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As filed with the U.S. Securities and Exchange Commission on June 3, 2021
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Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SENTINELONE, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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7372
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99-0385461
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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444 Castro Street, Suite 400
Mountain View, California 94041
(855) 868-3733
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Tomer Weingarten
Chairman of the Board of Directors, President, and Chief Executive Officer
SentinelOne, Inc.
444 Castro Street, Suite 400
Mountain View, California 94041
(855) 868-3733
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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Cynthia Hess
Steven Levine
Ran Ben-Tzur
David A. Bell
Fenwick & West LLP
801 California Street
Mountain View, California 94041
(650) 988-8500
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Efraim Harari
Chief Legal and Trust Officer
SentinelOne, Inc.
444 Castro Street, Suite 400
Mountain View, California 94041
(855) 868-3733
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Richard Kline
Brian Paulson
Latham & Watkins LLP
140 Scott Drive
Menlo Park, California 94025
(650) 328-4600
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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, as amended, or Securities Act, check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 Securities Exchange Act of 1934, as amended.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Smaller reporting company ☐
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Emerging growth company ☒
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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. ☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered
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Proposed Maximum
Aggregate Offering Price(1)(2)
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Amount of
Registration fee
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Class A common stock, $0.0001 par value per share
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$100,000,000
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$10,910
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(1)Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) of the Securities Act.
(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 which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
Preliminary Prospectus (Subject to Completion)
Issued , 2021
SentinelOne, Inc.
Class A Common Stock
SentinelOne, Inc. is offering shares of its Class A 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 per share of our Class A common stock will be between $ and $ .
We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to 20 votes per share and is convertible into one share of Class A common stock. Outstanding shares of Class B common stock will represent approximately % of the voting power of our outstanding capital stock immediately following the completion of this offering, with our directors, executive officers, and beneficial owners of 5% or greater of our outstanding capital stock, and their respective affiliates, holding approximately % of the voting power of our outstanding capital stock immediately following the completion of this offering, assuming no exercise by the underwriters’ of their over-allotment option to purchase additional shares of Class A common stock.
We have applied to list our Class A common stock on the New York Stock Exchange under the symbol “S.”
We are an “emerging growth company” as defined under the federal securities laws and, as such, we have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.
Investing in our Class A common stock involves risks. See the section titled “Risk Factors” beginning on page 20.
PRICE $ A SHARE
(1)See the section titled “Underwriters” for a description of the compensation payable to the underwriters.
At our request, the underwriters have reserved up to 5% of the shares of Class A common stock offered by this prospectus for sale at the initial public offering price through a directed share program. See the section titled “Underwriters—Directed Share Program” for additional information.
We have granted the underwriters the right to purchase up to an additional shares of our Class A common stock to cover over-allotments, if any, at the initial public offering price less the underwriting discount.
The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense
The underwriters expect to deliver the shares of Class A common stock to purchasers on , 2021.
Prospectus dated , 2021
TABLE OF CONTENTS
Through and including , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
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 prepared by or on behalf of us or to which we have referred you. Neither we nor the underwriters take any 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 Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the shares of Class A common stock.
For investors outside the United States: Neither we nor any of the underwriters have taken any action 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. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
FOUNDER LETTER
To Our Potential Stockholders:
In 2013, my childhood friend and I started SentinelOne to solve one of the largest and most critical problems of the digital age: cybersecurity. Cybersecurity has become – and will continue to be – indispensable to protecting our present and future way of life.
As we set out eight years ago to change the way we safeguard our life and work in the digital age, we saw an industry built upon stagnant products, false promises, and limited results. We saw the changing nature of digital infrastructure, the accelerating rise of breaches, and the devastating impacts of cyberattacks on society. The mounting pace of digitization has made securing even the most basic services our daily lives rely upon an exponential challenge. Together, these realities led us to create a new and better approach to this mission-critical problem.
The sheer amount of data, devices, and workloads in today’s enterprise environments make cybersecurity simply too big, too vast, and too fast for humans alone to burden. We knew the solution to this challenge was only to be found in the power of AI and data to devise a new, proactive, and autonomous approach that would be highly scalable.
Over the course of the journey, we have grown tremendously, collectively and individually. As a company, we have our core values which we celebrate and memorialize. Below, I’d like to share my thoughts and philosophy around what guides SentinelOne: who we are, why we are, and what we stand for as a team. I’m excited for you to join us on this journey. These concepts are what ground and guide us in serving our customers and protecting the world’s most important data and infrastructure.
Our Pledge: Be a Force for Good
We exist to be a force for good. People’s most sensitive data lives on computing devices and in the cloud, making cyberattacks one of the biggest threats to society. We pledge to place integrity first and to foster a culture of equality, diversity, and inclusion. We protect all data, we serve all people. We strive for truth, honesty, and transparency in all dealings with our customers, employees, shareholders, partners, and society at large. As a company, we believe being a neutral, unbiased standalone vendor is a key tenant for any company dealing with the security of people’s data in a space that transcends physical boundaries and common governing law.
Our Mission: Keep the World Running
The world is full of criminals, state actors, and other hostile agents who seek to exfiltrate and exploit data to disrupt our way of life. Our mission is to keep the world running by protecting and securing the core pillars of modern infrastructure: data and the systems that store, process, and share information. This is an endless mission as attackers evolve rapidly in their quest to disrupt operations, breach data, turn profit, and inflict damage.
Our Driving Principles
Accountability. Businesses should be held accountable to deliver results as advertised. Our technology does what we say it will do. As both a company and individuals, we assign extremely high value to personal and corporate accountability. In all our dealings with customers, we strive to serve with purpose and delight our customers and other business partners.
Deliver More Value. We exist to challenge the status quo and help our customers simplify their cybersecurity stack. We deliver more value to our customers by eliminating inefficiencies associated with legacy, human-powered solutions. We’re defining and delivering a new age of cybersecurity, built on the foundation of data analytics and AI coupled together to deliver an automated, efficient, enterprise-wide backbone – a central synapse for all enterprise asset protection. We also strive to make cybersecurity streamlined and easy by empowering our ecosystem of partners to deliver advanced security services on top of our platform to ensure resilient infrastructure for companies of all sizes.
Responsible Stewards. The very foundation of security in the digital world is trust. Our customers rely on us to be responsible stewards of their data and to protect it from intrusion and misuse. This means we must constantly innovate to stay ahead of sophisticated attackers.
Responsible Marketing. We market based on the merits of our platform and technology, free of misinformation as to the efficacy of the protection we offer. Deliberately misleading “fear uncertainty and doubt” messages and advertising meant to sway awareness are inconsistent with our principles. We do not lose sight that criminals, state actors, and other hostile adversaries are the real enemy.
Facts, Not Illusions. Our advertising leads with facts, not illusions, allowing truth and reality to guide decisions.
The world is a safer place because of SentinelOne. There remains much to be done to win the cybersecurity battle, and the journey won’t be easy or straightforward. I’m humbled by who we are, what we’ve become, and where we’re going.
We are SentinelOne.
Tomer Weingarten
PROSPECTUS SUMMARY
The following summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our Class A common stock. You should carefully read this prospectus in its entirety before investing in our Class A common stock, including the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Special Note Regarding Forward-Looking Statements,” and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus. Our fiscal year end is January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31. Our fiscal years ended January 31, 2020 and 2021 are referred to herein as fiscal 2020 and fiscal 2021, respectively.
SENTINELONE, INC.
Overview
Cy·ber·at·tack - Any unauthorized attempt to expose, alter, disable, destroy, steal, or gain data.
Cyberattacks have become the output of military-grade, highly resourced, and automated nation-state and cybercrime operations. We envisioned a revolutionary data and artificial intelligence, or AI, paradigm where technology alone could autonomously prevent, detect, and respond to cyberattacks. It is time to fight machine with machine.
We pioneered the world’s first purpose-built AI-powered extended detection and response, or XDR, platform to make cybersecurity defense truly autonomous, from the endpoint and beyond. Our Singularity Platform instantly defends against cyberattacks - performing at a faster speed, greater scale, and higher accuracy than possible from any single human or even a crowd.
Modern society is digital. With digital transformation changing everything, accelerated by the COVID-19 pandemic, organizations have become increasingly susceptible to cyberattacks. Every place where data resides is vulnerable from device to server to the cloud. From healthcare to commerce, education to infrastructure, transportation to manufacturing, financial institutions to government agencies, cyberattacks are one of the biggest threats to global stability and progress. Within milliseconds, services we rely on can cease to operate. Our growing reliance on technology creates an accelerating risk cycle: more devices generate and process more data which result in more opportunities for cybercriminals to attack. Cybersecurity is foundational to preserving our digital way of life.
Cyberattacks are a daily occurrence in every part of the world. Accepted defense mechanisms are failing. Legacy antivirus, powered by human-generated signatures, remains the most widely deployed security technology, despite proving ineffective and reactive. Human-powered endpoint detection and response, or EDR, emerged as the alternative in which people became the detection and response crew. This approach evangelized the “1-10-60” rule which claimed the best achievable cybersecurity outcome was capped at one minute to detect an attack, ten minutes to investigate, and 60 minutes to respond. Recent ransomware attacks prove it only takes milliseconds to breach an organization, exfiltrate data, and force a complete shutdown. The central problem with legacy antivirus and human-powered EDR is that both rely on linear human effort to defend against the exponential growth of cyber threats. This is akin to bringing a knife to a gunfight.
It is time for a new cybersecurity paradigm.
Our XDR platform ingests, correlates, and queries petabytes of structured and unstructured data from a myriad of ever-expanding disparate external and internal sources in real-time. We build rich context and deliver greater visibility by constructing a dynamic representation of data across an organization. As a result, our AI models are highly accurate, actionable, and autonomous. Our distributed AI models run both locally on every endpoint and every cloud workload, as well as on our cloud platform.
