute an Event of Default and cannot be cured with repayment reducing Borrower’s outstanding Indebtedness to Bank to $5,000,000 or below.

 

(a)                                  EBITDA Plus Total CapEx. Measured monthly and calculated on a cumulative basis beginning February 1, 2015, Borrower shall achieve EBITDA Plus Total CapEx of at least the amounts shown in the table immediately below for the corresponding reporting periods. For subsequent reporting periods, Bank and Borrower hereby agree that, on or before February 1 of each year during the term of this Agreement, Borrower shall provide Bank with a budget for the upcoming calendar year, which shall be approved by Borrower’s board of directors, and Bank shall use that budget to establish the EBITDA amounts for the upcoming year, with such amounts being incorporated herein by an amendment, which Borrower hereby agrees to execute.

 

1



 

Reporting Period Ending

 

Minimum EBITDA Plus Total CapEx

 

February 28, 2015

 

$

(1,625,000

)

March 31, 2015

 

$

(3,350,000

)

April 30, 2015

 

$

(4,600,000

)

May 31, 2015

 

$

(6,425,000

)

June 30, 2015

 

$

(7,850,000

)

July 31, 2015

 

$

(9,300,000

)

August 31, 2015

 

$

(13,000,000

)

September 30, 2015

 

$

(14,500,000

)

October 31, 2015

 

$

(16,000,000

)

November 30, 2015

 

$

(17,600,000

)

December 31, 2015

 

$

(18,700,000

)

 

(b)                                  Unfinanced Capital Expenditures. Borrower’s unfinanced capital expenditures, measured as of the last day of each calendar quarter and calculated on a cumulative year-to-date basis, shall not exceed the amounts set forth in the table immediately below for the corresponding reporting periods.

 

Reporting Period Ending

 

Minimum Unfinanced Capital
Expenditures

 

March 31, 2015

 

$

750,000

 

June 30, 2015

 

$

1,500,000

 

July 31, 2015

 

$

2,250,000

 

September 30, 2015

 

$

14,500,000

 

December 31, 2015

 

$

3,000,000

 

 

3.                                       The following defined terms are hereby added in Exhibit A to the Agreement, as follows:

 

“EBITDA Plus Total CapEx” means (a) EBITDA, plus (b) capital expenditures.

 

4.                                       The following defined terms in Exhibit A to the Agreement are hereby amended and restated, as follows:

 

“Formula Revolving Line” means a Credit Extension of up to $20,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit).

 

“Formula Revolving Maturity Date” means April 26, 2016.

 

5.                                       Subsection (c) of the defined term “ Permitted Indebtedness ” in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(c)                                   Indebtedness not to exceed $12,000,000 in the aggregate secured by a lien described in clause (c) of the defined term “ Permitted Liens ,” provided

 

2



 

such Indebtedness does not exceed at the time it is incurred the lesser of the cost or fair market value of the property financed with such Indebtedness;

 

6.                                       Subsection (g) of the defined term “ Permitted Investment ” in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(g)                                   Investments in unfinanced capital expenditures in any fiscal year, not to exceed $3,000,000;

 

7.                                       Subsection (c) of the defined term “ Permitted Liens ” in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(c)                                   Liens not to exceed $12,000,000 in the aggregate (i) upon or in any Equipment (other than Equipment financed by a Credit Extension) acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, in each case provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;

 

8.                                       Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

9.                                       Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct in all respects as of the date of this Amendment (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all respects as of such date).

 

10.                                This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

11.                                As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a)                                  this Amendment, duly executed by Borrower;

 

(b)                                  a Second Warrant to Purchase Stock, duly executed by Borrower;

 

(c)                                   an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment;

 

3



 

(d)                                  payment of a $20,000 facility fee, which may be debited from any of Borrower’s accounts;

 

(e)                                   payment of all Bank Expenses, including Bank’s expenses for the documentation of this Amendment and any related documents, and any UCC, good standing and intellectual property search or filing fees, which may be debited from any of Borrower’s accounts; and

 

(f)                                    such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

 

[Signature Page Follows]

 

4



 

IN WITNESS WHEREOF , the undersigned have executed this Amendment as of the first date above written.

 

 

BORROWER:

 

 

 

SENDGRID, INC.

 

 

 

 

 

By:

/s/ Michael Tognetti

 

Name:

Michael Tognetti

 

Title:

SVP & General Counsel

 

 

 

 

 

BANK:

 

 

 

SQUARE 1 BANK

 

 

 

 

 

By:

/s/ Adam Glick

 

Name:

Adam Glick

 

Title:

SVP

 

SIGNATURE PAGE TO THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT

 




Exhibit 10.10.4

 

FOURTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “ Amendment ”), is entered into as of May 27, 2015, by and between SQUARE 1 BANK (“ Bank ”) and SENDGRID, INC . (“ Borrower ”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and Security Agreement dated as of June 27, 2013 (as amended from time to time, the Agreement ). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

1.                                       Bank hereby waives any and all of Borrower’s existing violations of Section 6.6 (Primary Depository) of the Agreement for all the dates through the date of this Amendment.

 

2.                                       Section 6.6 of the Agreement is hereby amended and restated, as follows:

 

6.6                                Primary Depository . Borrower shall maintain all its depository and operating accounts with Bank and its primary investment accounts with Bank or Bank’s affiliates; provided that SendGrid UK Ltd., a Borrower’s UK Subsidiary, may maintain an account in UK for the purpose of funding all existing and future foreign operations, subject to the restriction that the aggregate amount on deposit in such account shall not exceed $300,000 at any time (the “ UK Account ”).

 

3.                                       Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

4.                                       Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct in all respects as of the date of this Amendment (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all respects as of such date).

 

5.                                       This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

6.                                       As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a)                                  this Amendment, duly executed by Borrower;

 

1



 

(b)                                  payment of all Bank Expenses, including Bank’s expenses for the documentation of this Amendment and any related documents, and any UCC, good standing or intellectual property search or filing fees, which may be debited from any of Borrower’s accounts; and

 

(c)                                   such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

 

[Signature Page Follows]

 

2



 

IN WITNESS WHEREOF , the undersigned have executed this Amendment as of the first date above written.

 

 

BORROWER:

 

 

 

SENDGRID, INC.

 

 

 

 

 

By:

/s/ Michael Tognetti

 

Name:

Michael Tognetti

 

Title:

SVP and General Counsel

 

 

 

BANK:

 

 

 

SQUARE 1 BANK

 

 

 

 

 

By:

/s/ Adam Glick

 

Name:

Adam Glick

 

Title:

SVP

 

SIGNATURE PAGE TO FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 




Exhibit 10.10.5

 

FIFTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “ Amendment ”), is entered into as of May 4, 2016, by and between PACIFIC WESTERN BANK , a California state chartered bank (“ Bank ”) and SENDGRID, INC . (“ Borrower ”).

 

RECITALS

 

Borrower and Bank (as successor in interest by merger to Square I Bank) are parties to that certain Loan and Security Agreement dated as of June 27, 2013 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

NOW, THEREFORE , the parties agree as follows:

 

1.                                       A new Section 2.1(c) is hereby added to the Agreement, as follows:

 

(c)                                   Usage of Letters of Credit Under the Letter of Credit Non-Formula Revolving Line.

 

(i)                                     Usage Period . Subject to and upon the terms and conditions of this Agreement, at any time from the Fifth Amendment Effective Date through the Letter of Credit Non-Formula Revolving Maturity Date, Borrower may request Letters of Credit, in amounts and upon terms as restricted in Section 2.1(c)(ii) below.

 

(ii)                                 Letter of Credit Services . Subject to and upon the terms and conditions of this Agreement, Borrower may request Letters of Credit from Bank. The aggregate amount of Letters of Credit outstanding under this Section 2.1(c) at any time shall not exceed the Letter of Credit Services Non-Formula Revolving Line. The terms and conditions (including repayment and fees) of such Letters of Credit shall be subject to the terms and conditions of the Bank’s standard forms of applications and agreements for each specific Letter of Credit provided, each of which Borrower hereby agrees to execute.

 

(iii)                             Collateralization of Obligations Extending Beyond Maturity . If Borrower has not cash secured its obligations with respect to any Letter of Credit by the Letter of Credit Services Non-Formula Revolving Maturity Date, then, effective as of such date, the balance in any deposit accounts held by Bank and the certificates of deposit or time deposit accounts issued by Bank in Borrower’s name (and any interest paid thereon or proceeds thereof, including any amounts payable upon the maturity or liquidation of such certificates or accounts), shall automatically secure such obligations to the extent of the then continuing or outstanding Letter of Credit. Borrower authorizes Bank to hold such balances in pledge and to decline to honor any drafts thereon or any requests by

 

1



 

Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the applicable Letter of Credit are outstanding or continue.

 

2.                                       Section 2.3(a)(i) of the Agreement is hereby amended and restated, as follows:

 

(i)                                     Formula Advances.

 

(ii)                                   (A) If Borrower’s Cash at Bank is greater than $8,000,000, then, except as set forth in Section 2.3(b), the Formula Advances shall bear interest, on the outstanding daily balance thereof, at a variable annual rate equal to the greater of: (A) 0.50% above the Prime Rate then in effect; or (B) 4,00%.

 

(iii)                                (B) If Borrower’s Cash at Bank is not greater than $8,000,000, then, except as set forth in Section 2.3(b), the Formula Advances shall bear interest, on the outstanding daily balance thereof, at a variable annual rate equal to the greater of: (A) 1.25% above the Prime Rate then in effect; or (B) 4.75%.

 

3.                                       Section 6.7 of the Agreement is hereby amended and restated, as follows:

 

6.7                                Financial Covenants . Borrower shall maintain at all times the following financial ratios and covenants.

 

(a)                                  EBITDA Less Total CapEx . Measured monthly and calculated on a cumulative basis beginning January 1, 2016, Borrower shall achieve EBITDA Less Total CapEx of at least the amounts shown in the table immediately below for the corresponding reporting periods. For subsequent reporting periods, Bank and Borrower hereby agree that, on or before February 1 of each year during the term of this Agreement, Borrower shall provide Bank with a budget for the upcoming calendar year, which shall be approved by Borrower’s board of directors, and Bank shall use that budget to establish the EBITDA amounts for the upcoming year, with such amounts being incorporated herein by an amendment, which Borrower hereby agrees to execute.

 

Reporting Period Ending

 

Minimum EBITDA Less Total CapEx

 

January 31, 2016

 

$

(2,400,000

)

February 29, 2016

 

$

(4,900,000

)

March 31, 2016

 

$

(7,600,000

)

April 30, 2016

 

$

(9,000,000

)

May 31, 2016

 

$

(10,400,000

)

June 30, 2016

 

$

(11,900,000

)

July 31, 2016

 

$

(12,500,000

)

August 31, 2016

 

$

(13,100,000

)

September 30, 2016

 

$

(13,700,000

)

October 31, 2016

 

$

(13,900,000

)

November 30, 2016

 

$

(14,100,000

)

December 31, 2016

 

$

(14,300,000

)

 

2



 

(b)                                  Unfinanced Capital Expenditures . Borrower’s unfinanced capital expenditures, measured as of the last day of each calendar quarter and calculated on a cumulative year-to-date basis, shall not exceed the amounts set forth in the table immediately below for the corresponding reporting periods, For subsequent reporting periods, Bank and Borrower hereby agree that, on or before February 1 of each year during the term of this Agreement, Borrower shall provide Bank with a budget for the upcoming calendar year, which shall be approved by Borrower’s board of directors, and Bank shall use that budget to establish the unfinanced capital expenditures amounts for the upcoming year, with such amounts being incorporated herein by an amendment, which Borrower hereby agrees to execute.

 

Reporting Period Ending

 

Maximum Unfinanced Capital Expenditures

 

June 30, 2016

 

$

4,000,000

 

September 30, 2016

 

$

5,000,000

 

December 31, 2016

 

$

6,000,000

 

 

4.                                       Section 7.2 of the Agreement is hereby amended and restated, as follows:

 

7.2 Change in Name, Location, Executive Office, or Executive Management; Change in Business; Change in Fiscal Year; Change in Control . Change its name or the state of Borrower’s formation or relocate its chief executive office without 30 days prior written notification to Bank; replace or suffer the departure of its chief executive officer or chief financial officer without delivering written notification to Bank within 10 days; fail to appoint an interim replacement or fill a vacancy in the position of chief executive officer or chief financial officer for more than 90 consecutive days; suffer a change on its board of directors which results in the failure of at least one partner of an Investor Representative to serve as a voting member, or suffer the resignation of one or more directors from its board of directors in anticipation of Borrower’s insolvency, in each case without the prior written consent of Bank which may be withheld in Bank’s sole discretion; take action to liquidate, wind up, or otherwise cease to conduct business in the ordinary course; engage in any business, or permit any of its Subsidiaries to engage in any business, other than or reasonably related or incidental to the businesses currently engaged in by Borrower; change its fiscal year end; have a Change in Control.