On each endpoint and cloud workload, we run highly optimized AI models in a single lightweight software agent. Our Static AI model predicts file-based attacks of all types, even previously unknown threats, often referred
to as “zero-day attacks,” with extreme precision in milliseconds. Our Behavioral AI model maps, monitors, and links all behaviors on the endpoint to create rich, contextual narratives that we call Storylines. These high-fidelity Storylines are continuously evaluated by our Behavioral AI model. When activity is deemed a threat, our software autonomously takes action to kill the attack. Because Storylines contain a complete record of unauthorized changes made during an attack, we are ready to remediate or roll back these changes. The power to turn back time on a device is unique in the market. It is the ultimate safety net and exemplifies autonomous cybersecurity. Thus, our software eliminates manual, expensive, and time-consuming incident cleanup.
In the cloud, our platform aggregates Storylines. Our Streaming AI detects anomalies that surface when multiple data feeds are correlated with additional external and internal data. By providing full visibility into the Storyline of every secured device across the organization through one console, our platform makes it very fast for analysts to easily search through petabytes of data to investigate incidents and proactively hunt threats. We have extended our control and visibility planes beyond the traditional endpoint to cloud workloads, unmanaged devices, and IoT devices. This empowers security analysts of all skill levels to hunt, investigate, and remediate even the most sophisticated threats across the network leveraging automated context provided by our Storylines. Our proprietary data stack and cloud architecture enable us to retain this rich, contextual data on behalf of our customers for up to three years in a highly cost-efficient manner. All of this threat intelligence is fed back into our AI model and further strengthens our algorithms, creating a strong flywheel effect and deepening our competitive moat.
Our Singularity Platform can be flexibly deployed on the environments that our customers choose, including public, private, or hybrid clouds. Our feature parity across Windows, macOS, Linux, and Kubernetes offers best-of-breed protection, visibility, and control across today’s heterogeneous IT environments. Together, these capabilities make our platform the logical choice for organizations of all sizes, industry verticals, and compliance requirements. Our platform offers true multi-tenancy, which enables the world’s largest organizations and our managed security providers and incident response partners the best management experience. Our customers realize improved cybersecurity outcomes with fewer people, producing an attractive return on investment.
Cybersecurity has always been a game of cat and mouse. The attacker only needs to be successful once whereas the defender must be correct each and every time. It is asymmetrical and simply impossible for humans alone to win. Our data and AI-powered XDR platform changes this paradigm, shifting the advantage to our customers. The results speak for themselves: in the world’s most recent mass-scale cyberattack, SolarWinds Sunburst, we kept each and every one of our customers safe. This is but one of numerous examples where our technology paradigm was battle tested. And, our customers won.
Our Singularity Platform can be used globally by organizations of all sizes across a broad range of industries. As of April 30, 2021, we had over 4,700 customers, increasing from over 2,700 as of April 30, 2020. Our AI and automation driven approach to cybersecurity has been adopted by some of the world’s largest and most demanding organizations. As a result, we have grown rapidly since our inception. Our revenue for fiscal 2020 and fiscal 2021 was $46.5 million and $93.1 million, respectively, representing year-over-year growth of 100%. Our revenue for the three months ended April 30, 2020 and 2021 was $18.0 million and $37.4 million, respectively, representing year-over-year growth of 108%. During this period, we continued to invest in growing our business to capitalize on our market opportunity. As a result, our net loss was $76.6 million and $117.6 million for fiscal 2020 and fiscal 2021, respectively, and $26.6 million and $62.6 million for the three months ended April 30, 2020 and 2021, respectively.
Industry Background
Cybersecurity is fundamentally a data problem. Advances in AI, specifically machine learning are revolutionizing cybersecurity. To achieve fully autonomous cyber defense, organizations need to leverage the petabytes of data being generated from their rapidly growing devices, applications, and IT infrastructure, then ingest, normalize, correlate, and apply powerful AI models on this high-fidelity contextual data and automatically detect and autonomously remediate anomalies.
Stakes are high for organizations and cybercriminals. The exponential growth of sensitive customer and business data has simultaneously made many organizations the target of highly sophisticated cybercriminals that are looking for opportunities to exfiltrate data and to disrupt operations, or for political or financial gain. According to
Cybersecurity Ventures, cybercrime is a massive $6 trillion business. Powered by very large networks of individual attackers distributed worldwide, cybercrime is practically infinite in scale and transcends geographical boundaries.
Tectonic shifts in IT require a “Zero Trust” operating procedure. With millions of remote laptops accessing thousands of applications running in public, private and hybrid clouds, traditional perimeter-based security controls are bypassed and organizations have to operate in a “Zero Trust” IT environment. The endpoint has become the epicenter and endpoint protection software the first, and last, line of defense. The following tectonic shifts in IT have increasingly left companies vulnerable:
•Rapid adoption of cloud computing. According to IDC, worldwide spending on cloud services is expected to grow at 15.7% annually from 2020 to 2024, to over $1 trillion. While public cloud services continue to be the largest engine of growth, private clouds are indispensable for mid-size to large organizations, in particular government agencies and companies in regulated industries, that seek enhanced control over their business-critical operations and data.
•The operating system landscape is more complex than ever before. The diversification of IT and bring-your-own-device, or BYOD, policies brought Macs and other devices into today’s organizations. While Windows remains the dominant operating system for computers, Linux has become widely adopted among organizations to power their business applications and servers.
•Proliferation of connected devices. According to IDC, an estimated 41.4 billion IoT devices will be online in 2025. Many of these devices will have little to no built-in security capabilities. As a result, the attack surface has exploded. Visibility across connected devices and continuous assessment of their risk profile has become a top priority for organizations.
•Remote work is here to stay. The COVID-19 pandemic changed the way most organizations operate, accelerating technology’s role in supporting remote work. Gartner found that 82% of company leaders say their organizations plan to let employees continue to work from home at least some of the time, while 47% plan to allow employees to do so all of the time.
Sophisticated cyberattacks circumvent existing security controls. Cyberattacks have evolved into highly sophisticated, organized, and large-scale attacks that seek to circumvent existing security controls and undermine critical societal functions through a variety of attacks that are:
•Fast acting. Many attacks take only seconds for adversaries to breach organizations. They bypass security controls that are based on the “1-10-60” rule which evangelizes that organizations have one minute to detect, ten minutes to investigate, and 60 minutes to remediate a security breach.
•Stealthy, with long dwell times. Some attacks are designed to breach the organization and stealthily infiltrate across assets to steal data, facilitate future attacks, or cause other harm over a long period of time, all while operating undetected. The average time to identify and contain a breach is 280 days, according to IBM Security’s Cost of a Data Breach Report 2020, giving threat actors plenty of time to inflict damage.
Cybersecurity teams are unable to scale. Organizations are facing an acute shortage of skilled cybersecurity talent. (ISC)2 estimates that approximately three million additional professionals are needed today to adequately defend organizations against cyberattacks worldwide. To keep up with the exponentially increasing number of connected devices, applications, and cyber threats, organizations are demanding a technology-powered, data-driven approach that does not require human intervention to prevent, detect, and remediate cyber threats.
Limitations of Existing Solutions
Organizations must deploy solutions that enable them to stay one step ahead of attackers and address intrusion attempts in real-time. As attackers up the ante, developing new skills and deploying new tactics and techniques, existing tools are often unable to prevent and respond effectively to breaches. The result is a rising number of successful high-profile attacks.
Key limitations of existing tools are that they:
•Cover a limited spectrum of cyber threats. Existing tools, such as signature-based approaches, human-powered monitoring, application whitelisting, and sandboxing, are each effective under limited circumstances, but lack the ability to detect the full spectrum of threats organizations are dealing with.
•Utilize AI approaches that rely on humans to power protection mechanisms. First generation AI tools cannot handle the volume, variety, and velocity of data that must be ingested and analyzed, in real-time, to be effective in preventing breaches. These tools often rely on ineffective pattern-matching algorithms in the cloud that generate so much “noise” that human intervention is required to extract useful “signals.” Due to their dependency on the cloud, they cannot take action at machine speed and are thus unable to detect and prevent or stop many fast-acting attacks.
•Lack long-term data visibility to proactively investigate advanced threats. Existing EDR tools lack the capability to store large sets of historical data cost efficiently. This makes full incident investigation challenging for security personnel, as they are unable to go back in time and see how the attack breached the organization and progressed.
•Struggle to protect complex modern IT environments. Existing tools were not designed to protect today’s multi-cloud, multi-device, multi-OS IT environments. Vendors have extended their existing solutions by bolting on functionalities, which has led to a wide disparity of capabilities across endpoints and operating systems. Existing tools further lack the ability to identify unmanaged IoT devices, which are increasingly used by attackers to access the networks of target organizations.
•Lack deployment flexibility for organizations. Organizations struggle with the limited deployment methods mandated by existing tools. On-premise tools impose complexity and maintenance burdens on organizations and lack the ability to quickly adapt to organizations’ rapidly evolving IT environments. Cloud-only cybersecurity vendors are unsuitable for many large and complex enterprises and governments that need private or hybrid cloud solutions to meet their security, regulatory and compliance requirements.
•Inhibit technology workflow automation. Many existing tools lack out-of-the box APIs. Their lack of flexible workflow integrations limits organizations’ ability to reduce overhead by automating processes, and to improve their security by ensuring that process steps are done quickly, consistently, and according to their predefined requirements.
A new paradigm for cybersecurity is needed to autonomously protect organizations and their heterogeneous IT footprints from highly sophisticated, machine-based attacks in a holistic, seamless, and automated manner.
Our Revolutionary XDR Approach to Cybersecurity
Our AI-powered Singularity Platform defines and delivers XDR. Our platform ingests, correlates, and queries petabytes of structured and unstructured data from a myriad of disparate external and internal sources in real-time. We build rich context by constructing a dynamic representation of data across an organization. As a result, our AI models are highly accurate, actionable, and autonomous. Our distributed AI models run both locally on every endpoint and every cloud workload, as well as on our cloud platform. Our Static and vector-agnostic Behavioral AI models, which run on the endpoints themselves, provide our customers with protection even when their devices are not connected to the cloud. In the cloud, our Streaming AI detects anomalies that surface when multiple data feeds are correlated. Furthermore, our platform provides visibility across an organization’s digital assets through one console, making it easy and very fast for analysts to search through petabytes of data to investigate incidents and hunt threats. Our Singularity Platform offers multi-tenancy and can be deployed on a diverse range of environments that our customers choose, including public, private, or hybrid clouds.