 

5.                                       The following defined terms are hereby added in Exhibit A to the Agreement, as follows:

 

“EBITDA Less Total CapEx” means (a) EBITDA, less (b) capital expenditures.

 

3



 

“Fifth Amendment Effective Date” means May 4, 2016.

 

“Investor Representative” means (i) Foundry, or (ii) Bessemer, or either of their Affiliates.

 

“Letter of Credit Services Non-Formula Revolving Line” means a Credit Extension of up to $2,000,000.

 

“Letter of Credit Services Non-Formula Revolving Maturity Date” means May 3, 2017.

 

6.                                       The following defined term in Exhibit A to the Agreement and its associated definition is hereby deleted in its entirety:

 

“EBITDA Plus Total CapEx”

 

7.                                       The following defined terms in Exhibit A to the Agreement are hereby amended and restated, as follows:

 

“Ancillary Services Sublimit” means a sublimit for Ancillary Services under the Formula Revolving Line not to exceed $5,000,000.

 

“Borrowing Base” means (A) for the period of time beginning on the Fifth Amendment Effective Date and continuing for 12 months thereafter, (i) five (5) (the “Primary Advance Rate”), multiplied by (ii) the average monthly Recurring Revenue for the trailing 3 months, as determined with reference to the most recent Borrowing Base Certificate delivered by Borrower, and (B) at all times thereafter, (i) four (4) (the “Secondary Advance Rate”, and together with the Primary Advance Rate, the “Advance Rate”), multiplied by (ii) the average monthly Recurring Revenue for the trailing 3 months, as determined with reference to the most recent Borrowing Base Certificate delivered by Borrower; provided that, in the case of both (A) and (B) above if Borrower’s most recently calculated Churn is greater than or equal to 5.00%, then Bank may change the applicable Advance Rate in its discretion.

 

“Credit Extensions” means each Formula Advance, Letter of Credit provided under the Letter of Credit Services Non-Formula Revolving Line, or any other extension of credit, by Bank to or for the benefit of Borrower hereunder.

 

“Formula Revolving Line” means a Credit Extension of up to $30,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit).

 

Formula Revolving Maturity Date ” means May 3, 2017.

 

8.                                       Subsection (c) of the defined term “ Permitted Indebtedness ” in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

4



 

(c)                                   Indebtedness not to exceed $17,000,000 in the aggregate secured by a lien described in clause (c) of the defined term “ Permitted Liens, ” provided such Indebtedness does not exceed at the time it is incurred the lesser of the cost or fair market value of the property financed with such Indebtedness;

 

9.                                       Subsection (g) of the defined term “ Permitted Investment ” in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(g)                                  Investments in unfinanced capital expenditures in any fiscal year not to exceed (i) $6,000,000 for the 2016 calendar year and (ii) for future years an amount determined by Bank following receipt of Borrower’s board approved plan as detailed more specifically in Section 6.7(b) of this Agreement. The unfinanced capital expenditures limits for future years shall be set forth in an Amendment to this Agreement, which Borrower hereby agrees to execute.

 

10.                                Subsection (c) of the defined term “ Permitted Liens ” in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(c)                                   Liens not to exceed $17,000,000 in the aggregate (i) upon or in any Equipment (other than Equipment financed by a Credit Extension) acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the time of its acquisition, in each case provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;

 

11.                                Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

12.                                Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct in all respects as of the date of this Amendment ( provided, however , that those representations and warranties expressly referring to another date shall be true, correct and complete in all respects as of such date).

 

13.                                This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

14.                                As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a)                                  this Amendment, duly executed by Borrower;

 

5



 

(b)                                  an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment;

 

(c)                                   payment of a $21,000 facility fee, which may be debited from any of Borrower’s accounts;

 

(d)                                  payment of all Bank Expenses, including Bank’s expenses for the documentation of this Amendment and any related documents, and any UCC, good standing and intellectual property search or filing fees, which may be debited from any of Borrower’s accounts; and

 

(e)                                   such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

 

[Signature Page Follows]

 

6



 

IN WITNESS WHEREOF , the undersigned have executed this Amendment as of the first date above written.

 

 

BORROWER:

 

 

 

SENDGRID, INC.

 

 

 

 

 

By:

/s/ Yancey Spruill

 

Name:

Yancey Spruill

 

Title:

CFO/COO

 

 

 

BANK:

 

 

 

PACIFIC WESTERN BANK

 

 

 

 

 

By:

/s/ Adam Glick

 

Name:

Adam Glick

 

Title:

SVP

 

SIGNATURE PAGE TO FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 




Exhibit 10.10.6

 

SIXTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT

 

THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the “ Amendment ”), is entered into as of May 8, 2017, by and between PACIFIC WESTERN BANK , a California state chartered bank (“ Batik ”) and SENDGRID, INC . (“ Borrower ”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and Security Agreement dated as of June 27, 2013 (as amended from time to time, the “ Agreement ”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

 

NOW, THEREFORE , the parties agree as follows:

 

1.                                       Pursuant to Section 7.3 of the Agreement, Borrower may acquire all or substantially all of the capital stock or property of another Person, except where certain conditions not applicable in this instance have been met, without Bank’s prior written consent. Borrower has informed Bank that Borrower entered into that certain Agreement and Plan of Merger by and among Borrower, Beehive Merger Sub, Inc., JCKM, Inc. (“ Seller ”), and Fortis Advisors LLC, dated as of March 3, 2017 (the “ Bizzy Merger Agreement ”), pursuant to which Borrower acquired all of the Capital Stock of Seller for an aggregate purchase price equal to $4,500,000 (subject to adjustment in accordance with the terms of the Bizzy Merger Agreement) (such transaction, the “ Bizzy Acquisition ”). Bank previously informally consented to the Bizzy Acquisition, and in order to more formally document such consent, Bank hereby confirms its consent to the Bizzy Acquisition. Borrower confirms that (i) all assets and the capital stock of Seller which were purchased by Borrower as part of the Bizzy Acquisition are free and clear of any and all liens, except for Permitted Encumbrances (as defined in the Dizzy Merger Agreement), (ii) all Indebtedness (as defined in the Bizzy Merger Agreement) of Seller has been discharged and paid in full, and (iii) Borrower agrees to execute and deliver to Bank any agreements reasonably requested by Bank in order to perfect Bank’s security interest in the assets and capital stock of Seller which were purchased by Borrower as part of the Bizzy Acquisition, such agreements to be in form and substance reasonably satisfactory to Bank, including, without limitation, any joinders to cause any of the foregoing assets and/or Persons to become a co-Borrower or a secured guarantor to the Agreement.

 

2.                                       Notwithstanding anything to the contrary set forth in Section 7.3 of the Agreement or the consents provided in Section 2 of this Amendment and any other acquisition prior to the date hereof, Bank hereby agrees that, from the date of this Amendment through May 8, 2018, Borrower shall be permitted to make acquisitions of all of the capital stock or property of another Person up to an aggregate amount equal to $6,000,000 in Cash consideration, without the consent of Bank. Borrower agrees that it shall provide Bank with 15 days’ prior written notice of any acquisition permitted to this Section 2, and shall provide to Bank any and all documents related to such acquisition, including, without limitation, all exhibits and schedules thereto. Borrower agrees it shall execute any

 

1



 

agreements reasonably requested by Bank in order to perfect Bank’s security interest in any assets or Persons acquired in connection with the foregoing acquisitions, such agreements to be in form and substance reasonably satisfactory to Bank, including, without limitation, any joinders to cause any of the foregoing assets and/or Persons to become a co-Borrower or a secured guarantor to the Agreement,

 

3.                                       Section 6.7(a) of the Agreement is hereby amended and restated, as follows:

 

(a)                                  EBITDA Less Total CapEx . Measured monthly and calculated on a cumulative basis beginning January 1, 2017, Borrower shall achieve EBITDA Less Total CapEx of at least the amounts shown in the table immediately below for the corresponding reporting periods. For subsequent reporting periods, Bank and Borrower hereby agree that, on or before February 1 of each year during the term of this Agreement, Borrower shall provide Bank with a budget for the upcoming calendar year, which shall be approved by Borrower’s board of directors, and Bank shall use that budget to establish the EBITDA amounts for the upcoming year, with such amounts being incorporated herein by an amendment, which Borrower hereby agrees to execute.

 

Reporting Period Ending

 

Minimum EBITDA Less Total CapEx

 

February 28, 2017

 

$

(4,250,000

)

March 31, 2017

 

$

(7,000,000

)

April 30, 2017

 

$

(9,250,000

)

May 31, 2017

 

$

(16,000,000

)

June 30, 2017

 

$

(16,750,000

)

July 31, 2017

 

$

(17,250,000

)

August 31, 2017

 

$

(17,750,000

)

September 30, 2017

 

$

(17,500,000

)

October 31, 2017

 

$

(18,250,000

)

November 30, 2017

 

$

(17,250,000

)

December 31, 2017

 

$

(15,500,000

)

 

4.                                       Section 6.7(b) of the Agreement is hereby amended and restated, as follows:

 

(b)                                  Unfinanced Capital Expenditures .  Borrower’s unfinanced capital expenditures, measured as of the last day of each calendar quarter and calculated on a cumulative year-to-date basis, shall not exceed the amounts set forth in the table immediately below for the corresponding reporting periods. For subsequent reporting periods, Bank and Borrower hereby agree that, on or before February 1 of each year during the term of this Agreement, Borrower shall provide Bank with a budget for the upcoming calendar year, which shall be approved by Borrower’s board of directors, and Bank shall use that budget to establish the unfinanced capital expenditures amounts for the upcoming year, with

 

2



 

such amounts being incorporated herein by an amendment, which Borrower hereby agrees to execute.

 

Reporting Period Ending

 

Maximum Unfinanced Capital Expenditures

 

March 31, 2017

 

$

2,500,000

 

June 30, 2017

 

$

2,750,000

 

September 30, 2017

 

$

3,250,000

 

December 31, 2017

 

$

3,750,000

 

 

5.                                       The following defined terms set forth in Exhibit A to the Agreement are hereby amended and restated, as follows:

 

“Borrowing Base” means (i) four (4) (the “Advance Rate”), multiplied by (ii) the average monthly Recurring Revenue for the trailing 3 months, as determined with reference to the most recent Borrowing Base Certificate delivered by Borrower; provided that, if Borrower’s most recently calculated Churn is greater than or equal to 5.00%, then Bank may change the applicable Advance Rate in its discretion.

 

“Formula Revolving Line” means a Credit Extension of up to $40,000,000 (inclusive of any amounts outstanding under the Ancillary Services Sublimit).

 

“Formula Revolving Maturity Date” means May 8, 2018.

 

“Letter of Credit Services Non-Formula Revolving Line” means a Credit Extension of up to $3,000,000.

 

“Letter of Credit Services Non-Formula Revolving Maturity Date” means May 8, 2018.

 

6.                                       Subsection (c) of the defined term “ Permitted Indebtedness ” in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(c)                                   Indebtedness not to exceed $22,000,000 in the aggregate secured by a lien described in clause (c) of the defined term “ Permitted Liens, ” provided such Indebtedness does not exceed at the time it is incurred the lesser of the cost or fair market value of the property financed with such Indebtedness;

 

7.                                       Subsection (c) of the defined term “ Permitted Liens ” in Exhibit A to the Agreement is hereby amended and restated, as follows:

 

(c)                                   Liens not to exceed $22,000,000 in the aggregate (1) upon or in any Equipment (other than Equipment financed by a Credit Extension) acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such Equipment, or (ii) existing on such Equipment at the

 

3



 

time of its acquisition, in each case provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment;

 

8.                                       Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement.

 

9.                                       Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct in all respects as of the date of this Amendment (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all respects as of such date).

 

10.                                This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

11.                                As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

 

(a)                                  this Amendment, duly executed by Borrower;

 

(b)                                  an officer’s certificate of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment;

 

(c)                                   payment of a $40,000 facility fee, which may be debited from any of Borrower’s accounts;

 

(d)                                  payment of all Bank Expenses, including Bank’s expenses for the documentation of this Amendment and any related documents, and any UCC, good standing and intellectual property search or filing fees, which may be debited from any of Borrower’s accounts; and

 

(e)                                   such other documents and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

 

[Signature Page Follows]

 

4



 

IN WITNESS WHEREOF , the undersigned have executed this Amendment as of the first date above written.

 

 

BORROWER:

 

 

 

SENDGRID, INC.