Key Benefits of our Singularity Platform
Key benefits of our platform include:
•Protects against present and future cyber threats. A combination of our powerful Static AI and Behavioral AI on the device with Streaming AI models in the cloud addresses the full spectrum of attacks in an evolving threat landscape, including ransomware, known and unknown malware, trojans, hacking tools, memory exploits, script misuse, bad macros and “living off the land,” or file-less, attacks.
•Enables protection and visibility across all digital assets. Our Singularity Platform provides organizations with our full suite of real-time threat prevention, detection and remediation capabilities across all of their endpoints, cloud workloads, servers, and operating systems. Our platform further leverages our agents, combined with passive and active network discovery methods, to provide our customers with organization-wide visibility into all of their network assets, managed and unmanaged.
•Provides autonomous protection and remediation. Powered by our AI and Storyline technology, our agents defend and heal endpoints autonomously and in real-time by stopping malicious processes, quarantining, remediating, and even rolling back events to surgically keep endpoints clean.
•Enables facilitated, as well as fully-automated, incident investigation and proactive threat hunting. Our platform gives security teams the ability to search their IT assets for behavioral indicators via a single-click interface. Our deep visibility and contextual data empowers security analysts of all skill levels to run queries at very fast speeds, and quickly understand the root causes behind the most complex threats.
•Provides full forensic recall for complete remediation. We offer our customers the ability to retain rich, contextual data for up to three years in a highly cost efficient manner. This forensic data helps our customers to investigate breaches that have stealthily infiltrated their organization and operated undetected for many months. It gives them the ability to ensure that any incident has been fully remediated without the need to reimage or replace elements of their IT infrastructure.
•Provides a superior customer experience. The combination of our intuitive and clean user interface, our ability to provide context with one click, and our high degree of automation empowers our customers to use our platform independent of their expertise level. As a result, our customers report a 97% Customer Satisfaction Score.
•Delivers rapid time to value. By deploying our Singularity Platform, customers can receive a return on investment of 353% over three years, and a payback period of less than three months according to a 2020 Total Economic Impact study that we commissioned and that was conducted by Forrester Consulting. Our Singularity Platform can be quickly and easily deployed on the diverse IT environments of our customers, and without extensive configuration or maintenance.
Competitive Strengths
Our platform has the following key competitive strengths:
•Recognized market leadership. Our platform provides leading threat protection and visibility capabilities. The following industry and customer recognition is a testament to our capabilities:
◦In the MITRE ATT&CK®2020 assessment, we were the only vendor to achieve 100% visibility with zero missed detections across all tested operating systems amongst a study of 29 endpoint vendors evaluated. In the MITRE ATT&CK®2019 assessment, our solution achieved the lowest number of missed detections and the highest number of correlated detections amongst a study of 21 cybersecurity vendors.
◦In the 2020 Gartner Peer Insights ‘Voice of the Customer’: Endpoint Detection and Response Solutions, we had the highest overall rating (4.8/5) and most verified reviews (123).
◦We were named a Leader in the 2021 Gartner Magic Quadrant for Endpoint Protection Platforms report. In addition, we scored highest across all three Use Cases in the related 2021 Gartner Critical Capabilities for Endpoint Protection Platforms report.
•Flexible deployment model. Our Singularity Platform can be deployed on a diverse range of environments that our customers choose, including the public, private, or hybrid cloud, making it relevant for organizations of all sizes with varying compliance and regulatory requirements.
•Proprietary data stack. Our modern, innovative, and extensible data stack enables us to ingest, process and analyze massive amounts and a wide variety of data types efficiently. Our independent, component-driven architecture allows us to evolve rapidly leveraging continued innovations of public cloud infrastructure, while controlling every aspect of our innovation roadmap and customer experience.
•Deeply embedded within our customers’ IT stacks. Our API-first approach and Singularity Marketplace allow our customers to easily integrate intelligence, analytics, automation, and other third-party business applications with our platform.
•Rich partner ecosystem. We have deep partnerships with many of the leading independent software vendors, or ISVs, alliance partners whom we engage with on joint technology and go-to-market strategies; and channel partners, such as distributors, resellers, managed service providers, or MSPs, managed security service providers, or MSSPs, managed detection and response providers, or MDRs, original equipment manufacturers, or OEMs, and incident response firms, or IR firms. As we empower our partners through technology, many of our partners act as force multipliers and broaden our market reach.
•Quality and access of cybersecurity and AI talent. Our thought leadership in security and AI, combined with our award winning culture, allows us to attract and retain the best talent at a global scale. It allows us to develop state-of-the-art solutions, to innovate faster, and to solve many of the industry’s most complex problems.
Our Market Opportunity
According to IDC, the addressable market addressed by our solutions today is expected to reach $40.2 billion in 2024, growing at a compound annual growth rate, or CAGR, of 11.9% between 2021 and 2024. Our addressable market today represents revenue from the following markets:
•Corporate Endpoint Security. A $9.7 billion market in 2021 and growing to $12.0 billion in 2024; comprising Modern Endpoint Security, Server Security (physical servers and cloud workload security), Information Protection and Control, and Endpoint Management.
•Cybersecurity Analytics, Intelligence, Response, and Orchestration. A $13.1 billion market in 2021 and growing to $17.1 billion in 2024; comprising Device Vulnerability Assessment, Forensics and Incident Investigation, Policy and Compliance, Security Device Systems Management, Security Information and Event Management, or SIEM, and Software Vulnerability Assessment.
•IT Operations Management. A $5.9 billion market in 2021 and growing to $11.1 billion in 2024.
We believe IoT Security represents another incremental market opportunity, which we address through our Ranger modules. By empowering MSPs, MSSPs, MDRs, and IR firms with our technology and through our deep partnerships with them, we benefit from the market penetration of those entities. IDC estimates that the Managed Security Services market alone will grow to $44.0 billion by 2024. In addition to these markets, we believe several adjacent markets, including Threat Intelligence and Data Loss Prevention will be addressable by us in the future as we continue to innovate and build out our capabilities and offerings.
We believe our XDR capabilities position us well to consolidate and unify spend across these categories. Over time, we believe this unification and re-architecture of the prevention, detection, and response paradigm will create new opportunities for additional products and features for us.
Growth Strategy
Key elements of our growth strategy include:
•Continue to innovate and enhance our cybersecurity and data platform. We will continue to expand our platform and XDR capabilities and develop new modules to include greater functionality and address additional use cases. Through our convergence of cybersecurity and data, we intend to bring our customers and prospects a variety of differentiated cybersecurity-first and enhanced data analytics offerings. Having access to some of the world’s top cybersecurity and AI talent allows us to conduct extensive research and development to maintain our leading position.
•Drive new customer acquisition. We intend to continue to add new customers through a product-first approach to customer acquisition. This approach enables us to build trusted relationships with a large and rapidly growing group of highly influential managed service and incident response providers, as opposed to creating a dynamic of competition that creates friction between product vendors and service providers. We intend to continue to build our relationships with our channel partners, including MSPs, MSSPs, MDRs, OEMs, and IR firms, as well as our alliance partners to expand our market reach.
•Increase adoption within our customer base. As we enhance our platform functionality and value proposition, we expect many of our customers to adopt additional platform functionalities and Singularity Modules to address all of their cybersecurity use cases through the same platform and agent.
•Expand our global footprint. We intend to continue to grow our international customer base by increasing our investments in our international operations.
•Expand our total addressable market through acquisitions. We intend to complement our organic investments with acquisitions to successfully execute on our XDR strategy.
Risk Factors Summary
Our business is subject to numerous risks and uncertainties, including those in the section titled “Risk Factors” immediately following this prospectus summary. These risks include the following:
•We have a limited operating history, which makes it difficult to evaluate our current business and future prospects and increases the risks associated with your investment.
•We have a history of losses, anticipate increases in our operating expenses in the future, and may not achieve or sustain profitability. If we cannot achieve and sustain profitability, our business, financial condition, and operating results will be adversely affected.
•We face intense competition and could lose market share to our competitors, which would adversely affect our business, operating results, and financial condition.
•Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.
•A network or data security incident against us, whether actual, alleged, or perceived, may harm our reputation, create liability and regulatory exposure, and adversely impact our financial results.
•Defects, errors, or vulnerabilities in our platform, the failure of our platform to block malware or prevent a security breach, misuse of our platform, or risks of product liability claims would harm our reputation and adversely impact our business, operating results, and financial condition.
•If we are unable to retain our customers, renew and expand our relationships with them, and add new customers, we may not be able to sustain revenue growth, and we may not achieve or maintain profitability in the future.
•If our platform is not effectively interoperated within our customers’ IT infrastructure, deployments could be delayed or canceled, which would adversely impact our business, operating results, and financial condition.
•Disruptions or other business interruptions that affect the availability of our platform could adversely impact our customer relationships and overall business.
•We may not timely and cost-effectively scale and adapt our existing technology to meet our customers’ performance and other requirements.
•The dual class structure of our common stock will have the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of this offering, including our directors, executive officers, and beneficial owners of 5% or greater of our outstanding capital stock who will hold in the aggregate % of the voting power of our capital stock following the completion of this offering, which will limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.
Channels for Disclosure of Information
Following the effectiveness of the registration statement of which this prospectus forms a part, we intend to announce material information to the public through filings with the Securities and Exchange Commission, or the SEC, the investor relations page on our website (www.sentinelone.com), press releases, public conference calls, public webcasts, our Twitter account (@SentinelOne), our Facebook page, our LinkedIn page, our company news site (www.sentinelone.com/press/) and our corporate blog (www.sentinelone.com/blog/).