 

 

 

 

 

By:

/s/ Yancey Spruill

 

Name:

Yancey Spruill

 

Title:

CFO/COO

 

 

 

BANK:

 

 

 

PACIFIC WESTERN BANK

 

 

 

 

 

By:

/s/ Adam Glick

 

Name:

Adam Glick

 

Title:

SVP

 

SIGNATURE PAGE TO SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 




Exhibit 10.11.1

 

August 28, 2014

 

Sameer Dholakia
Sameer.dholakia@gmail.com

 

Dear Sameer:

 

On behalf of SendGrid, Inc. (the “ Company ”), I am pleased to offer you employment in the position of Chief Executive Officer of the Company. This letter sets out the terms of your employment with the Company, which will start on or around October 1, 2014. You will be paid a starting base salary of $29,166 per month ($350,000 per year), less applicable tax and other withholdings payable in accordance with the Company’s normal payroll procedure. You will also be eligible for an annual bonus of $150,000 (pro-rated for 2014) based upon your achievement of milestones established by the Board. Your reasonable travel expenses will be covered by the Company, including a corporate apartment in Colorado if appropriate.

 

You will also be eligible to participate in various Company benefit plans, including group health insurance, 401(k), and vacation programs in accordance with the Company’s benefit plans.

 

Within one week of the commencement of your employment a board meeting will be called to vote on your equity grant. Subject to the approval of the Company’s Board of Directors, you will be granted an option to purchase 4.5% of the shares of the Company’s common stock based upon the fully diluted shares outstanding as of your start date (the “ Option ”) under the Company’s stock option plan at an exercise price equal to the fair market value of that stock on your option grant date, as well as Restricted Stock Units (“ RSUs ”, the RSUs and Options collectively referred to as “ Stock ”) equal to 2.0% of the Company’s common stock based upon the fully diluted shares outstanding as of your start date. The Options will provide for an early exercise at your election subject to the repurchase rights of the Company for unvested Options. The Company will work with you on the most tax advantageous alternatives for the RSUs which may include among other things, your purchase of the RSUs with a promissory note issued by the Company payable upon a Change of Control or initial public offering or issuance of the RSUs in consideration for future services rendered. The Stock will vest over a period of four years as follows: one forty-eighth (1/48) of the total number of shares will vest on each monthly anniversary of the start date until all shares have vested, provided that you continue to be employed by the Company at such time. The Stock will be subject to the terms and conditions of the Company’s stock option plan and standard form of stock agreement, which you will be required to sign as a condition of receiving the grant.

 

As is standard practice, all employment at the Company is terminable at will. This means that you will be free to end your employment with the Company at any time for any reason or for no reason. Similarly, the Company may end your employment at any time for any reason, with or without cause. This “at will” nature of your employment may not be changed except in writing and approved by the Board of Directors of the Company. Notwithstanding the foregoing, in the event that your employment is terminated by the Company for other than Cause (as defined below) or you terminate your employment for Good Reason (as defined below), it will be deemed that you have earned all base and bonus compensation that has been earned to date, all vested stock and six months acceleration of unvested stock, as well as an additional six months of your then current base cash compensation and continued health care benefits as severance. “ Cause ” shall mean your involvement

 



 

in fraud, embezzlement or criminal activity. “ Good Reason ” shall mean: (i) you are no longer the Chief Executive Officer of the Company; (ii) within 6 months following your start date the Company has not raised a minimum of $15 million of financing, (iii) 20% or greater reduction by the Company or the Board of your current total targeted compensation (base salary and annual bonus); or (iv) you are required to relocate your residence outside of the Silicon Valley area of CA..

 

In addition, in the event of a Change of Control of the Company, your Stock vesting will be treated as follows: you will receive 25% acceleration of the then unvested Stock in conjunction with the Change of Control, and the remaining Stock will vest (or repurchase rights lapse) in an even linear monthly fashion over the subsequent year following the Change of Control. In the Case of a Change of control and subsequent termination without Cause (as defined above) or your termination for Good Reason (“ double trigger ”), then 100% of the unvested Stock would accelerate immediately (and all repurchase rights shall lapse). For the purposes of this offer letter, the term “ Change in Control ” shall have the meanings defined under the Company’s stock option Plan provided that the acceleration provisions in this paragraph shall not apply in the event that the Change of Control is solely a merger, consolidation or similar transaction where immediately thereafter the then current controlling shareholders of the Company continue to control the Company and you continue to be the CEO of the Company.

 

As a condition of your employment, you will be required to sign the Company’s standard form of Employee Nondisclosure and Non-Solicitation Agreement, and to provide the Company with documents establishing your identity and right to work in the United States. Those documents must be provided to the Company within three business days of your employment start date.

 

In addition, the Company reserves the right to conduct a background investigation and/or reference check on all of its potential employees. Your offer of employment is contingent upon satisfactory completion of such background investigation and/or reference check, if any, in the sole discretion of the Company. All such background investigations and/or reference checks shall be conducted in accordance with applicable state and federal laws.

 

By accepting this offer, you agree that throughout your employment, you will observe all the Company’s rules governing conduct of our business and employees, including our policies protecting employees from illegal discrimination and harassment. Employment with the Company is a full-time job, requiring your complete commitment. During the course of your employment, you may not

 

compete with the Company or work for any competing entity, and you must obtain permission in advance from the Company before accepting any outside employment or board membership of any kind.

 

In the event of any dispute or claim relating to or arising out of your employment relationship with the Company, this agreement, or the termination of your employment with the Company for any reason (including, but not limited to, any claims of breach of contract, defamation, wrongful termination or age, sex, sexual orientation, race, color, national origin, ancestry, marital status, religious creed, physical or mental disability or medical condition or other discrimination, retaliation or harassment), you and the Company agree that all such disputes shall be fully resolved by confidential, binding arbitration conducted by a single arbitrator through the American Arbitration Association (“ AAA ”) under the AAA’s National Rules for the Resolution of Employment Disputes

 



 

then in effect, which are available online at the AAA’s website at www.adr.org or by requesting a copy from the Human Resources Department. You and the Company hereby waive your respective rights to have any such disputes or claims tried before a judge or jury.

 

This agreement, the non-disclosure and stock option agreements referred to above constitute the entire agreement between you and the Company regarding the terms and conditions of your employment, and they supersede all prior or contemporaneous negotiations, representations or agreements between you and the Company. The provisions of this agreement may only be modified by a document signed by you and an authorized officer of the Company.

 

We wish to impress on you that you must not bring to the Company any confidential or proprietary information or material of any former employer, disclose or use such information or material in the course of your employment with the Company, or violate any other obligation to your former employers.

 

Sameer, we look forward to working with you at SendGrid, Inc. Please sign and date this letter on the space provided below to acknowledge your acceptance of the terms of this agreement. This offer will expire if not accepted by 9 am pacific time on August 29th, 2014.

 

 

Sincerely,

 

 

 

SendGrid, Inc.

 

 

 

 

 

/s/ Byron B. Deeter

 

Byron Deeter, Member, Board of Directors

 

I agree to and accept employment with Company, Inc. on the terms and conditions set forth in this agreement. I understand and agree that my employment with the Company is at-will.

 

Date: August 28, 2014

/s/ Sameer Dholakia

 

Sameer Dholakia

 




Exhibit 10.11.2

 

April 17, 2015
Yancey Spruill

 

Re: Offer of Employment with SendGrid, Inc.

 

Dear Yancey,

 

SendGrid, Inc. (the “ Company ”) is very pleased to offer you employment as Chief Financial Officer & Chief Operating Officer beginning on a date to be determined in June, 2015. This letter states the complete terms and conditions of your offer, subject to a satisfactory result of a background check. If you agree to these terms and conditions, please sign at the end of this letter in the space indicated.

 

1.                                       Duties . As CFO & COO, you will provide overall strategic and operational direction to multiple line operating units including finance, accounting, business operations and intelligence, and product support. You will assist the CEO and board to ensure attainment of organizational objectives. You will report to Sameer Dholakia, CEO, who will be primarily responsible for evaluating your performance. The Company may change your position, title, duties, and place of employment from time to time as it deems necessary.

 

2.                                       Compensation and Benefits . Beginning on a date to be determined in June 2015, you will be compensated according to the Compensation Plan attached hereto as Exhibit A, and receive benefits according to our enrollment eligibility process. The Company may modify your compensation and benefits from time to time in its sole discretion. In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 576,861 shares of the Company’s Common Stock as determined by the Company’s Board of Directors or its Compensation Committee. The exercise price per share will be equal to the fair market value per share of Common Stock on the date the option is granted as determined by the Board of Directors. The option will be subject to the terms, conditions and vesting applicable to options granted under the Company’s 2012 Equity Incentive Plan, as described in that Plan and the applicable grant award documents.

 

3.                                       Company Agreements . One of the conditions of your employment with the Company is the maintenance of the confidentiality of the Company’s proprietary and confidential information. In your work for the Company, you will not use or disclose any confidential information, including trade secrets, of any former company or other person to whom you have an obligation of confidentiality. Rather, you will be expected to use only that information that is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain or which is otherwise provided or developed by the Company. While working for the Company from your personal residence or elsewhere, you also should not use any unpublished documents or property belonging to any former Company or other person to whom you have an obligation of confidentiality. During our discussions about your job duties, you assured us that you would be able to perform those duties within the guidelines described above. This offer is conditioned upon you executing the Company’s Employee Proprietary Information and Inventions Agreement upon commencement of your employment.

 



 

4.                                       At-Will Employment . Your employment with the Company will be “at-will.” This means that either you or the Company may terminate your employment at any time, with or without cause, with or without notice, and for any reason or no reason. Any contrary representations or agreements which may have been made to you are superseded by this offer. The “at will” nature of your employment described in this offer letter shall constitute the entire agreement between you and the Company concerning the nature and duration of your employment. Though your job duties, title, compensation, and benefits may change over time, none of these events change our agreement that you are an “at will” employee. In addition, the fact that the rate of your salary or other compensation is stated in units of years or months and that your vacation and sick leave accrue annually or monthly does not alter the at-will nature of your employment, and does not mean and should not be interpreted to mean that you are guaranteed employment for any period time. The “at will” term of your employment with the Company can only be changed in a writing signed by you and the CEO of the Company. Notwithstanding the foregoing, in the event that your employment is terminated by the Company for other than Cause (as defined below) or you terminate your employment for Good Reason (as defined below), your unvested options will accelerate vesting by six months prior to the termination date. In addition, if a Change in Control occurs and as of, or within twelve (12) months after, the effective time of such Change in Control your employment terminates due to an involuntary termination other than for Cause or due to a voluntary termination with Good Reason, then, as of the date of termination, the vesting and exercisability of your unvested options shall be accelerated in full immediately prior to such termination. “ Cause ” shall include your involvement in fraud, embezzlement or criminal activity. “ Good Reason ” shall include the assignment to you of any duties or responsibilities that results in a material diminution in your function or a material reduction by the Company in your annual base salary.

 

5.                                       Exempt Employment . The Company’s regular working day is from 8 a.m. to 5 p.m., Monday through Friday. As an exempt, salaried employee, you will be expected to work additional hours as required by the nature of your work assignments.

 

6.                                       Miscellaneous . This letter and any other documents subsequently signed by you constitute the complete and exclusive terms and conditions of your employment and supercede any and all prior agreements, whether written or oral. This agreement will be governed by and construed according to the laws of the State of Colorado. By joining the Company, you are agreeing to abide by all laws and regulations, all the Company policies and procedures and that you are bound by the terms and conditions of the Company’s Business Protection Agreement (if any). Violations of these policies may lead to immediate termination of employment in the Company’s sole discretion. As required by law, this offer is subject to satisfactory proof of your right to work in the United States.

 

We look forward to having you join us at the Company. If you wish to accept this offer under the terms and conditions described above please sign and date this document and return it to Human Resources by April 23, 2015. If you have any questions about the terms of this offer, please do not hesitate to call us to discuss our offer at your earliest convenience.

 



 

Sincerely,

 

 

 

 

 

Sameer Dholakia, CEO

 

SendGrid, Inc.

 

 

 

I have read this offer and I understand and accept its terms.

 

 

 

/s/ Yancey Spruill

 

Date: April 23, 2015

 

 



 

EXHIBIT A

 

COMPENSATION

 

Your starting semi-monthly base salary will be $12,500, which is equivalent to $300,000 on an annualized basis. Your target bonus will be $120,000 for a potential annual compensation of $420,000. Your salary is subject to adjustment from time to time in accordance with the company’s compensation policies.

 

You will also be eligible to participate in the benefit programs that SendGrid, Inc. (the “ Company ”) makes available to its employees. Your eligibility and participation will be subject to the terms of the benefit programs and policies, and all benefits are subject to change or elimination at the sole discretion of the Company.