The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
Corporate Information
We were incorporated in the State of Delaware as Sentinel Labs, Inc. in January 2013. We changed our name to SentinelOne, Inc. in March 2021. Our principal executive offices are located at 444 Castro Street, Suite 400, Mountain View, California 94041. Our telephone number is (855) 868-3733. Our website address is www.sentinelone.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. Investors should not rely on any such information in deciding whether to purchase our Class A common stock. Unless otherwise indicated, the terms “SentinelOne,” the “company,” “we,” “us,” and “our” refer to SentinelOne, Inc. and our subsidiaries, and references to our “common stock” include our Class A common stock and Class B common stock.
SentinelOne, the SentinelOne logo, and other registered or common law trade names, trademarks, or service marks of SentinelOne appearing in this prospectus are the property of SentinelOne. This prospectus contains additional trade names, trademarks, and service marks of ours and of other companies. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with these other companies, or endorsement or sponsorship of us by these other companies. Other trademarks appearing in this prospectus are the property of their respective holders. Solely for convenience, our trademarks and trade names referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor, to these trademarks and trade names.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the
Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include:
•being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this prospectus;
•an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;
•an exemption from the requirement that critical audit matters be discussed in our independent auditor’s reports on our audited financial statements or any other requirements that may be adopted by the Public Company Accounting Oversight Board unless the SEC determines that the application of such requirements to emerging growth companies is in the public interest;
•reduced disclosure about our executive compensation arrangements;
•exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a stockholder approval of any golden parachute arrangements; and
•extended transition periods for complying with new or revised accounting standards.
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,” as defined in the rules under the Securities Exchange Act of 1934, as amended, or the Exchange Act, 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 this offering.
We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies. Further, pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards. It is possible that some investors will find our Class A common stock less attractive as a result, which may result in a less active trading market for our Class A common stock and higher volatility in our stock price.
THE OFFERING
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Class A common stock offered
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shares
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Underwriters’ over-allotment option to purchase Class A common stock
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shares
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Class A common stock to be outstanding after this offering
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shares ( shares if the underwriters exercise their over-allotment option in full)
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Class B common stock to be outstanding after this offering
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shares
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Total Class A and Class B common stock to be outstanding after this offering
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shares ( shares if the underwriters exercise their over-allotment option in full)
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Use of proceeds
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We estimate that the net proceeds from the sale of shares of our Class A common stock in this offering will be approximately $ , or approximately $ if the underwriters’ over-allotment option is exercised in full, based upon the assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses.
We primarily intend to use the net proceeds from this offering for working capital and other general corporate purposes. We may also use a portion of the proceeds for the acquisition of, or investment in, technologies, solutions, or businesses that complement our business. However, we do not have agreements or commitments for any acquisitions or investments outside the ordinary course of business at this time. See the section titled “Use of Proceeds” for additional information.
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Voting rights
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Following the completion of this offering, shares of our Class A common stock will be entitled to one vote per share. Shares of Class B common stock will be entitled to 20 votes per share. Holders of our Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by law or our restated certificate of incorporation. Following the completion of this offering, each share of our Class B common stock will be convertible into one share of our Class A common stock at any time and will convert automatically upon certain transfers and upon the earlier of (i) the date specified by a vote of the holders of 66 2/3% of the then outstanding shares of Class B common stock, (ii) seven years from the date of this prospectus, (iii) the first date following the completion of this offering on which the number of shares of outstanding Class B common stock (including shares of Class B common stock subject to outstanding stock options) held by Tomer Weingarten, including certain permitted entities that Mr. Weingarten controls, is less than 25% of the number of shares of Class B common stock (including shares of Class B common stock subject to outstanding stock options) that Mr. Weingarten originally held as of the date of this prospectus, (iv) the date fixed by our board of directors, following the first date following the completion of this offering when Mr. Weingarten is no longer providing services to us as an officer, employee, consultant or member of our board of directors, (v) the date fixed by our board of directors following the date, if applicable, on which Mr. Weingarten is terminated for cause, as defined in our restated certificate of incorporation, and (vi) the date that is 12 months after the death or disability, as defined in our restated certificate of incorporation, of Mr. Weingarten. The holders of our outstanding Class B common stock will hold % of the voting power of our outstanding capital stock following this offering, with our directors, executive officers, and beneficial owners of 5% or greater of our outstanding capital stock and their respective affiliates holding % of the voting power in the aggregate. These stockholders will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change of control transaction. See the sections titled “Principal Stockholders” and “Description of Capital Stock” for additional information.
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Directed share program
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At our request, the underwriters have reserved up to 5% of shares offered by this prospectus for sale at the initial public offering price through a directed share program available to senior executives and their friends and family members, directors, certain of our channel partners, and other individuals identified by our leadership. The sales will be administered by Morgan Stanley & Co. LLC. We do not know if these parties will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of Class A common stock. Additionally, except in the case of shares purchased by any director or officers, shares purchased through the directed share program will not be subject to a lock-up restriction. See the section titled “Underwriters—Directed Share Program” for additional information.
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Risk factors
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See the section titled “Risk Factors” and other information included in this prospectus for a discussion of some of the factors you should consider before deciding to purchase shares of our Class A common stock.
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Proposed New York Stock Exchange trading symbol
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“S”
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The number of shares of our Class A common stock and Class B common stock that will be outstanding after this offering is based on zero shares of our Class A common stock outstanding and 219,942,711 shares of our Class B common stock outstanding (after giving effect to the automatic conversion of all outstanding shares of redeemable convertible preferred stock into an aggregate of 169,438,121 shares of Class B common stock immediately prior to the completion of this offering), in each case, as of April 30, 2021, and excludes:
•48,644,223 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock outstanding as of April 30, 2021 under our 2013 Equity Incentive Plan, or our 2013 Plan, with a weighted-average exercise price of $3.77 per share;
•759,131 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock granted after April 30, 2021 under our 2013 Plan with a weighted-average exercise price of $16.19 per share;
•1,075,623 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock outstanding under our 2011 Stock Incentive Plan, or our 2011 Plan, which we assumed in connection with our acquisition of Scalyr, Inc., or Scalyr, in February 2021, with a weighted-average exercise price of $1.72 per share;
•954,884 shares of our Class B common stock issuable upon the exercise of warrants to purchase shares of our Class B common stock outstanding as of April 30, 2021 with an exercise price of $0.62 per share; and
•46,613,004 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (i) 4,275,089 shares of our Class B common stock reserved for future issuance under our 2013 Plan, as of April 30, 2021 (which number of shares is prior to the stock options to purchase shares of our Class B common stock granted after April 30, 2021), (ii) 35,281,596 shares of our Class A common stock reserved for future issuance under our 2021 Equity Incentive Plan, or the 2021 Plan, which will become effective on the date immediately prior to the date of this prospectus, and (iii) 7,056,319 shares of our Class A common stock reserved for issuance under our 2021 Employee Stock Purchase Plan, or the 2021 ESPP, which will become effective on the date of this prospectus.
On the date of this prospectus, any remaining shares of Class B common stock available for issuance under our 2013 Plan will be added to the shares of our Class A common stock reserved for issuance under our 2021 Plan, and we will cease granting awards under the 2013 Plan. Our 2021 Plan and 2021 ESPP also provide for automatic annual increases in the number of shares reserved thereunder. For additional information, see the section titled “Executive Compensation—Employee Benefit and Stock Plans.”
Unless otherwise noted, the information in this prospectus reflects and assumes the following:
•a 1-to-3 forward stock split of our outstanding capital stock, that was effected in February 2020, or the Forward Stock Split;
•the amendment to our currently in effect amended and restated certificate of incorporation in 2021 to redesignate our outstanding common stock as Class B common stock and create a new class of Class A common stock to be offered and sold in this offering;
•the automatic conversion of all outstanding shares as of April 30, 2021 of (i) 31,405,183 shares of our Series E redeemable convertible preferred stock into an aggregate of 33,785,191 shares of our Class B common stock, which such number of shares of Class B common stock issuable upon the conversion of the
Series E redeemable convertible preferred stock will increase through the completion of this offering pursuant to an adjustment feature described in the section titled “Description of Capital Stock—Series E Redeemable Convertible Preferred Stock Conversion Price” and (ii) an aggregate of 135,652,930 shares of our Series A, Series B, Series C, Series D, and Series F redeemable convertible preferred stock into the same number of shares of Class B common stock upon completion of this offering, or, collectively, the Capital Stock Conversion;
•the filing and effectiveness of our restated certificate of incorporation and the effectiveness of our restated bylaws, each of which will occur immediately prior to the completion of this offering;
•no exercise of outstanding stock options or warrants subsequent to April 30, 2021; and
•no exercise by the underwriters of their over-allotment option to purchase additional shares of our Class A common stock in this offering.
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables summarize our consolidated financial and other data. We derived our summary consolidated statements of operations data for the years ended January 31, 2020 and 2021 (except for pro forma basic and diluted net loss per share attributable to common stockholders and weighted-average shares used in computing pro forma basic and diluted net loss per share attributable to common stockholders) from our audited consolidated financial statements included elsewhere in this prospectus. We derived our summary consolidated statements of operations data for the three months ended April 30, 2020 and 2021 (except for pro forma basic and diluted net loss per share attributable to common stockholders and weighted-average shares used in computing pro forma basic and diluted net loss per share attributable to common stockholders) and our summary consolidated balance sheet data as of April 30, 2021 from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair statement of such data. Our historical results are not necessarily indicative of the results to be expected in the future and our interim results are not necessarily indicative of results to be expected for the full year or any other period. You should read the following summary consolidated financial and other data in conjunction with the sections titled “Selected Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements, the accompanying notes, and other financial information included elsewhere in this prospectus. Our fiscal year end is January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31.
Consolidated Statements of Operations Data
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Year Ended January 31,
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Three Months Ended April 30,
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2020
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2021
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2020
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2021
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(in thousands, except share and per share data)
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Revenue
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$
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46,474
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$
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93,056
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$
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17,957
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$
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37,395
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Cost of revenue(1)
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18,331
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39,332
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7,613
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18,283
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Gross profit
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28,143
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53,724
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10,344
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19,112
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Operating expenses:
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Research and development(1)
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36,683
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62,444
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13,865
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27,820
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Sales and marketing(1)
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51,322
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77,740
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17,751
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36,180
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General and administrative(1)
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15,122
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29,059
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4,957
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16,724
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Total operating expenses
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103,127
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169,243
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36,573
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80,724
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Loss from operations
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(74,984)
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(115,519)
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(26,229)
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(61,612)
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Interest income
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886
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231
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150
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23
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Interest expense
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(2,015)
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(1,401)
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(300)
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(303)
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Other income (expense), net
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(217)
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(424)
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(193)
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(593)
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Loss before provision for income taxes
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(76,330)
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(117,113)
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(26,572)
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(62,485)
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Provision for income taxes
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237
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460
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66
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149
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Net loss
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$
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(76,567)
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$
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(117,573)
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$
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(26,638)
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$
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(62,634)
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Net loss per share attributable to common stockholders, basic and diluted(2)
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$
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(2.34)
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$
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(3.31)
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$
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(0.78)
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$
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(1.37)
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Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted(2)
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32,712,350
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35,482,444
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33,973,809
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45,725,703
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Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(3)
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$
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(0.58)
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$
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(0.29)
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Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(3)
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204,433,503
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215,163,824
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__________________
(1)Includes stock-based compensation expense as follows:
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Year Ended January 31,
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Three Months Ended April 30,
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2020
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2021
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2020
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2021
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(in thousands)
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Cost of revenue
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$
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138
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$
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308
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$
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70
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$
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383
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Research and development
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1,686
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6,590
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|
|
2,763
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7,139
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Sales and marketing
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1,034
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|
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3,835
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|
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461
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|
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2,047
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General and administrative
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1,488
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5,179
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|
|
357
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|
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3,868
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Total
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$
|
4,346
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|
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$
|
15,912
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|
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$
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3,651
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|
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$
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13,437
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|
Stock-based compensation expense includes $2.5 million, $8.7 million, $2.5 million, and $0.2 million of expense related to secondary stock sales described in Note 11 to our consolidated financial statements included elsewhere in this prospectus for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021, respectively.
(2)See Notes 2 and 13 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculation of our basic and diluted net loss per share attributable to common stockholders.
(3)Basic and diluted pro forma net loss per share attributable to common stockholders for fiscal 2021 and the three months ended April 30, 2021 gives effect to the Capital Stock Conversion as though the conversion had occurred as of the beginning of the period.
The following table sets forth the computation of unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except share and per share data):
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|
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|
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Year Ended January 31, 2021
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Three Months Ended April 30, 2021
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Numerator:
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|
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Net loss and pro forma net loss
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$
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(117,573)
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$
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(62,634)
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Denominator:
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Weighted-average shares used in computing net loss per share
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35,482,444
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45,725,703
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Pro forma adjustment to reflect conversion of convertible redeemable preferred stock into common stock
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168,951,059
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169,438,121
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Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted
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204,433,503
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|
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215,163,824
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|
Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)
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$
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(0.58)
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|
|
$
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(0.29)
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Consolidated Balance Sheet Data
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As of April 30, 2021
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Actual
|
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Pro Forma(1)
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Pro Forma
as Adjusted(2)(3)
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(in thousands)
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Cash, cash equivalents, and short-term investments
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$
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362,555
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$
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362,555
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$
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Working capital(4)
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280,187
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280,187
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Total assets
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619,969
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619,969
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Long-term debt
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19,662
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19,662
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|
|
Redeemable convertible preferred stock
|
621,139
|
|
|
—
|
|
|
|
|
Additional paid-in capital
|
166,974
|
|
|
788,096
|
|
|
|
|
Accumulated deficit
|
(413,206)
|
|
|
(413,206)
|
|
|
|
|
Total stockholders’ (deficit) equity
|
(245,874)
|
|
|
375,265
|
|
|
|
__________________
(1)The pro forma column above reflects (i) the Capital Stock Conversion, as if such conversion had occurred on April 30, 2021, (ii) the redesignation of our outstanding common stock as Class B common stock as if such redesignation had occurred on April 30, 2021, and (iii) the filing and effectiveness of our restated certificate of incorporation that will become effective immediately prior to the completion of this offering.
(2)The pro forma as adjusted column above gives effect to (i) the pro forma adjustments set forth above and (ii) the sale and issuance by us of shares of our Class A common stock in this offering, based upon the assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses.
(3)Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, would increase or decrease the amount of our pro forma as adjusted cash, cash equivalents, and short-term investments, working capital, total assets, additional paid-in capital, and total stockholders’ (deficit) equity by $ million, assuming that the number of shares of our Class A common stock offered, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions. An increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, the amount of our pro forma as adjusted cash, cash equivalents, and short-term investments, working capital, total assets, additional paid-in capital, and total stockholders’ (deficit) equity by $ million, assuming the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions.
(4)Working capital is defined as current assets less current liabilities.
Key Business Metrics and Non-GAAP Financial Measures
We review a number of operating and financial metrics, including the following key metrics and non-GAAP financial measures to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. See the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics” for additional information regarding our key business metrics and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for additional information and reconciliations of our non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with U.S. generally accepted accounting principles, or GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or For the Year Ended
January 31,
|
|
As of or For the Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
(dollars in thousands)
|
|
Annualized recurring revenue (ARR)
|
$
|
66,764
|
|
|
$
|
130,825
|
|
|
$
|
74,845
|
|
|
$
|
161,323
|
|
|
Customers with ARR of $100,000 or more
|
104
|
|
|
219
|
|
|
122
|
|
|
277
|
|
|
Dollar-based net retention rate
|
119
|
%
|
|
117
|
%
|
|
122
|
%
|
|
124
|
%
|
|
Gross profit
|
$
|
28,143
|
|
|
$
|
53,724
|
|
|
$
|
10,344
|
|
|
$
|
19,112
|
|
|
Non-GAAP gross profit
|
$
|
28,281
|
|
|
$
|
54,032
|
|
|
$
|
10,414
|
|
|
$
|
19,986
|
|
|
Gross margin
|
61
|
%
|
|
58
|
%
|
|
58
|
%
|
|
51
|
%
|
|
Non-GAAP gross margin
|
61
|
%
|
|
58
|
%
|
|
58
|
%
|
|
53
|
%
|
|
Loss from operations
|
$
|
(74,984)
|
|
|
$
|
(115,519)
|
|
|
$
|
(26,229)
|
|
|
$
|
(61,612)
|
|
|
Non-GAAP loss from operations
|
$
|
(70,638)
|
|
|
$
|
(99,607)
|
|
|
$
|
(22,578)
|
|
|
$
|
(47,501)
|
|
|
Operating margin
|
(161)
|
%
|
|
(124)
|
%
|
|
(146)
|
%
|
|
(165)
|
%
|
|
Non-GAAP operating margin
|
(152)
|
%
|
|
(107)
|
%
|
|
(126)
|
%
|
|
(127)
|
%
|
|
Net cash used in operating activities
|
$
|
(44,424)
|
|
|
$
|
(66,570)
|
|
|
$
|
(11,795)
|
|
|
$
|
(30,798)
|
|
|
Net cash used in investing activities
|
$
|
(3,187)
|
|
|
$
|
(6,265)
|
|
|
$
|
(925)
|
|
|
$
|
(5,242)
|
|
|
Net cash provided by financing activities
|
$
|
52,770
|
|
|
$
|
423,978
|
|
|
$
|
153,179
|
|
|
$
|
1,917
|
|
|
Free cash flow
|
$
|
(47,077)
|
|
|
$
|
(72,611)
|
|
|
$
|
(12,720)
|
|
|
$
|
(32,591)
|
|
RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus before making a decision to invest in our Class A common stock. Our business, financial condition, operating results, or prospects could also be adversely affected by risks and uncertainties that are not presently known to us or that we currently believe are not material. If any of the risks actually occur, our business, financial condition, operating results, and prospects could be adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose all or part of your investment.
Risks Related to Our Business and Industry
We have a limited operating history, which makes it difficult to evaluate our current business and future prospects and increases the risks associated with your investment.
We were founded in January 2013 and released our first endpoint security solution in February 2015. Our limited operating history may make it difficult to evaluate our current business and future prospects. We have encountered, and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. Further, we have limited historical financial data, and we operate in a rapidly evolving market. As a result, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable or established market. If our assumptions regarding these risks and uncertainties are incorrect or change due to changes in our markets or otherwise, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business and operating results would be adversely affected. We cannot assure you that we will be successful in addressing these and other challenges we may face in the future.
We have a history of losses, anticipate increases in our operating expenses in the future, and may not achieve or sustain profitability. If we cannot achieve and sustain profitability, our business, financial condition, and operating results will be adversely affected.
We have incurred net losses in all periods since our inception, and we may not achieve or maintain profitability in the future. We experienced a net loss of $76.6 million and $117.6 million for fiscal 2020 and fiscal 2021, respectively. We experienced a net loss of $26.6 million and $62.6 million for the three months ended April 30, 2020 and 2021, respectively. As of April 30, 2021, we had an accumulated deficit of $413.2 million. While we have experienced significant growth in revenue in recent periods, we cannot predict when or whether we will reach or maintain profitability. We also expect our operating expenses to increase in the future as we continue to invest for our future growth, including expanding our research and development function to drive further development of our platform, expanding our sales and marketing activities, developing the functionality to expand into adjacent markets, and reaching customers in new geographic locations, which will negatively affect our operating results if our total revenue does not increase. In addition to the anticipated costs to grow our business, we also expect to incur significant additional legal, accounting, and other expenses as a newly public company. These efforts and additional expenses may be more costly than we expect, and we cannot guarantee that we will be able to increase our revenue to offset our operating expenses. Our revenue growth is expected to decline and our revenue may decline for a number of other reasons, including reduced demand for our platform, increased competition, a decrease in the growth or reduction in size of our overall market, or if we cannot capitalize on growth opportunities. Any failure to increase our revenue or to manage our costs as we invest in our business would prevent us from achieving or maintaining profitability.