 




Exhibit 10.11.3

 

October 2, 2015

 

Scott Heimes

 

Re: Offer of Employment with SendGrid, Inc.

 

Dear Scott,

 

SendGrid, Inc. (the “ Company ”) is very pleased to offer you employment as Chief Marketing Officer beginning on November 16, 2015. This letter states the complete terms and conditions of your offer, subject to a satisfactory result of references and a background check. If you agree to these terms and conditions, please sign at the end of this letter in the space indicated.

 

1.                                       Duties . As Chief Marketing Officer, you will serve as a key member of the executive team and be responsible for owning a multi-year marketing and business development strategy, while managing a highly functioning team. You will report to Sameer Dholakia, CEO, who will be primarily responsible for evaluating your performance. The Company may change your position, title, duties, and place of employment from time to time as it deems necessary.

 

2.                                       Compensation and Benefits . Beginning on November 16, 2015 you will be compensated according to the Compensation Plan attached hereto as Exhibit A, and receive benefits according to our enrollment eligibility process. The Company may modify your compensation and benefits from time to time in its sole discretion. In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 1.11% of the Company’s common stock based upon the fully diluted shares outstanding on your start date. The option will be subject to the terms, conditions and vesting applicable to options granted under the Company’s 2012 Equity Incentive Plan, as described in that Plan and the applicable grant award documents. One-fourth of the options vest one year after the vesting commencement date; the balance of the options vest in a series of 36 successive equal monthly installments.

 

3.                                       Company Agreements . One of the conditions of your employment with the Company is the maintenance of the confidentiality of the Company’s proprietary and confidential information. In your work for the Company, you will not use or disclose any confidential information, including trade secrets, of any former company or other person to whom you have an obligation of confidentiality. Rather, you will be expected to use only that information that is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain or which is otherwise provided or developed by the Company. While working for the Company from your personal residence or elsewhere, you also should not use any unpublished documents or property belonging to any former Company or other person to whom you have an obligation of confidentiality. During our discussions about your job duties, you assured us that you would be able to perform those duties within the guidelines described above. This offer is conditioned upon you executing the Company’s Employee Proprietary Information and Inventions Agreement upon commencement of your employment.

 



 

4.                                       At-Will Employment . Your employment with the Company will be “at-will.” This means that either you or the Company may terminate your employment at any time, with or without cause, with or without notice, and for any reason or no reason. Any contrary representations or agreements which may have been made to you are superseded by this offer. The “at-will” nature of your employment described in this offer letter shall constitute the entire agreement between you and the Company concerning the nature and duration of your employment. Though your job duties, title, compensation, and benefits may change over time, none of these events change our agreement that you are an “at-will” employee. In addition, the fact that the rate of your salary or other compensation is stated in units of years or months and that your vacation and sick leave accrue annually or monthly does not alter the at-will nature of your employment, and does not mean and should not be interpreted to mean that you are guaranteed employment for any period time. The “at-will” term of your employment with the Company can only be changed in a writing signed by you and the CEO of the Company. In addition, if a Change in Control occurs and as of, or within twelve (12) months after, the effective time of such Change in Control your employment terminates due to an involuntary termination other than for Cause or due to a voluntary termination with Good Reason, then, as of the date of termination, the vesting and exercisability of your unvested options shall be accelerated in full immediately prior to such termination. “ Cause ” shall include your involvement in fraud, embezzlement or criminal activity. “ Good Reason ” shall include the assignment to you of any duties or responsibilities that results in a material diminution in your function or a material reduction by the Company in your annual base salary.

 

5.                                       Exempt Employment . The Company’s regular working day is from 8 a.m. to 5 p.m., Monday through Friday. As an exempt, salaried employee, you will be expected to work additional hours as required by the nature of your work assignments.

 

6.                                       Miscellaneous . This letter and any other documents subsequently signed by you constitute the complete and exclusive terms and conditions of your employment and supercede any and all prior agreements, whether written or oral. This agreement will be governed by and construed according to the laws of the State of Colorado. By joining the Company, you are agreeing to abide by all laws and regulations, all the Company policies and procedures and that you are bound by the terms and conditions of the Company’s Business Protection Agreement (if any). Violations of these policies may lead to immediate termination of employment in the Company’s sole discretion. As required by law, this offer is subject to satisfactory proof of your right to work in the United States.

 

We look forward to having you join us at the Company. If you wish to accept this offer under the terms and conditions described above please sign and date this document and return it to Human Resources by October 5, 2015. If you have any questions about the terms of this offer, please do not hesitate to call us to discuss at your earliest convenience.

 



 

Sincerely,

 

 

 

/s/ Sameer Dholakia

 

Sameer Dholakia, CEO

 

SendGrid, Inc.

 

 

 

I have read this offer and I understand and accept its terms.

 

 

/s/ Scott Heimes

 

Scott Heimes

 

 

 

Date: 10/2/2015

 

 



 

EXHIBIT A

 

COMPENSATION

 

Your starting semi-monthly base salary will be $11,458.33, which is equivalent to $275,000 on an annualized basis. Your target bonus will be $68,750 for a potential annual compensation of $343,750. Your salary is subject to adjustment from time to time in accordance with the company’s compensation policies.

 

You will be eligible to receive a one-time starting bonus in the gross amount of $31,250 to be paid on the first payday after the commencement of your employment with SendGrid. If your employment terminates for any reason before the one-year anniversary of the commencement of your employment with SendGrid, you will be required to promptly repay a pro-rated share of this starting bonus to SendGrid in an amount equal to one-twelfth (1/12th) of the starting bonus multiplied by the difference between twelve (12) and the total number of completed calendar months that you were employed by SendGrid.

 

Upon successful relocation to either of our Colorado offices, anticipated as no later than September 2017, you will be eligible to receive a one-time relocation bonus in the gross amount of $25,000 to be paid on the first payday after the commencement of your employment with SendGrid. If your employment terminates for any reason before the one-year anniversary of your relocation, you will be required to promptly repay a pro-rated share of this relocation bonus to SendGrid in an amount equal to one-twelfth (1/12th) of the starting bonus multiplied by the difference between twelve (12) and the total number of completed calendar months post successful relocation. Until your successful relocation, the Company will cover travel and other reasonable expenses associated with the commute to and from your home office. This includes payment of a Denver apartment rental, not to exceed $3,000 per month.

 

You will also be eligible to participate in the benefit programs the Company makes available to its employees. Your eligibility and participation will be subject to the terms of the benefit programs and policies, and all benefits are subject to change or elimination at the sole discretion of the Company.

 




Exhibit 10.11.4

 

July 18, 2016

 

Leandra Fishman

 

Re: Offer of Employment with SendGrid, Inc.

 

Dear Leandra,

 

SendGrid, Inc. (the “ Company ”) is very pleased to offer you employment as SVP Sales & Customer Success beginning on August 15, 2016. This letter states the complete terms and conditions of your offer, subject to a satisfactory result of references and a background check. If you agree to these terms and conditions, please sign at the end of this letter in the space indicated.

 

1.                                       Duties . As SVP Sales & Customer Success, you will serve as a key member of the executive team and be responsible for owning a multi-year sales and customer success strategy, while managing a highly functioning team. You will report to Sameer Dholakia, CEO, who will be primarily responsible for evaluating your performance. The Company may change your position, title, duties, and place of employment from time to time as it deems necessary.

 

2.                                       Compensation and Benefits . Beginning on August 15, 2016, you will be compensated according to the Compensation Plan attached hereto as Exhibit A, and receive benefits according to our enrollment eligibility process. The Company may modify your compensation and benefits from time to time in its sole discretion. In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase .80% of the Company’s common stock based upon the fully diluted shares outstanding on your start date. The option will be subject to the terms, conditions and vesting applicable to options granted under the Company’s 2012 Equity Incentive Plan, as described in that Plan and the applicable grant award documents. One-fourth of the options vest one year after the vesting commencement date; the balance of the options vest in a series of 36 successive equal monthly installments.

 

3.                                       Company Agreements . One of the conditions of your employment with the Company is the maintenance of the confidentiality of the Company’s proprietary and confidential information. In your work for the Company, you will not use or disclose any confidential information, including trade secrets, of any former company or other person to whom you have an obligation of confidentiality. Rather, you will be expected to use only that information that is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain or which is otherwise provided or developed by the Company. While working for the Company from your personal residence or elsewhere, you also should not use any unpublished documents or property belonging to any former Company or other person to whom you have an obligation of confidentiality. During our discussions about your job duties, you assured us that you would be able to perform those duties within the guidelines described above. This offer is conditioned upon you executing the Company’s Employee Proprietary Information and Inventions Agreement upon commencement of your employment.

 



 

4.                                       At-Will Employment . Your employment with the Company will be “at-will.” This means that either you or the Company may terminate your employment at any time, with or without cause, with or without notice, and for any reason or no reason. Any contrary representations or agreements which may have been made to you are superseded by this offer. The “at-will” nature of your employment described in this offer letter shall constitute the entire agreement between you and the Company concerning the nature and duration of your employment. Though your job duties, title, compensation, and benefits may change over time, none of these events change our agreement that you are an “at-will” employee. In addition, the fact that the rate of your salary or other compensation is stated in units of years or months and that your vacation and sick leave accrue annually or monthly does not alter the at-will nature of your employment, and does not mean and should not be interpreted to mean that you are guaranteed employment for any period time. The “at-will” term of your employment with the Company can only be changed in a writing signed by you and the CEO of the Company. In addition, if a Change in Control occurs and as of, or within twelve (12) months after, the effective time of such Change in Control your employment terminates due to an involuntary termination other than for Cause or due to a voluntary termination with Good Reason, then, as of the date of termination, the vesting and exercisability of your unvested options shall be accelerated in full immediately prior to such termination. “ Cause ” shall include your involvement in fraud, embezzlement or criminal activity. “ Good Reason ” shall include the assignment to you of any duties or responsibilities that results in a material diminution in your function or a material reduction by the Company in your annual base salary.

 

5.                                       Exempt Employment . The Company’s regular working day is from 8 a.m. to 5 p.m., Monday through Friday. As an exempt, salaried employee, you will be expected to work additional hours as required by the nature of your work assignments.

 

6.                                       Miscellaneous . This letter and any other documents subsequently signed by you constitute the complete and exclusive terms and conditions of your employment and supercede any and all prior agreements, whether written or oral. This agreement will be governed by and construed according to the laws of the State of Colorado. By joining the Company, you are agreeing to abide by all laws and regulations, all the Company policies and procedures and that you are bound by the terms and conditions of the Company’s Business Protection Agreement (if any). Violations of these policies may lead to immediate termination of employment in the Company’s sole discretion. As required by law, this offer is subject to satisfactory proof of your right to work in the United States.

 

We look forward to having you join us at the Company. If you wish to accept this offer under the terms and conditions described above please sign and date this document and return it to Human Resources by July 20, 2016. If you have any questions about the terms of this offer, please do not hesitate to call us to discuss at your earliest convenience.

 



 

Sincerely,

 

 

 

/s/ Sameer Dholakia

 

Sameer Dholakia, CEO

 

SendGrid, Inc.

 

 

 

I have read this offer and I understand and accept its terms.

 

 

/s/ Leandra Fishman

 

Leandra Fishman

 

 

 

Date: 7/18/2016

 

 



 

EXHIBIT A

 

COMPENSATION

 

Your starting semi-monthly base salary will be $9,375, which is equivalent to $225,000 on an annualized basis. Your annual sales commission target will be $135,000. You will also be eligible to participate in our Executive Bonus Plan with an annual target bonus of $90,000, for a potential annualized compensation of $450,000. The variable components will be pro-rated for the 2016 calendar year. Your compensation is subject to adjustment from time to time in accordance with the company’s compensation policies.

 

In addition, the Company will cover travel and other reasonable expenses associated with the commute to and from your home office. This includes access to a company-leased Denver-based apartment rental.

 

You will also be eligible to participate in the benefit programs the Company makes available to its employees. Your eligibility and participation will be subject to the terms of the benefit programs and policies, and all benefits are subject to change or elimination at the sole discretion of the Company.

 



 

SendGrid, Inc.

 

2016 Executive Bonus Plan

 

SendGrid, Inc. Confidential

 



 

SendGrid, Inc.
2016 Executive Bonus Plan
Adopted Effective January 1, 2016

 

Program Objectives

 

We believe it is important to tie our compensation to individual and company performance. The 2016 Executive Bonus Plan (the “ Bonus Plan ”) provides an opportunity whereby certain employees (a “ Participant ”) may be eligible to receive a bonus (a “ Bonus ”) based on a combination of the Participant’s Individual Performance and the Company’s Performance.