We face intense competition and could lose market share to our competitors, which would adversely affect our business, operating results, and financial condition.
The market for cybersecurity products and services is intensely competitive, fragmented and characterized by rapid changes in technology, customer requirements, industry standards, increasingly sophisticated attackers and by
frequent introductions of new or improved products and services. We expect to continue to face intense competition from current competitors, as well as from new entrants into the market. If we are unable to anticipate or react to these challenges, our competitive position would weaken, and we would experience a decline in revenue or reduced revenue growth, and loss of market share that would adversely affect our business, financial condition and operating results.
Our competitors and potential competitors include the following:
•endpoint security providers, such as CrowdStrike Holdings, Inc. and VMware, Inc.;
•legacy anti-virus providers such as McAfee Corp., Symantec (a subsidiary of Broadcom, Inc.), and Microsoft Corporation; and
•providers of general network security products and services who offer a broad portfolio of solutions, such as Palo Alto Networks, Inc.
Our ability to compete effectively depends upon numerous factors, many of which are beyond our control, including, but not limited to:
•our ability to attract and retain new customers, expand our platform or sell additional products and services to our existing customers;
•the budgeting cycles, seasonal buying patterns, and purchasing practices of our customers, including any slowdown in technology spending due to the COVID-19 pandemic and market downturns;
•changes in customer, distributor or reseller requirements or market needs;
•price competition;
•the timing and success of new product and service introductions by us or our competitors or any other change in the competitive landscape of our industry, including consolidation among our competitors or customers and strategic partnerships entered into by and between our competitors;
•changes in our mix of products, subscriptions and services sold, including changes in the average contract length for subscriptions and support;
•our ability to successfully and continuously expand our business domestically and internationally;
•changes in the growth rate of the endpoint security market;
•deferral of orders from customers in anticipation of new or enhanced products and services announced by us or our competitors;
•significant security breaches of, technical difficulties with or interruptions to, the use of our platform;
•the timing and costs related to the development or acquisition of technologies or businesses or strategic partnerships;
•our ability to execute, complete or integrate efficiently any acquisitions that we may undertake;
•increased expenses, unforeseen liabilities, or write-downs and any impact on our operating results from any acquisitions we consummate;
•our ability to increase the size and productivity of our distribution channels;
•decisions by potential customers to purchase security solutions from larger, more established security vendors or from their primary network equipment vendors;
•timing of revenue recognition and revenue deferrals;
•insolvency or credit difficulties confronting our customers, which could increase due to the effects of the COVID-19 pandemic and adversely affect their ability to purchase or pay for our platform, products, and services in a timely manner or at all;
•the cost and potential outcomes of litigation, which could have a material adverse effect on our business;
•future accounting pronouncements or changes in our accounting policies;
•increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates; and
•general macroeconomic conditions, both domestically and in our foreign markets that could impact some or all regions where we operate.
Many of our competitors have greater financial, technical, marketing, sales, and other resources, greater name recognition, longer operating histories, and a larger base of customers than we do. Our competitors may be able to devote greater resources to the development, promotion and sale of their products and services than we can, and they may offer lower pricing than we do. Further, they may have greater resources for research and development of new technologies, customer support and to pursue acquisitions, or they may have other financial, technical, or other resource advantages. Our larger competitors have substantially broader and more diverse product and service offerings and more mature distribution and go-to-market strategies, which allows them to leverage their existing customer and distributor relationships to gain business in a manner that discourages potential customers from purchasing our platform. Also, in connection with the travel restrictions and shelter-in-place policies resulting from the COVID-19 pandemic, we have seen an increase in usage and subscriptions from smaller customers, many of whom are small or medium sized businesses. Conditions in our market could change rapidly and significantly as a result of technological advancements, partnering or acquisitions by our competitors or continuing market consolidation. Some of our competitors have recently made or could make acquisitions of businesses or have established cooperative relationships that may allow them to offer more directly competitive and comprehensive products and services than were previously offered and adapt more quickly to new technologies and customer needs. These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer orders, reduced revenue and gross margin, increased net losses and loss of market share. Even if there is significant demand for endpoint security solutions like ours, if our competitors include functionality that is, or is perceived to be, equivalent to or better than ours in legacy products that are already generally accepted as necessary components of an organization’s IT security architecture, we will have difficulty increasing the market penetration of our platform. Furthermore, even if the functionality offered by other cybersecurity providers is different and more limited than the functionality of our platform, organizations may elect to accept such limited functionality in lieu of purchasing products and services from additional vendors like us. If we are unable to compete successfully, or if competing successfully requires us to take aggressive action with respect to pricing or other actions, our business, financial condition and operating results would be adversely affected.
Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.
Our operating results may vary significantly from period to period, which could adversely affect our business, operating results and financial condition. Our operating results have varied significantly from period to period in the past, and we expect that our operating results will continue to vary significantly in the future such that period-to-period comparisons of our operating results may not be meaningful. Accordingly, our financial results in any one quarter should not be relied upon as indicative of future performance. Our quarterly financial results may fluctuate as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including:
•the impact of the COVID-19 pandemic on our operations, financial results, and liquidity and capital resources, including on customers, sales, expenses, and employees;
•our ability to attract new and retain existing customers;
•the budgeting cycles, seasonal buying patterns, and purchasing practices of customers;
•the timing and length of our sales cycles;
•changes in customer or channel partner requirements or market needs;
•changes in the growth rate of the cybersecurity market generally and market for endpoint security;
•the timing and success of new product and service introductions by us or our competitors or any other competitive developments, including consolidation among our customers or competitors;
•the level of awareness of cybersecurity threats, particularly advanced cyberattacks, and the market adoption of our platform;
•our ability to successfully expand our business domestically and internationally;
•decisions by organizations to purchase security solutions from larger, more established security vendors or from their primary IT equipment vendors;
•changes in our pricing policies or those of our competitors;
•any disruption in our relationship with channel partners;
•insolvency or credit difficulties confronting our customers, affecting their ability to purchase or pay for our solution;
•significant security breaches of, technical difficulties with or interruptions to, the use of our platform;
•extraordinary expenses such as litigation or other dispute-related settlement payments or outcomes;
•general economic conditions, both domestic and in our foreign markets;
•future accounting pronouncements or changes in our accounting policies or practices;
•negative media coverage or publicity;
•political events;
•the amount and timing of operating costs and capital expenditures related to the expansion of our business; and
•increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates.
In addition, we experience seasonal fluctuations in our financial results as we typically receive a higher percentage of our annual orders from new customers, as well as renewal orders from existing customers, in our fourth fiscal quarter as compared to other quarters due to the annual budget approval process of many of our customers.
Any of the above factors, individually or in the aggregate, may result in significant fluctuations in our financial and other operating results from period to period. As a result of this variability, our historical operating results should not be relied upon as an indication of future performance. Moreover, this variability and unpredictability could result in our failure to meet our operating plan or the expectations of investors or analysts for any period. If we fail to meet such expectations for the reasons described above or other reasons, our stock price could fall substantially, and we could face costly lawsuits, including securities class action suits.
Our platform represents a new approach to endpoint protection and, therefore, it is difficult to predict adoption and demand for our platform.
Our cloud-native, artificial intelligence-enabled endpoint security platform represents a new approach to endpoint protection. Accordingly, it is difficult to predict customer adoption and demand for our platform, the size
and growth rate of this market, the entry of competitive products and services or the success of existing competitive products and services.
Any expansion in our market depends on a number of factors, including the cost, performance and perceived value associated with, and customer adoption of, our platform. If the market for our services does not achieve widespread adoption or there is a reduction in demand for our software or our services in our market caused by a lack of customer acceptance, implementation challenges for deployment, technological challenges, competing technologies and services, decreases in corporate spending, weakening economic conditions, or otherwise, it could result in reduced customer orders and decreased revenue, which would adversely affect our business operations and financial condition.
Our platform interoperates with, but does not necessarily replace, other security products. Businesses that use other cybersecurity products and services may be hesitant to purchase our platform if they believe their existing products and services provide a level of security that is sufficient to meet their needs. If we do not succeed in convincing customers that our platform should be an integral part of their overall approach to security, our sales will not grow as quickly as anticipated, or at all, which would have an adverse impact on our business, operating results and financial condition.
If businesses do not continue to adopt our platform for any of the reasons discussed above or for other reasons not contemplated, our sales would not grow as quickly as anticipated, or at all, and our business, operating results and financial condition would be adversely affected.
A network or data security incident against us, whether actual, alleged, or perceived, would harm our reputation, create liability, and regulatory exposure, and adversely impact our business, operating results, and financial condition.
Increasingly, companies are subject to a wide variety of attacks on their networks on an ongoing basis. Traditional computer “hackers,” malicious code (such as viruses and worms), phishing attempts, employee theft or misuse, denial of service attacks, and sophisticated nation-state and nation-state supported actors engage in intrusions and attacks that create risks for our internal networks and cloud deployed products and the information they store and process. Cybersecurity companies face particularly intense attack efforts, and we have faced and will continue to face cyber threats and attacks from a variety of sources. Although we have implemented security measures to prevent such attacks, our networks and systems may be breached due to the actions of outside parties, employee error, malfeasance, a combination of these, or otherwise, and as a result, an unauthorized party may obtain access to our systems, networks, or data. We may face difficulties or delays in identifying or otherwise responding to any attacks or actual or potential security breaches or threats. A breach in our data security or an attack against our platform could impact our networks or the networks of our customers that are secured by our platform, creating system disruptions or slowdowns and providing access to malicious parties to information stored on our networks or the networks of our customers, resulting in data being publicly disclosed, altered, lost, or stolen, which could subject us to liability and adversely impact our financial condition.
Any actual, alleged or perceived security breach in our systems or networks, or any other actual, alleged or perceived data security incident we suffer, could result in damage to our reputation, negative publicity, loss of customers and sales, loss of competitive advantages over our competitors, increased costs to remedy any problems and otherwise respond to any incident, regulatory investigations and enforcement actions, costly litigation, and other liability. We would also be exposed to a risk of loss or litigation and potential liability under laws, regulations and contracts that protect the privacy and security of personal information. For example, the California Consumer Privacy Act of 2018, or the CCPA, imposes a private right of action for security breaches that could lead to some form of remedy including regulatory scrutiny, fines, private right of action settlements, and other consequences. Where a security incident involves a breach of security leading to the accidental or unlawful destruction, loss, alternation, unauthorized disclosure of, or access to, personal data in respect of which we are a controller or processor under the GDPR or U.K. GDPR (as defined below), this could result in fines of up to €20 million or 4% of annual global turnover under the GDPR or £17 million and 4% of total annual revenue in the case of the U.K. GDPR. We may also be required to notify such breaches to regulators and/or individuals which may result in us incurring additional costs.
In addition, we may incur significant financial and operational costs to investigate, remediate, eliminate and put in place additional tools and devices designed to prevent actual or perceived security breaches and other security incidents, as well as costs to comply with any notification obligations resulting from any security incidents. Any of these negative outcomes could adversely impact the market perception of our platform and customer and investor confidence in our company, and would adversely impact our business, operating results, and financial condition.
Defects, errors, or vulnerabilities in our platform, the failure of our platform to block malware or prevent a security breach, misuse of our platform, or risks of product liability claims would harm our reputation and adversely impact our business, operating results, and financial condition.
Our platform is multi-faceted and may be deployed with material defects, software “bugs” or errors that are not detected until after their commercial release and deployment to our customers. From time to time, certain of our customers have reported defects in our platform related to performance, scalability, and compatibility. Our platform also provides our customers with the ability to customize a multitude of settings, and it is possible that a customer could misconfigure our platform or otherwise fail to configure our products in an optimal manner. Such defects and misconfigurations of our platform could cause our platform to operate at suboptimal efficacy, cause it to fail to secure customers’ computing environments and detect and block threats or temporarily interrupt the functionality of our customers’ endpoints. In addition, because the techniques used by computer hackers to access or sabotage target computing environments change frequently and generally are not recognized until launched against a target, there is a risk that an advanced attack could emerge that our platform is unable to detect or prevent. Furthermore, as a well-known provider of security solutions, our networks, platform, products, including cloud-based technology, and customers could be targeted by attacks specifically designed to disrupt our business and harm our reputation. In addition, defects or errors in our platform could result in a failure to effectively update customers’ cloud-based products. Our data centers and networks may experience technical failures and downtime, may fail to distribute appropriate updates, or may fail to meet the increased requirements of a growing customer base, any of which could temporarily or permanently expose our customers’ computing environments, leaving their computing environments unprotected against cyber threats. Any of these situations could result in negative publicity to us, damage our reputation, and increase expenses and customer relations issues, which would adversely impact our business, financial condition, and operating results.
Advances in computer capabilities, discoveries of new weaknesses and other developments with software generally used by the Internet community may increase the risk we will suffer a security breach. Furthermore, our platform may fail to detect or prevent malware, ransomware, viruses, worms or similar threats for any number of reasons, including our failure to enhance and expand our platform to reflect industry trends, new technologies and new operating environments, the complexity of the environment of our clients and the sophistication of malware, viruses and other threats. Our platform may fail to detect or prevent threats in any particular test for a number of reasons. We or our service providers may also suffer security breaches or unauthorized access to personal information, financial account information, and other confidential information due to employee error, rogue employee activity, unauthorized access by third parties acting with malicious intent or who commit an inadvertent mistake or social engineering. If we experience any breaches of security measures or sabotage or otherwise suffer unauthorized use or disclosure of, or access to, personal information, financial account information or other confidential information, we might be required to expend significant capital and resources to address these problems. We may not be able to remedy any problems caused by hackers or other similar actors in a timely manner, or at all. To the extent potential customers, industry analysts or testing firms believe that the failure to detect or prevent any particular threat is a flaw or indicates that our platform does not provide significant value, our reputation and business would be harmed. Any real or perceived defects, errors or vulnerabilities in our platform, or any other failure of our platform to detect an advanced threat, could result in:
•a loss of existing or potential customers;
•delayed or lost revenue and adverse impacts to our business, financial condition and operating results;
•a delay in attaining, or the failure to attain, market acceptance;
•the expenditure of significant financial and research and development resources in efforts to analyze, correct, eliminate, or work around errors or defects, and address and eliminate vulnerabilities;
•an increase in resources devoted to customer service and support, which could adversely affect our gross margin;
•harm to our reputation or brand; and
•claims and litigation, regulatory inquiries, or investigations, enforcement actions, and other claims and liabilities, all of which may be costly and burdensome and further harm our reputation.
Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until after they are launched against a target, we and our service providers may be unable to anticipate these techniques or to implement adequate preventative measures. Moreover, if a high-profile cybersecurity incident occurs with respect to another software as a service, or SaaS, provider, customers may lose trust in the security of the SaaS business model generally, which could adversely impact our ability to retain existing customers or attract new ones. In the last few years there have been many successful advanced cybersecurity incidents that have damaged several prominent companies in spite of strong information security measures. For example, SolarWinds Corporation, a provider of IT monitoring and management products and services, experienced a cyberattack that appears likely to be the result of a supply chain attack by an outside nation state, resulting in vulnerabilities being included in software updates related to its Orion Platform products delivered between March and June 2020. We expect that the risks associated with cybersecurity incidents and the costs of preventing such attacks will continue to increase in the future.
In addition, we cannot assure you that any limitation of liability provisions in our customer agreements, contracts with third-party vendors and service providers, or other contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security breach or other security-related matter as a result of federal, state, or local laws or ordinances, or unfavorable judicial decisions in the U.S. or other countries. We maintain insurance to protect against certain claims associated with the use of our platform, but our insurance coverage may not adequately cover any claim asserted against us. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds in litigation, divert management’s time and other resources, and harm our reputation. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any future claim will not be excluded or otherwise be denied coverage by any insurer. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely impact our business, operating results and financial condition.
If we are unable to retain our customers, renew and expand our relationships with them, and add new customers, we may not be able to sustain revenue growth, and we may not achieve or maintain profitability in the future.
In recent periods, we have experienced rapid growth in the adoption of our platform, customer base and revenue. However, we may not continue to grow in the future. Any success that we may experience in the future will depend, in large part, on our ability to, among other things:
•maintain, renew and expand our existing customer base;
•continue to attract new customers;
•induce customers to expand deployment of the initially adopted module(s) of our platform across their organizations and infrastructure, and to adopt additional modules of our platform and services;
•improve the capabilities of our platform through research and development;
•continue to successfully expand our business domestically and internationally; and
•successfully compete with other companies in the endpoint security industry.
Our customers have no obligation to renew their subscription for our platform after the expiration of their contractual subscription period, which is generally one to three years, and in the normal course of business, some customers have elected not to renew. In addition, our customers may renew for shorter contract subscription lengths or cease using certain features. Our customer retention and expansion may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with our services, our pricing, customer security and networking issues and requirements, our customers’ spending levels, decreases in the number of endpoints to which our customers deploy our solution, mergers and acquisitions involving our customers, industry developments, competition and general economic conditions. If our efforts to maintain and expand our relationships with our existing customers are not successful, our business, operating results and financial condition will materially suffer.
If our platform is not effectively interoperated within our customers’ IT infrastructure, deployments could be delayed or canceled, which would adversely impact our business, operating results, and financial condition.
Our platform must effectively interoperate with our customers’ existing IT infrastructure, which often has different specifications, utilizes multiple protocol standards, deploys products and services from multiple vendors, and contains multiple generations of products and services that have been added over time. As a result, our solutions can sometimes encounter interoperability issues on deployment or over time, which require additional support and problem solving with customers, in some cases, at a substantial cost to us. We may also have to modify our software so that our products will interoperate with a customer’s infrastructure. These issues would cause longer deployment and integration times for our platform and could cause order cancellations, either of which would adversely affect our business, operating results and financial condition. In addition, government and other customers may require our platform to comply with certain security or other certifications and standards. If we are unable to achieve, or are delayed in achieving, compliance with these certifications and standards, we may be disqualified from selling our platform to such customers, or may otherwise be at a competitive disadvantage, either of which could adversely impact our business, operating results and financial condition.
Disruptions or other business interruptions that affect the availability of our platform could adversely impact our customer relationships and overall business.
Our platform is hosted through Amazon Web Services, or AWS. Our software and systems are designed to use computing, storage capabilities, bandwidth, and other services provided by AWS, and currently our cloud service infrastructure is run on AWS. We have experienced, and expect in the future that we may experience from time to time, interruptions, delays or outages in service availability due to a variety of factors. Capacity constraints could arise from a number of causes such as technical failures, natural disasters, fraud or security attacks. The level of service provided by AWS, or regular or prolonged interruptions in that service, could also impact the use of, and our customers’ satisfaction with, our platform and could harm our business and reputation. In addition, hosting costs will increase as our customer base grows, which could adversely affect our business, operating results and financial condition.
Furthermore, AWS has discretion to change and interpret its terms of service and other policies with respect to us, including on contract renewal, and those actions may be unfavorable to our business operations. AWS may also take actions beyond our control that could seriously harm our business, including discontinuing or limiting our access to one or more AWS services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether, or altering how we are able to process data on AWS in a way that is unfavorable or costly to us. Although we expect that we could obtain similar services from other third parties, if our arrangement with AWS were terminated, we could experience interruptions on our platform and in our ability to make our content available to customers, as well as delays and additional expenses in arranging for alternative cloud infrastructure services. Such a transition may require technical changes to our platform, including, but not limited to, our cloud service infrastructure which was designed to run on AWS. Making such changes could be costly in terms of time and financial resources.
Any of these factors could reduce our revenue, subject us to liability, and cause our customers to decline to renew their subscriptions, any of which would harm our business and operating results.
We may not timely and cost-effectively scale and adapt our existing technology to meet our customers’ performance and other requirements.