 

Eligibility

 

Participants are eligible to participate in the Bonus Plan as determined by the Chief Executive Officer. The Participant must be employed and in good standing on the date of the Target Bonus payment to be eligible for any portion of the Target Bonus and must execute the Participation Agreement attached hereto as Exhibit A.

 

Bonus Plan Cycle

 

The effective date of this Bonus Plan is January 1, 2016. Participant’s Target Bonus for the full calendar year shall be as defined in the Participant’s Participation Agreement. The Target Bonus will be paid on a regular payroll cycle no more than 75 calendar days following the end of the Bonus Period. For purposes of this Bonus Plan, the Bonus Period is defined as the completion of calendar year 2016.

 

Weighting of Awards

 

Eligibility to receive a Participant’s Target Bonus is based upon a combination Individual Performance, weighted at 20% of Target Bonus, and the Company’s Performance (defined below), weighted at 80% of Target Bonus for the Bonus Period.

 

I ndividual Performance

 

The Individual Performance Achievement of the potential Target Bonus shall consist of demonstrable activity of both competencies and responsibilities resulting in the following ratings.

 



 

Rating

 

Description

 

% of Target Bonus

 

1 - Insufficient

 

Objectives were not achieved and the outcomes were poor

 

0%

 

2 - Below Expectations

 

Objectives were not quite achieved and the results were below expectations

 

<10%

 

3 - Good

 

Objectives were achieved and the results were what was expected

 

20%

 

4 - Great

 

Objectives were achieved and the results were beyond expectations

 

Discretionary

 

5 - Amazing

 

Objectives were achieved and the results were truly outstanding

 

Discretionary

 

 

Company Performance

 

The Company Performance Achievement of the potential Target Bonus shall consist of an array of metrics that reflect our Enduring Measures of Success to include: 1. Customer Satisfaction, 2. Employee Engagement, 3. Innovation, 4. Revenue growth and 5. Profitability. Annualized recurring revenue (“ ARR ”) is calculated by multiplying the Q4 2016 recurring revenue by four (4).

 

Enduring Measure Connection

 

Metric 2016 Plan ($MM)

 

% of Target
Bonus @ 100%
Achievement

 

Financial

 

Revenue (GAAP)

 

$

76.5

 

12.50

%

Financial

 

ARR (Q4)

 

$

85.5

 

12.50

%

Financial

 

2H Adjusted NI

 

$

0.5

 

25

%

Customer

 

NPS

 

42

 

10

%

Employee Engagement

 

Engagement%

 

75

 

10

%

Innovation

 

ARR from New Products

 

$

8.3MM

 

10

%

 



 

2016 Revenue Payout Matrix

 

2016 Revenue Goals ($MM)

 

 

 

Range

 

Low

 

Base

 

High

 

Revenue (GAAP)

 

(20)% to +20%

 

$

61.20

 

$

76.50

 

$

91.80

 

ARR (Q4)

 

(10)% to +10%

 

$

76.95

 

$

85.50

 

$

94.05

 

 

 

 

 

 

Revenue (GAAP)

 

 

 

 

 

Low

 

Base

 

High

 

 

 

Low

 

80

%

85

%

90

%

ARR (Q4)

 

Base

 

85

%

100

%

105

%

 

 

High

 

90

%

115

%

120

%

 

Other Variable Comp Elements Payout Matrix

 

 

 

 

 

 

 

Payout Targets

 

 

 

Goal

 

Base Plan

 

Low (-20%)

 

Base

 

High (+20%)

 

2H Adjusted NI (MM)

 

$

0.50

 

$

0.40

 

$

0.50

 

$

0.60

 

NPS

 

42

 

34

 

42

 

50

 

Engagement

 

75

 

60

 

75

 

90

 

 

Goal

 

 

 

Payout %

 

 

 

2H Adjusted NI

 

80

%

100

%

120

%

NPS

 

80

%

100

%

120

%

Engagement

 

80

%

100

%

120

%

 

Goal

 

Base Payout

 

Payout % of Total Variable in 2016

 

2H Adjusted NI

 

25

%

20

%

25

%

30

%

NPS

 

10

%

8

%

10

%

12

%

Engagement

 

10

%

8

%

10

%

12

%

 



 

Zero (0) payout below 80% achievement and capped payout above 120% achievement. If results fall between levels then the respective Bonus percentage will be calculated based on linear interpolation.

 

Miscellaneous

 

This Bonus Plan supersedes any and all other bonus plans that may have been discussed prior to the effective date of this Bonus Plan.

 

Eligible employees starting in their position after July 1st may or may not have their Target Bonus prorated. Determination of proration is at the discretion of the CEO and/or the Company’s Board of Directors.

 

Participants who were on a leave of absence 30 or more days during during the Bonus Plan period are eligible for a prorated Target Bonus consideration.

 

The Company reserves the right to amend, discontinue or rescind this Bonus Plan at any time and /or add, reduce or limit the amount of any Bonus payments or to limit the number of participants any time such actions are deemed appropriate and in the best interest of the Company.

 

The Bonus Plan is intended to provide a financial incentive to Participants and is not intended to confer any rights to continued employment upon Participants whose employment will remain at-will and subject to termination by either the Company or Participant at any time, with or without cause or notice.

 

The rights and obligations of a Participant under the Bonus Plan will be governed by and interpreted, construed and enforced in accordance with the laws of the State of Colorado without regard to its or any other jurisdiction’s conflicts of laws principles.

 

The Bonus Plan and the executed Participation Agreement set forth all of the agreements and understandings between the Company and Participant with respect to the subject matter hereof, and supersedes and terminates all prior agreements and understandings between the Company and Participant with respect to the subject matter hereof.

 



 

EXHIBIT A

 

SendGrid, Inc.
2016 Executive Bonus Plan
Participation Agreement

 

This Participation Agreement (the “ Participation Agreement ”) is entered into by and between SendGrid, Inc., a Delaware corporation (the “ Company ”), and the undersigned employee of the Company (“ Participant ”), as of the date set forth below.

 

This Participation Agreement is attached to a copy of the 2016 Executive Bonus Plan (the “ Plan ”). Each capitalized term not defined in this Participation Agreement will have the meaning ascribed to such term in the Plan.

 

The Board has designated you a Participant in the Plan. You are encouraged to read the Plan in its entirety. The final decision as to whether you have earned any payments under the Plan will be made by the Board or the Representative in accordance with the Plan.

 

Participant’s total Target Bonus for 2016 shall be $90,000 (“ Target Bonus ”).

 

In consideration of your eligibility to participate in the Plan as a Participant, a benefit to which you are not otherwise entitled, you hereby agree, to the greatest extent permitted by law, and to the extent applicable, to the following terms of the Plan:

 

1.                                       You must continue to be a satisfactory performer as determined by your manager.

 

2.                                       This Participation Agreement does not constitute a guarantee of a specific period or term of employment and does not constitute an employment contract. Your employment remains “at will”, and you continue to be subject to all company policies and guidelines.

 

3.                                       SendGrid reserves the right to change, eliminate or replace all or parts of the Plan at will at any time, with or without notice, to adjust targets, objectives, to terminate the Plan or make any other adjustments and changes deemed appropriate.

 

4.                                       This Participation Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Participation Agreement and the Participation Agreement shall not be modified or rescinded, except by a written Participation Agreement signed by SendGrid, Inc. and you. The provisions of this Agreement supersede all prior and contemporaneous discussions, writings and understandings of the parties with respect to the subject matter of this Participation Agreement.

 

To indicate your acceptance of your designation as a Participant in the Plan, please sign a copy of this Participation Agreement in the space indicated below.

 

/s/ Leandra Fishman

 

/s/ Sameer Dholakia

Leandra Fishman

Sameer Dholakia, CEO for SendGrid, Inc.

 

 

Date: 7/18/2016

Date: 8/23/2016

 




Exhibit 10.11.5

 

August 28, 2016

 

Pattie Money

 

Re: Offer of Employment with SendGrid, Inc.

 

Dear Pattie,

 

SendGrid, Inc. (the “ Company ”) is very pleased to offer you employment as Chief People Officer beginning on October 3, 2016. This letter states the complete terms and conditions of your offer, subject to a satisfactory result of references and a background check. If you agree to these terms and conditions, please sign at the end of this letter in the space indicated.

 

1.                                       Duties . As Chief People Officer, you will serve as a key member of the executive team and be responsible for owning our people operations strategy and managing a highly functioning team. You will report to Sameer Dholakia, CEO, who will be primarily responsible for evaluating your performance. The Company may change your position, title, duties, and place of employment from time to time as it deems necessary.

 

2.                                       Compensation and Benefits . Beginning on October 3, 2016, you will be compensated according to the Compensation Plan attached hereto as Exhibit A, and receive benefits according to our enrollment eligibility process. The Company may modify your compensation and benefits from time to time in its sole discretion. In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 0.50% of the Company’s common stock based upon the fully diluted shares outstanding on your start date. The option will be subject to the terms, conditions and vesting applicable to options granted under the Company’s 2012 Equity Incentive Plan, as described in that Plan and the applicable grant award documents. One-fourth of the options vest one year after the vesting commencement date; the balance of the options vest in a series of 36 successive equal monthly installments.

 

3.                                       Company Agreements . One of the conditions of your employment with the Company is the maintenance of the confidentiality of the Company’s proprietary and confidential information. In your work for the Company, you will not use or disclose any confidential information, including trade secrets, of any former company or other person to whom you have an obligation of confidentiality. Rather, you will be expected to use only that information that is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain or which is otherwise provided or developed by the Company. While working for the Company from your personal residence or elsewhere, you also should not use any unpublished documents or property belonging to any former Company or other person to whom you have an obligation of confidentiality. During our discussions about your job duties, you assured us that you would be able to perform those duties within the guidelines described above. This offer is conditioned upon you executing the Company’s Employee Proprietary Information and Inventions Agreement upon commencement of your employment.

 



 

4.                                       At-Will Employment . Your employment with the Company will be “at-will.” This means that either you or the Company may terminate your employment at any time, with or without cause, with or without notice, and for any reason or no reason. Any contrary representations or agreements which may have been made to you are superseded by this offer. The “at-will” nature of your employment described in this offer letter shall constitute the entire agreement between you and the Company concerning the nature and duration of your employment. Though your job duties, title, compensation, and benefits may change over time, none of these events change our agreement that you are an “at-will” employee. In addition, the fact that the rate of your salary or other compensation is stated in units of years or months and that your vacation and sick leave accrue annually or monthly does not alter the at-will nature of your employment, and does not mean and should not be interpreted to mean that you are guaranteed employment for any period time. The “at-will” term of your employment with the Company can only be changed in a writing signed by you and the CEO of the Company. In addition, if a Change in Control occurs and as of, or within twelve (12) months after, the effective time of such Change in Control your employment terminates due to an involuntary termination other than for Cause or due to a voluntary termination with Good Reason, then, as of the date of termination, the vesting and exercisability of your unvested options shall be accelerated in full immediately prior to such termination. “ Cause ” shall include your involvement in fraud, embezzlement or criminal activity. “ Good Reason ” shall include the assignment to you of any duties or responsibilities that results in a material diminution in your function or a material reduction by the Company in your annual base salary.

 

5.                                       Exempt Employment . The Company’s regular working day is from 8 a.m. to 5 p.m., Monday through Friday. As an exempt, salaried employee, you will be expected to work additional hours as required by the nature of your work assignments.

 

6.                                       Miscellaneous . This letter and any other documents subsequently signed by you constitute the complete and exclusive terms and conditions of your employment and supercede any and all prior agreements, whether written or oral. This agreement will be governed by and construed according to the laws of the State of Colorado. By joining the Company, you are agreeing to abide by all laws and regulations, all the Company policies and procedures and that you are bound by the terms and conditions of the Company’s Business Protection Agreement (if any). Violations of these policies may lead to immediate termination of employment in the Company’s sole discretion. As required by law, this offer is subject to satisfactory proof of your right to work in the United States.

 

We look forward to having you join us at the Company. If you wish to accept this offer under the terms and conditions described above please sign and date this document and return it to Human Resources by August 29, 2016. If you have any questions about the terms of this offer, please do not hesitate to call us to discuss at your earliest convenience.

 



 

Sincerely,

 

 

 

/s/ Sameer Dholakia

 

Sameer Dholakia, CEO SendGrid, Inc.

 

 

 

I have read this offer and I understand and accept its terms.

 

 

/s/ Patricia J. Money

 

Patricia J. Money

 

 

 

Date: 8/29/2016

 

 



 

EXHIBIT A

 

COMPENSATION

 

Your starting semi-monthly base salary will be $9,791.66, which is equivalent to $235,000 on an annualized basis. You will also be eligible to participate in our Executive Bonus Plan with an annual target bonus of 30% of earned base salary. Your compensation is subject to adjustment from time to time in accordance with the company’s compensation policies.

 

In addition, the Company will offer reimbursement of relocation expenses for your move to the Denver office up to a maximum reimbursement of $35,000. We will only reimburse for reasonable expenditures which are supported by valid receipts provided promptly to the company.

 

You will also be eligible to participate in the benefit programs the Company makes available to its employees. Your eligibility and participation will be subject to the terms of the benefit programs and policies, and all benefits are subject to change or elimination at the sole discretion of the Company.

 




Exhibit 10.11.6

 

 

September 23, 2015

 

Steve Sloan

 

Re: Offer of Employment with SendGrid, Inc.

 

Dear Steve,

 

SendGrid, Inc. (the “ Company ”) is very pleased to offer you employment as Chief Product Officer beginning on October 26, 2015. This letter states the complete terms and conditions of your offer, subject to a satisfactory result of references and a background check. If you agree to these terms and conditions, please sign at the end of this letter in the space indicated.

 

1.             Duties. As Chief Product Officer, you will serve as a key member of the executive team and be responsible for owning a multi-year product strategy, while managing a highly functioning team.  You will report to Sameer Dholakia, CEO, who will be primarily responsible for evaluating your performance. The Company may change your position, title, duties, and place of employment from time to time as it deems necessary.

 

2.             Compensation and Benefits. Beginning on October 26, 2015, you will be compensated according to the Compensation Plan attached hereto as Exhibit A , and receive benefits according to our enrollment eligibility process. The Company may modify your compensation and benefits from time to time in its sole discretion. In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 1.11% of the Company’s common stock based upon the fully diluted shares outstanding on your start date. The option will be subject to the terms, conditions and vesting applicable to options granted under the Company’s 2012 Equity Incentive Plan, as described in that Plan and the applicable grant award documents.

 

3.             Company Agreements. One of the conditions of your employment with the Company is the maintenance of the confidentiality of the Company’s proprietary and confidential information. In your  work for the Company, you will not use or disclose any confidential information, including trade secrets, of any former company or other person to whom you have an obligation of confidentiality. Rather, you will  be expected to use only that information that is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain or which is otherwise provided or developed by the Company. While working for the Company from your personal residence or elsewhere, you also should not use any unpublished documents or property belonging to any former Company or other person to whom you have an obligation of confidentiality. During our discussions about your job duties, you assured us that you would be able to perform those duties within the guidelines described above.  This offer is conditioned upon you executing the Company’s Employee Proprietary Information and Inventions Agreement upon commencement of your employment.

 

4.             At-Will  Employment.  Your  employment  with  the  Company  will  be  “at-will.”   This  means that either you or the Company may terminate your employment at any time, with or without cause, with or without notice, and for any reason or no reason. Any contrary representations or agreements which may have been made to you are superseded by this offer. The “at will” nature of your employment described in this offer letter shall constitute the entire agreement between you and the Company concerning the nature and duration of your employment.  Though your job duties, title, compensation,  and benefits may change over time, none of these events change our agreement that you

 

1401 Walnut St. Ste. 500, Boulder, CO 80302 • 303.552.0653 • FAX 720.398.8212
www.sendgrid.com

 



 

are an “at will” employee. In addition, the fact that the rate of your salary or other compensation is stated in units of years or months and that your vacation and sick leave accrue annually or monthly does not alter the at-will nature of your employment, and does not mean and should not be interpreted to mean that you are guaranteed employment for any period time. The “at will” term of your employment with the Company can only be changed in a writing signed by you and the CEO of the Company. In addition, if a Change in Control occurs and as of, or within twelve (12) months after, the effective time of such Change in Control your employment terminates due to an involuntary termination other than for Cause or due to a voluntary termination with Good Reason, then, as of the date of termination, the vesting and exercisability of your unvested options shall be accelerated in full immediately prior to such termination. “Cause” shall include your involvement in fraud, embezzlement or criminal activity. “Good Reason” shall include the assignment to you of any duties or responsibilities that results in a material diminution in your function or a material reduction by the Company in your annual base salary or a relocation of your principal workplace by more than 50 miles.

 

 

5.             Exempt Employment. The Company’s regular working day is from 8 a.m. to 5 p.m., Monday through Friday. As an exempt, salaried employee, you will be expected to work additional hours as required by the nature of your work assignments.

 

6.             Miscellaneous. This letter and any other documents subsequently signed by you constitute the complete and exclusive terms and conditions of your employment and supercede any and all prior agreements, whether written or oral. This agreement will be governed by and construed according to the laws of the State of Colorado. By joining the Company, you are agreeing to abide by all laws and regulations, all the Company policies and procedures and that you are bound by the terms and conditions of the Company’s Business Protection Agreement (if any). Violations of these policies may lead to immediate termination of employment in the Company’s sole discretion. As required by law, this offer is subject to satisfactory proof of your right to work in the United States.

 

We look forward to having you join us at the Company. If you wish to accept this offer under the terms  and conditions described above please sign and date this document and return it to Human Resources by September 30, 2015. If you have any questions about the terms of this offer, please do not hesitate to call us to discuss at your earliest convenience.

 

Sincerely,

 

/s/ Sameer Dholakia

 

Sameer Dholakia, CEO

 

SendGrid, Inc.

 

 

I have read this offer and I understand and accept its terms.

 

/s/ Steve Sloan

 

Steve Sloan

 

 

 

Date: 9/28/2015

 

 



 

E XHIBIT  A

 

C OMPENSATION

 

Your starting semi-monthly base salary will be $10,833.33, which is equivalent to $260,000 on an annualized basis. Your target bonus will be $65,000 for a potential annual compensation of $325,000. Your salary is subject to adjustment from time to time in accordance with the company’s compensation policies.

 

You will also be eligible to participate in the benefit programs the Company makes available to its employees. Your eligibility and participation will be subject to the terms of the benefit programs and policies, and all benefits are subject to change or elimination at the sole discretion of the Company.

 



 

Your Employee

 

BENEFITS

 

2015

 

 

1



 

MEDICAL

 

SendGrid’s medical plan offers 3 plans to choose from. The HMO plan utilizes a large network of doctors and hospitals who have agreed to provide services at discounted rates. You are covered on this plan ONLY if you use network providers. The PPO Hybrid plan includes benefits when you use the network, and you will receive the highest level of benefits offered by the plan at the lowest cost to you. However, you are not required to use the network. You always have the complete freedom to select any provider whenever you need care. The non-network benefits are lower and your out-of-pocket costs are higher. Finally, the HSA plan allows you to open a Health Savings Account and set aside money pre-tax for your future medical care costs.

 

CIGNA

EFFECTIVE DATE: 1/1/2015—12/31/2015

 

 

 

HMO

 

PPO

 

HSA

 

 

 

In Network

 

Non Network

 

In Network

 

Non Network

 

In Network

 

Non Network

 

Calendar Year Deductible:

 

None

 

 

 

$1,000 Single $2,000 Family

 

$2,000 Single $4,000 Family

 

$2,500 Single $5,000 Family

 

$5,000 Single $10,000 Family

 

Employee Coinsurance:

 

0%

 

 

 

20%

 

40%

 

$0

 

40%

 

Calendar Year Out-of-Pocket Max:

 

$2,500 Individual $5,000 Family Includes Copays

 

 

 

$3,500 Single $7,000 Family Includes Copays and Deductible

 

$6,500 Single $13,000 Family Includes Deductible

 

$3,000 Single $9,000 Family Includes Copays and Deductible

 

$ 6,000 Single $18,000 Family Includes Deductible

 

Physician Office Visit:

 

$0 Preventive $25 Copay

 

No coverage out of network

 

$0 Preventive $30 Copay

 

No Coverage Preventive Plan pays 60% after deductible

 

$0 Preventive Plan pays 100% after deductible

 

No Coverage Preventive Plan pays 60% after deductible

 

Specialist Office Visit:

 

$0 Preventive $50 Copay

 

 

 

$0 Preventive $60 Copay

 

No coverage Preventive Plan pays 60% after deductible

 

$0 Preventive Plan pays 100% after deductible

 

No Coverage Preventive Plan pays 60% after deductible

 

Inpatient Hospital:

 

$500 Per occurrence deductible

 

 

 

Plan pays 80% after deductible

 

Plan pays 60% after deductible

 

Plan pays 100% after deductible

 

Plan pays 60% after deductible

 

Outpatient Hospital:

 

$500 Per occurrence deductible

 

 

 

Plan pays 80% after deductible

 

Plan pays 60% after deductible

 

Plan pays 100% after deductible

 

Plan pays 60% after deductible

 

Emergency Room:

 

$100 Copay

 

$100 Copay

 

$150 Copay

 

$150 Copay

 

Plan pays 100% after deductible

 

Plan pays 60% after deductible

 

Urgent Care:

 

$50 Copay

 

No coverage out of network

 

$50 Copay

 

Plan pays 60% after deductible

 

Plan pays 100% after deductible

 

Plan pays 60% after deductible

 

PRESCRIPTION DRUGS

 

 

 

 

 

 

 

 

 

HSA Copays apply after deductible is met

 

Generic Brand:

 

$10 Copay

 

 

 

$15 Copay

 

 

 

$10 copay

 

 

 

Preferred Brand:

 

$30 Copay

 

 

 

$40 Copay

 

 

 

$30 copay

 

 

 

Non-Preferred Brand:

 

$50 Copay

 

No coverage out of network

 

$60 Copay

 

No coverage out of network

 

$60 copay

 

No coverage out of network

 

Mail Order:

 

2 times copay for 90 day supply

 

 

 

2.5 times copay for 90 day supply

 

 

 

2 times copay for 90 day supply

 

 

 

Lifetime Maximum Benefit:

 

No Limit

 

No Limit

 

No Limit

 

No Limit

 

No Limit

 

No Limit

 

CONTRIBUTIONS:

 

PER PAY CHECK

PER PAY CHECK

 

PER PAY CHECK

 

Employee Only:

 

$54.76

$45.47

 

$0.00

 

Employee + Spouse:

 

$114.99

$95.48

 

$0.00

 

Employee + Child(ren):

 

$104.04

$86.39

 

$0.00

 

Family:

 

$164.28

$136.40

 

$0.00

 

 

2


 

ELIGIBILITY

 

If you are a regular full time employee working 30 hours a week or more, you are eligible for all benefits outlined in this summary. For Medical, Dental, and Vision eligible employees may elect to cover a spouse and/or dependent child covered up to age 26 (even if married or non-student). Medical, dental, vision, life, and disability benefits are effective the 1st day of the month following date of hire.  AFLAC benefits are effective on the 1st day of the month following 30 days from your date of hire.

 

HEALTH SAVINGS ACCOUNT

 

Health Savings Accounts are portable, tax-advantaged savings accounts that can be compared to a medical IRA. An HSA is designed to help offset the deductible costs of the Medical Plans.

 

WHO CAN OPEN AN HSA?

 

Any adult can contribute to an HSA if they:

 

·                   Have coverage under an HSA —qualified “high deductible health plan” (HDHP)

 

·                   Have no other non-HSA insurance policy coverage including coverage under their spouses Flexible Spending Account.

 

·                   Are not enrolled in Medicare

 

·                   Cannot be claimed as a dependent on someone else’s tax return

 

HOW MUCH CAN I CONTRIBUTE?

 

If your HSA qualified coverage begins in any month other than January, you can make the full HSA contribution for the calendar year as long as you keep your HSA qualified coverage through the end of the following calendar year.

 

 

 

SendGrid’s 2015
HSA Contribution

 

2015—
Maximum
Employee
Contribution

 

Employee Only

 

$

500

 

$

2,850

 

Employee & Family Includes spouse only or children only

 

$

500

 

$

6,150

 

 

HSA PRO RATE

 

The SendGrid HSA contribution will be prorates for the number  of months you are covered under the plan.

 

HOW MUCH PREMIUM DO I SAVE?

 

If you enroll in the HSA plan, you pay no premiums each month.

 

ANNUAL PREMIUM SAVED

 

 

 

Compared
to HMO

 

Compared
to PPO

 

Employee Only

 

$

1,314.22

 

$

1,091.16

 

Employee & Spouse

 

$

2,759.86

 

$

2,291.52

 

Employee & Child(ren)

 

$

2,497.03

 

$

2,073.26

 

Employee & Family

 

$

3,942.65

 

$

3,273.58

 

 

ADVANTAGES

 

SECURITY — Your High Deductible Health Plan protects your financial future from catastrophic medical events.

 

AFFORDABILITY — HSA High Deductible Health Plans cost less, thus enabling you to purchase lower cost medical insurance coverage.

 

PORTABILITY — Accounts belong to the account holder.  You can keep you HSA if you change jobs, change your medical coverage, change your marital status or mover to another state.

 

OWNERSHIP — Funds remain in the account from year to year, just like an IRA.  There is no “use it or lose it” .

 

TAX SAVINGS — An HSA provides you triple tax savings:

 

·                   Tax deductions when you contribute to your account

 

·                   Tax-free earnings on funds maintained in the account

 

·                   Tax-free withdrawals for qualified medical expenses.

 

3



 

DENTAL

 

Staying healthy includes obtaining quality dental care for you and your family. SendGrid’s dental plan allows you to use an extensive network of providers and offers flexibility based upon where you choose to access care. You are covered at the highest level if you select dental care through this network, but have the option  to obtain care outside the network at a higher cost to you.

 

DELTA DENTAL

EFFECTIVE DATE: 1/1/2015—12/31/2015

 

 

 

DENTAL PLAN

 

 

 

PPO
Providers

 

Premier
Providers

 

Non
Network

 

Calendar Year Deductible:

 

$50 Single
$150 Family

 

Calendar Year Max Benefit:

 

$1,500 per family member

 

Preventive Care:

 

Plan pays 100%- does not apply to maximum

 

Plan pays 100%- applies to maximum

 

Plan pays 100% of allowed amount applies to maximum

 

Basic Services:

 

Plan pays 80% after deductible

 

Plan pays 80% after deductible

 

Plan pays 80% of allowed amount after deductible

 

Major Services:

 

Plan pays 50% after deductible

 

Plan pays 50% after deductible

 

Plan pays 80% of allowed amount after deductible

 

Orthodontic Treatment For children to age 19:

 

Plan pays 50%

 

Plan pays 50%

 

Plan pays 50% of allowed amount

 

CONTRIBUTIONS:

 

PER PAY CHECK

 

Employee Only:

 

$3.66

 

Employee + Spouse:

 

$6.85

 

Employee + Child(ren):

 

$8.13

 

Family:

 

$12.92

 

 

VISION

 

SendGrid offers vision coverage through VSP to help you pay for your routine vision services and supplies. You can see any vision provider you choose, but you’ll enjoy significant savings when you use VSP providers. You pay only a small copayment for most network services and supplies, and the plan pays the rest. Plus VSP providers file claims for you. There is an allowance per service for out of network providers, which you would be reimbursed.

 

VISION SERVICE PLAN (VSP)

EFFECTIVE DATE: 1/1/2015—12/31/2015

 

 

 

VISION PLAN

 

 

 

In Network

 

Non Network

 

Eye Exam: Covered every 12 months

 

$20 Copay

 

Up to $50 reimbursement

 

Lenses: Covered every 12 months

 

$20 Copay

 

$50 to $125 reimbursement depending on lenses type

 

Lens Options: Standard Progressive- Premium Progressive- Custom Progressive-

 

$50 $80-$90 $120-$160

 

$50 to $125 reimbursement depending on lenses type

 

Frames:

 

$130 allowance; 20% off amount over $130

 

Up to $70 reimbursement

 

Contact Lenses: In lieu of Glasses Only

 

$130 allowance

 

Up to $105 reimbursement

 

Glasses and Sunglasses

 

30% off additional glasses

 

 

 

Laser Vision Correction

 

5%-15% discount

 

None

 

CONTRIBUTIONS:

 

PER PAY CHECK

 

Employee Only:

 

$0.98

 

Employee + Spouse:

 

$1.57

 

Employee + Child(ren):

 

$1.61

 

Family:

 

$2.59

 

 

4



 

SHORT TERM DISABILITY (STD)

 

SendGrid provides a STD benefit in case you are unable to perform your job due to illness or injury unrelated to your work. Your STD benefit is based on your pay. You will begin to receive the benefit after the waiting period, and you will only receive the benefit while you are unable to perform your job or until the benefit duration has expired.

 

LONG TERM DISABILITY (LTD)

 

If you are unable to perform your job for a continuous 90-day period due to illness or injury, your LTD benefit will take effect. The benefit of the plan is summarized in the table to the right. LTD benefits are subject to pre-existing condition limits, and benefits are reduced if the disability begins after age 60. Disability benefits are payable without taxes if you elect to include the premiums in your taxable income.

 

BASIC LIFE AND AD&D

 

SendGrid provides Life and Accidental Death and Dismemberment insurance to all employees in the amount of 2 times your salary.

 

VOLUNTARY LIFE INSURANCE

 

You can purchase additional Life for yourself and your dependents. The AD&D benefit can be purchased separately from the Life coverage. If you choose to apply for Voluntary Life or AD&D insurance coverage (or increase your original amount) during a subsequent enrollment period, you and your dependents will be subject to medical underwriting.

 

AFLAC

 

CRITICAL ILLNESS PLAN - A group critical illness plan helps prepare you for the added costs of battling a specific critical illness.

 

ACCIDENT PLAN — An accident insurance plan provides benefits to help cover the costs associated with unexpected bills. For new hires, the start date for AFLAC benefits differs from the other benefits offered through SendGrid.

 

HARTFORD LONG & SHORT TERM DISABILITY

 

 

 

SHORT TERM
DISABILITY

 

LONG TERM
DISABILITY

 

Benefit Amount:

 

66 2/3% of your weekly salary

 

66 2/3% of your monthly salary

 

Maximum Benefit:

 

$2,300 per week

 

$10,000 per month

 

Benefit Waiting Period:

 

8 days for sickness or accident

 

180 days

 

Benefit Duration:

 

25 weeks

 

Social Security Normal Retirement Age

 

 

HARTFORD LIFE AND AD&D

 

Life Insurance Benefit Amount:

 

2 times your annual salary to $500,000 maximum

 

Accidental Death & Dismemberment:

 

Same as basic life

 

Age reductions:

 

Reduces by 35% at age 65, 70, 75 and 25% at age 80, 85, 90, 95

 

 

HARTFORD VOLUNTARY LIFE AND AD&D

 

 

 

Employee

 

Spouse

 

Child

 

Insurance Schedules:

 

$10,000 Increments

 

$5,000 Increments

 

15 days to 6 months $100 6 months to age 19 $10,000

 

Guarantee Issue for Newly Eligible:

 

Lesser of $200,000 or 3 times salary

 

$30,000

 

$10,000

 

Overall Benefit Maximum:

 

Lesser of $500,000 or 5 times salary

 

$150,000 or 50% of employee amount

 

$10,000

 

Stand Alone Accidental Death and Dismemberment

 

$10,000 increments not to exceed 1 times salary

 

No coverage

 

No coverage

 

 

5



 

FLEXIBLE SPENDING ACCOUNT

 

Flexible Spending Accounts (FSAs) allow you to set aside pre-tax dollars from each paycheck to pay for out-of-pocket healthcare and dependent care expenses.

 

MEDICAL EXPENSE ACCOUNT- Each year, you can contribute up to $2,500 to the medical account. Then, you draw on your contributions throughout the year to pay for eligible expenses. You don’t pay federal taxes on your FSA contributions or reimbursements. Over the Counter Medications are NOT eligible for reimbursement under the Medical Flexible Spending Account without a Doctor prescription. If you participate in the HDHP/ H.S.A. plan  with CIGNA you can contribute to a Limited purpose FSA. This plan is limited to only Dental and Vision expenses ONLY.

 

DEPENDENT CARE ACCOUNT- Each year you can elect to redirect up to $2,500 if you are married filing a separate return or up to $5,000 if you are single or married filing a joint return.

 

TRANSPORTATION ACCOUNT- Employees may also elect the Transportation FSA to use pre-tax funds to pay for Transit Passes or Vanpooling up to $130 per month. For qualified parking expenses the limit is $250 per month.

 

The plans are subject to the IRS “ use it or lose it ” rules. Please carefully estimate your annual elections to avoid losing any of your elected amount at the end of the year.

 

CHANGE IN FAMILY STATUS

 

All benefit selections are binding except in the event you have a “change in family status”. If one of these situations occurs, you have 31 days to notify the group administrator and complete the appropriate paperwork. If you do not make the change within the 31 days following the event, your next opportunity to make a change will occur during the plan’s  open enrollment period.  Examples of status changes include:

 

·             Marriage or Divorce

 

·             Birth or Death of dependent

 

·             Adoption

 

·             Loss of Eligibility for insurance

 

·             Spouse’s employment or termination of employment

 

·             Unpaid leave of absence of employee or spouse

 

·             Reduction or Increase in hours worked from Part Time to Full Time

 

·             Change in residence that affects eligibility

 

6



 

HEALTH ADVOCATE

 

Your Health Advocate benefit, provided free by SendGrid, offers features to help you and your family with healthcare- related problems and personal and work/life issues. A medical, benefits or claims expert can help you with complex conditions, find specialists, address eldercare issues, clarify insurance coverage, work on claim denials, help negotiate medical bills and more. This benefit can be used by anyone in your household and your parents or parent-in-laws.

 

ADDITIONAL BENEFITS & PERKS

 

·             401(k) with 4% match

 

All income is subject to 401k withholding

 

·             Stock Options

 

·             PTO Plan

 

·             3 weeks vacation

 

·             9 paid holidays

 

·             1 floating Holiday

 

·             1 community day

 

·             Unlimited sick pay

 

·             Parental leave

 

·             Tuition reimbursement

 

·             Monthly commuting allowance

 

·             Monthly cell phone allowance

 

·             Monthly wellness allowance

 

·             Monthly allowance if waiving medical coverage

 

·             Referral bonuses

 

·             Gifts for birthdays and anniversaries

 

·             Community kitchen

 

·             Free food at local restaurants

 

·             Weekly catered lunch

 

WAIVING HEALTH COVERAGE

 

If you already have current group medical coverage, you may choose to waive or opt out of SendGrid’s group health benefits. To waive coverage you must make an active  election specifying that you decline medical benefits. You will also be asked to provide evidence of other group health  care coverage. Employees who are covered under another group plan and waive health coverage will be given a $250 per month medical waiver benefit and are still eligible to enroll in optional plans and flexible spending accounts.

 

7



 

 

DIRECTORY

 

FOR QUESTIONS
ABOUT

 

CONTACT

 

PHONE #

 

WEB/E-MAIL

Medical

 

CIGNA

 

800-244-6224

 

www.cigna.com

Dental

 

DELTA DENTAL

 

800-610-0201

 

www.deltadentalco.com

Vision

 

VSP

 

800-877-7195

 

www.vsp.com

STD

 

Hartford

 

877-778-1383

 

www.thehartfordatwork.com

LTD

 

Hartford

 

877-778-1383

 

www.thehartfordatwork.com

Life and AD&D

 

Hartford

 

877-778-1383

 

www.thehartfordatwork.com

Flexible Spending Account

 

24HourFlex

 

800-651-4855

 

www.24hourflex.com

Health Savings Account

 

HSA Bank

 

800-357-6246

 

www.hsabank.com

Health Advocate

 

Email— answers@healthadvocate.com

 

866-695-8622

 

www.healthadvocate.com

All of the Above

 

Carol Moran

 

888-795-0300
720-207-2358

 

carol.moran@hubinternational.com

 

Your Employee
Benefits...at a Glance
was
created by:

 

HUB International Insurance Services
1125 17th Street, Suite 900
Denver, CO 80202

Telephone (303) 893 - 0300
Fax (303) 861-8147
www.hubinternational.com

 

 

About This Brochure

 

This is a custom brochure that provides only a highlight of the plans offered to you by your employer and in no way serves as the actual plan description or plan document for the plans. The plan documents will always govern the offered benefits that your employer provides for you. We reserve the right to modify any or all of these plans at anytime.

 

8




Exhibit 10.11.7

 

SendGrid Inc.
929 Pearl Street, Suite 200
Boulder, CO 80302

 

August 8, 2011

 

Michael Tognetti

 

Re: Offer of Employment with SendGrid, Inc.

 

Dear Michael:

 

SendGrid, Inc. (the “ Company ”) is very pleased to offer you employment as VP & General Counsel, beginning on September 6, 2011. This letter states the complete terms and conditions of your offer. If you agree to these terms and conditions, please sign at the end of this letter in the space indicated.

 

1.                                       Duties . As a VP & General Counsel, you will be responsible for making sure SendGrid is operating within the law at all times as well as other duties as assigned. You will report to James Franklin, CEO, who will be primarily responsible for evaluating your performance. The Company may change your position, title, duties, and place of employment from time to time as it deems necessary.

 

2.                                       Compensation and Benefits . Beginning on September 6, 2011 you will be compensated, and receive the benefits, according to the Compensation Plan attached hereto as Exhibit A. The Company may modify your compensation and benefits from time to time in its sole discretion. In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 66,000 shares of the Company’s Common Stock as determined by the Company’s Board of Directors or its Compensation Committee, The exercise price per share will be equal to the fair market value per share of Common Stock on the date the option is granted as determined by the Board of Directors. The option will be subject to the terms, conditions and vesting applicable to options granted under the Company’s 2009 Equity Incentive Plan, as described in that Plan and the applicable grant award documents.

 

3.                                       Company Agreements . One of the conditions of your employment with the Company is the maintenance of the confidentiality of the Company’s proprietary and confidential information. In your work for the Company, you will not use or disclose any confidential information, including trade secrets, of any former company or other person to whom you have an obligation of confidentiality. Rather, you will be expected to use only that information that is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain or which is otherwise provided or developed by the Company. While working for the Company from your personal residence or elsewhere, you also should not use any unpublished documents or property belonging to any former Company or other person to whom you have an obligation of confidentiality. During our discussions about your job duties, you assured us that you would be able to perform those duties within the guidelines described above. Before your start date, you must therefore execute the Company’s Employee Proprietary Information and Inventions Agreement. However, your commencement of employment

 



 

shall constitute acceptance of all the terms and conditions in such Agreement, regardless of whether you have signed it.

 

4.                                       At-Will Employment . Your employment with the Company will be “at-will.” This means that either you or the Company may terminate your employment at any time, with or without cause, with or without notice, and for any reason or no reason. Any contrary representations or agreements which may have been made to you are superseded by this offer. The “at will” nature of your employment described in this offer letter shall constitute the entire agreement between you and the Company concerning the nature and duration of your employment. Though your job duties, title, compensation, and benefits may change over time, none of these events change our agreement that you are an “at will” employee. In addition, the fact that the rate of your salary or other compensation is stated in units of years or months and that your vacation and sick leave accrue annually or monthly does not alter the at-will nature of your employment, and does not mean and should not be interpreted to mean that you are guaranteed employment for any period time. The “at will” term of your employment with the Company can only be changed in a writing signed by you and the Chief Executive Officer of the Company.

 

5.                                       Exempt Employment . The Company’s regular working day is from 8 a.m. to 5 p.m., Monday through Friday. As an exempt, salaried employee, you will be expected to work additional hours as required by the nature of your work assignments.

 

6.                                       Miscellaneous . This letter and any other documents subsequently signed by you constitute the complete and exclusive terms and conditions of your employment and supercede any and all prior agreements, whether written or oral. This agreement will be governed by and construed according to the laws of the State of Colorado. By joining the Company, you are agreeing to abide by all laws and regulations, all the Company policies and procedures and that you are bound by the terms and conditions of the Company’s Business Protection Agreement (if any). Violations of these policies may lead to immediate termination of employment in the Company’s sole discretion. As required by law, this offer is subject to satisfactory proof of your right to work in the United States.

 

We look forward to having you join us at the Company. If you wish to accept this offer under the terms and conditions described above please sign and date this letter and the attached Employee Proprietary Information and Inventions Agreement and return them to me by August 19, 2011. If you have any questions about the terms of this offer, please do not hesitate to call me to discuss our offer at your earliest convenience.

 



 

Sincerely,

 

SendGrid, Inc.

 

By:

/s/ Chad Varra

 

Name: Chad Varra

 

Title: CFO

 

 

I have read this offer and I understand and accept its terms.

 

/s/ Michael Tognetti

 

Date: 8/8/11

 

 



 

EXHIBIT A

 

COMPENSATION

 

Your base salary compensation will be $175,000 per year.

 

You will also be eligible to participate in the benefit programs that SendGrid, Inc. (the “ Company ”) makes available to its employees. Your eligibility and participation will be subject to the terms of the benefit programs and policies, and all benefits are subject to change or elimination at the sole discretion of the Company.

 




Exhibit 10.11.8

 

 

February 18, 2015

 

Craig Kaes

 

Re:                              Offer of Employment with SendGrid, Inc.

 

Dear Craig:

 

SendGrid, Inc. (the “ Company ”) is very pleased to offer you employment as Vice President of Engineering, beginning on March 16, 2015.  This letter states the complete terms and conditions of your offer, subject to a satisfactory result of a background check.  If you agree to these terms and conditions, please sign at the end of this letter in the space indicated.

 

1.                                       Duties .  As Vice President of Engineering, you will direct the delivery of the company’s engineering strategy.  You will also work amongst leadership across the company to establish a highly efficient planning and release process.  You will report to Sameer Dholakla, CEO, who will be primarily responsible for evaluating your performance.  The Company may change your position, title, duties, and place of employment from time to time as it deems necessary.

 

2.                                       Compensation and Benefits .  Beginning on March 16, 2015, you will be compensated according to the Compensation Plan attached hereto as Exhibit A , and receive benefits according to our enrollment eligibility process.  The Company may modify your compensation and benefits from time to time in its sole discretion.  In addition, subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 1% of the Company’s Common Stock as determined by the Company’s Board or Directors or its Compensation Committee.  The exercise price per share will be equal to the fair market value per share of Common Stock on the date the option is granted as determined by the Board of Directors.  The option will be subject to the terms, conditions and vesting applicable to options granted under the Company’s 2012 Equity Incentive Plan, as described in that Plan and the applicable grant award documents.

 

3.                                       Company Agreements .  One of the conditions of your employment with the Company is the maintenance of the confidentiality of the Company’s proprietary and confidential information.  In your work for the Company, you will not use or disclose any confidential information, including trade secrets, of any former company or other person to whom you have an obligation of confidentiality.  Rather, you will be expected to use only that information that is generally known and used by persons with training and experience comparable to your own, which is common knowledge in the industry or otherwise legally in the public domain or which is otherwise provided or developed by the Company.  While working for the Company from your personal residence or elsewhere, you also should not use any unpublished documents or property belonging to any former Company or other person to whom you have an obligation of confidentiality.  During our discussions about your job duties, you assured us that you would be able to perform those duties within the guidelines described above.  This offer is conditioned upon you executing the Company’s Employee Proprietary Information and Inventions Agreement upon commencement of your employment.

 

1401 Walnut St.  Ste.  500, Boulder, CO 80302 · 303.552.0653 · FAX 720.398.8212

www.sendgrld.com

 



 

4.                                       At-Will Employment .  Your employment with the Company will be “at-will.” This means that either you or the Company may terminate your employment at any time, with or without cause, with or without notice, and for any reason or no reason.  Any contrary representations or agreements which may have been made to you are superseded by this offer.  The “at will” nature of your employment described in this offer letter shall constitute the entire agreement between you and the Company concerning the nature and duration of your employment.  Though your job duties, title, compensation, and benefits may change over time, none of these events change our agreement that you are an “at will” employee.  In addition, the fact that the rate of your salary or other compensation is stated in units of years or months and that your vacation and sick leave accrue annually or monthly does not alter the at-will nature of your employment, and does not mean and should not be interpreted to mean that you are guaranteed employment for any period time.  The “at will” term of your employment with the Company can only be changed in a writing signed by you and the CEO of the Company.

 

5.                                       Exempt Employment .  The Company’s regular working day is from 8 a.m.  to 5 p.m., Monday through Friday.  As an exempt, salaried employee, you will be expected to work additional hours as required by the nature of your work assignments.

 

6.                                       Miscellaneous .  This letter and any other documents subsequently signed by you constitute the complete and exclusive terms and conditions of your employment and supercede any and all prior agreements, whether written or oral.  This agreement will be governed by and construed according to the laws of the State of Colorado.  By joining the Company, you are agreeing to abide by all laws and regulations, all the Company policies and procedures and that you are bound by the terms and conditions of the Company’s Business Protection Agreement (if any).  Violations of these policies may lead to immediate termination of employment in the Company’s sole discretion.  As required by law, this offer is subject to satisfactory proof of your right to work in the United States.

 

We look forward to having you join us at the Company.  If you wish to accept this offer under the terms and conditions described above please sign and date this document and return it to Human Resources by February 23, 2015.  If you have any questions about the terms of this offer, please do not hesitate to call us to discuss our offer at your earliest convenience.

 

Sincerely,

 

/s/ Chad Varra

 

Chad Varra, CFO

 

SendGrid, Inc.

 

 

 

I have read this offer and I understand and accept its terms.

 

/s/ Craig Kaes

 

 

 

Date: 2/18/2015

 

 



 

EXHIBIT A

 

COMPENSATION

 

Your starting semi-monthly base salary will be $8,958.33, which is equivalent to $215,000 on an annualized basis.  Your target bonus will be $53,570 for a potential annual compensation of $268,750.

 

You will be eligible to receive a one-time starting bonus in the gross amount of $20,000 to be paid on the first payday after the commencement of your employment with SendGrid.  If your employment terminates for any reason before the two-year anniversary of the commencement of your employment with SendGrid, you will be required to promptly repay a pro-rated share of this starting bonus to SendGrid in an amount equal to one-twenty-fourth (1/24 th ) of the starting bonus multiplied by the difference between twenty-four (24) and the total number of completed calendar months that you were employed by SendGrid.

 

Your salary is subject to adjustment from time to time in accordance with the company’s compensation policies.

 

You will also be eligible to participate in the benefit programs that SendGrid, Inc. (the “Company”) makes available to its employees.  Your eligibility and participation will be subject to the terms of the benefit programs and policies, and all benefits are subject to change or elimination at the sole discretion of the Company.

 




Exhibit 10.12

 

 

Name: Leandra Fishman

Position: SVP Sales & Customer Success

Compensation: Base: $225,000 +Variable: $135,000 = OTE: $360,000

 

2017 Annual Quota

 

$99,759,425

 

Quota

 

Quota

 

Q1

 

Q2

 

Q3

 

Q4

 

Total

 

Cohort—Non Services

 

$

22,111,877

 

$

22,709,497

 

$

22,966,973

 

$

24,161,587

 

$

91,949,934

 

Sales — Non Services

 

$

195,826

 

$

728,832

 

$

1,406,479

 

$

2,149,519

 

$

4,480,656

 

Services

 

$

571,873

 

$

759,179

 

$

920,441

 

$

1,077,342

 

$

3,328,835

 

 

Rate

 

Tiers

 

Multiplier

 

Rate

 

0.00% - 99.99%

 

1.0x

 

0.0013533

 

100.00% - 100.249%

 

4.0x

 

0.0054130

 

100.250% - Max

 

7.0x

 

0.0094728

 

 

Annual Earning Potential (Base + Variable)

 

Pay Category

 

95%

 

100%

 

102%

 

105%

 

Variable

 

$

128,250

 

$

135,000

 

$

152,888

 

$

181,238

 

Base

 

$

225,000

 

$

225,000

 

$

225,000

 

$

225,000

 

Total

 

$

353,250

 

$

360,000

 

$

377,888

 

$

406,238

 

 

I acknowledge this quota in conjunction with the 2017 Incentive Compensation Terms and Conditions.

 

 

 

DocuSigned by:

 

 

Leandra Fishman

 

/s/ Leandra Fishman

 

7/12/2017

Printed Name

 

Signature

 

Date

 




Exhibit 21.1

 

Subsidiaries of SendGrid, Inc.

 

Name of Subsidiary

 

Jurisdiction of Organization

SendGrid UK Limited

 

England and Wales

JCKM, Inc.

 

Delaware

 




Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

The Board of Directors
SendGrid, Inc.:

 

We consent to the use of our report dated August 18, 2017, with respect to the consolidated balances sheets of SendGrid, Inc. as of December 31, 2015 and 2016, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2016, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

 

/s/ KPMG LLP

 

Denver, CO
October 18, 2017

 




Exhibit 99.1

 

October 13, 2017

 

SendGrid, Inc.

1801 California Street, Suite 500

Denver, Colorado 80202

 

Dear Sirs:

 

We, Egg Strategy, Inc. of 909 Walnut Street, Suite 200, Boulder, CO 80302, hereby consent to the filing with the Securities and Exchange Commission of a Registration Statement on Form S-1, and any amendments thereto (the “ Registration Statement ”) of SendGrid, Inc. and any related prospectuses of (i) our name and all references thereto, and (ii) the statements set out in the Schedule hereto. We also hereby consent to the filing of this letter as an exhibit to the Registration Statement.

 

Yours faithfully,

 

 

 

/s/ David A. Trifiletti

 

 

 

David A. Trifiletti

 

General Manager

 

For and on behalf of Egg Strategy, Inc.

 

 

SCHEDULE

 

Quote 1: “67% of consumers between the ages of 13-50 believe that email is essential to their lives and 74% said email is their preferred communication method with companies.”

 

Quote 2: “ According to a 2017 study that we commissioned from Egg Strategy, Inc., a consumer research and brand strategy consulting firm, 67% of consumers between the ages of 13-50 believe that email is essential to their lives and 74% said email is their preferred communication method with companies or brands. In fact, over the next five years, 83% of Generation Z consumers (ages 13-21) expect to increase or maintain their email usage, the most of all generations studied.”