Our future growth is dependent upon our ability to continue to meet the needs of new customers and the expanding needs of our existing customers as their use of our solutions grows. As our customers gain more experience with our platform, the number of endpoints and events, the amount of data transferred, processed and stored by us, and the number of locations where our platform is being accessed, have in the past, and may in the future, expand rapidly. In order to meet the performance and other requirements of our customers, we intend to continue to make significant investments to increase capacity and to develop and implement new technologies in our service and cloud infrastructure operations. These technologies, which include databases, applications and server optimizations, network and hosting strategies and automation, are often advanced, complex, new and untested. We may not be successful in developing or implementing these technologies. In addition, it takes a significant amount of time to plan, develop and test improvements to our technologies and infrastructure, and we may not be able to accurately forecast demand or predict the results we will realize from such improvements. To the extent that we do not effectively scale our operations to meet the needs of our growing customer base and to maintain performance as our customers expand their use of our solution, we will not be able to grow as quickly as we anticipate, our customers may reduce or cancel use of our solutions and we will be unable to compete as effectively and our business and operating results will be adversely impacted.
If we do not accurately anticipate and promptly respond to changes in our customers’ technologies, business plans or security needs, our competitive position and prospects will be adversely impacted.
The cybersecurity market has grown quickly and is expected to continue to evolve rapidly. Moreover, many of our customers operate in markets characterized by rapidly changing technologies and business plans, which require them to add numerous network-connected endpoints and adapt to increasingly complex IT environments, incorporating a variety of hardware, software applications, operating systems and networking protocols. As their technologies and business plans grow more complex, we expect these customers to face new and increasingly sophisticated methods of attack. We face significant challenges in ensuring that our platform effectively identifies and responds to these advanced and evolving attacks. As a result of the continued rapid innovations in the technology industry, including the rapid growth of smartphones, tablets and other devices, enterprise employees using personal devices for work, and the rapidly evolving Internet of Things, we expect the networks of our customers to continue to change rapidly and become more complex. There can be no assurance that we will be successful in developing and marketing, on a timely basis, enhancements to our platform that adequately address the changing needs of our customers. In addition, any enhancements to our platform could involve research and development processes that are more complex, expensive and time-consuming than we anticipate. We may experience unanticipated delays in the availability of enhancements to our platform and may fail to meet customer expectations with respect to the timing of such availability. If we do not quickly respond to the rapidly changing and rigorous needs of our customers by developing and releasing updates to our platform on a timely basis that can adequately respond to advanced threats and our customers’ evolving needs, our business, operating results and financial condition will be adversely affected.
If we are not able to maintain and enhance our brand and reputation, our business and operating results may be adversely affected.
We believe that maintaining and enhancing our brand and our reputation as a leading provider of endpoint security solutions is critical to our relationship with our existing customers, channel partners and alliance partners and our ability to attract new customers and partners. The successful promotion of our brand will depend on a number of factors, including our marketing efforts, our ability to continue to develop additional features for our platform, our ability to successfully differentiate our platform from competitive cloud-based or legacy security solutions and, ultimately, our ability to detect and stop breaches. Although we believe it is important for our growth, our brand promotion activities may not be successful or yield increased revenue.
In addition, independent industry or financial analysts and research firms often test our solutions and provide reviews of our platform, as well as the products of our competitors, and perception of our platform in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive as
compared to those of our competitors’ products, our brand may be adversely affected. Our solutions may fail to detect or prevent threats in any particular test for a number of reasons that may or may not be related to the efficacy of our solutions in real world environments. To the extent potential customers, industry analysts or testing firms believe that the occurrence of a failure to detect or prevent any particular threat is a flaw or indicates that our solutions or services do not provide significant value, we may lose customers, and our reputation, financial condition and business would be harmed. Additionally, the performance of our channel partners and alliance partners may affect our brand and reputation if customers do not have a positive experience with these partners. In addition, we have in the past worked, and continue to work, with high profile customers as well as assist in analyzing and remediating high profile cyberattacks. Our work with such customers has exposed us to publicity and media coverage. Negative publicity about us, including about our management, the efficacy and reliability of our platform, our products offerings, our professional services and the customers we work with, even if inaccurate, could adversely affect our reputation and brand.
If we are unable to maintain successful relationships with our channel partners and alliance partners, or if our channel partners or alliance partners fail to perform, our ability to market, sell and distribute our platform will be limited, and our business, operating results, and financial condition will be harmed.
Substantially all of our sales are fulfilled through our channel partners, including resellers, distributors, MSPs, MSSPs, MDRs, OEMs, and IR firms, and we expect that we will continue to generate a significant portion of our revenue from channel partners for the foreseeable future. Our channel partners generated 92% and 96% of our revenue for fiscal 2020 and fiscal 2021, respectively. Our channel partners generated 95% and 91% of our revenue for the three months ended April 30, 2020 and 2021, respectively. Our two largest channel partners for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 were Exclusive Networks and SHI International Corp. We generated 19% of our revenue from Exclusive Networks for both fiscal 2020 and fiscal 2021 and 19% and 17% for the three months ended April 30, 2020 and 2021, respectively. We generated 14% and 13% of our revenue from SHI International for fiscal 2020 and fiscal 2021, respectively. We generated 14% and 10% of our revenue from SHI International for the three months ended April 30, 2020 and 2021, respectively. Our agreements with our channel partners, including agreements with Exclusive Networks and SHI International, are non-exclusive, do not last for set terms, and may be terminated by either party at any time. Further, channel partners fulfill our sales on a purchase order basis and do not impose minimum purchase requirements or related terms on sales. Additionally, we have entered, and intend to continue to enter, into alliance partnerships with third parties to support our future growth plans. The loss of a substantial number of our channel partners or alliance partners, or the failure to recruit additional partners, would adversely affect our business, operating results, and financial condition.
To the extent our partners are unsuccessful in selling our platform, or if we are unable to enter into arrangements with and retain a sufficient number of high-quality partners in each of the regions in which we sell our platform, we are unable to keep them motivated to sell our platform, or our partners shift focus to other vendors and/or our competitors, our ability to sell our platform and operating results will be harmed. The termination of our relationship with any significant partner may adversely impact our sales and operating results. Our ability to achieve revenue growth in the future will depend in part on our ability to maintain successful relationships with our channel partners and in training our channel partners to independently sell and deploy our platform.
We are also exposed to credit and liquidity risks and our operating results will be harmed if our partners were to become unable or unwilling to pay us, terminated their relationships with us or went out of business. Although we have programs in place that are designed to monitor and mitigate such risks, we cannot guarantee these programs will be effective in reducing our risks. If we are unable to adequately control these risks, our business, operating results, and financial condition would be harmed. If partners fail to pay us under the terms of our agreements or we are otherwise unable to collect on our accounts receivable from these partners, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. Our partners may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, or pay those amounts more slowly, either of which would adversely affect our business, operating results and financial condition. We may be further impacted by consolidation of our existing channel partners. In such instances, we may experience changes to our overall business and operational relationships due to dealing with a larger combined entity, and our ability to maintain such relationships on favorable contractual terms may be more limited. We may also become increasingly dependent on a more limited number of channel partners, as consolidation increases the relative
proportion of our business for which each channel partner is responsible, which may magnify the risks described in the preceding paragraphs.
Our business depends, in part, on sales to government organizations, and significant changes in the contracting or fiscal policies of such government organizations could have an adverse effect on our business and operating results.
Our future growth depends, in part, on increasing sales to government organizations. Demand from government organizations is often unpredictable, subject to budgetary uncertainty and typically involves long sales cycles. We have made significant investments to address the government sector, but we cannot assure you that these investments will be successful, or that we will be able to maintain or grow our revenue from the government sector. Although we anticipate that they may increase in the future, sales to governmental organizations have not accounted for, and may never account for, a significant portion of our revenue. Sales to governmental organizations are subject to a number of challenges and risks that may adversely impact our business. Sales to such government entities include the following risks:
•selling to governmental agencies can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale;
•government certification requirements applicable to our platform may change and, in doing so, restrict our ability to sell into the governmental sector until we have attained the revised certification. For example, although we are currently certified under the Federal Risk and Authorization Management Program, or FedRAMP, such certification is costly to maintain and if we lost our certification in the future it would restrict our ability to sell to government customers;
•government demand and payment for our platform may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our platform;
•governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our platform, which would adversely impact our revenue and operating results, or institute fines or civil or criminal liability if the audit were to uncover improper or illegal activities; and
•governments may require certain products to be manufactured, produced, hosted or accessed solely in their country or in other relatively high-cost locations, and we may not produce or host all products in locations that meet these requirements, affecting our ability to sell these products to governmental agencies.
The occurrence of any of the foregoing could cause governmental organizations to delay or refrain from purchasing our solutions in the future or otherwise have an adverse effect on our business, operating results and financial condition.
Our long-term success depends, in part, on our ability to expand the sale of our platform to customers located outside of the United States and our current, and any further, expansion of our international operations exposes us to risks that could have a material adverse effect on our business, operating results, and financial condition.
We are generating a growing portion of our revenue outside of the United States, and conduct our business activities in various foreign countries, including some emerging markets where we have limited experience, where the challenges of conducting our business can be significantly different from those we have faced in more developed markets and where business practices may create internal control risks. There are certain risks inherent in conducting international business, including:
•fluctuations in foreign currency exchange rates, which could add volatility to our operating results;
•new, or changes in, regulatory requirements;
•uncertainty regarding regulation, currency, tax, and operations resulting from the United Kingdom’s, or the U.K. exit from the European Union, or the E.U., and possible disruptions in trade, the sale of our services and commerce, and movement of our people between the U.K., E.U., and other locations;
•tariffs, export and import restrictions, restrictions on foreign investments, sanctions, and other trade barriers or protection measures;
•we consider ourselves to be a processor under the GDPR/U.K. GDPR in some instances and a controller of personal data in other circumstances. For example, by expanding into the E.U. and U.K., we may also trigger Article 3(2) of the GDPR/U.K. GDPR as we may be considered to be monitoring data subjects. Additionally, where processing personal data on behalf of our E.U./U.K. customers or processing personal data of E.U./U.K. end users, we may be required to sign data processing agreements which comply with Article 28 of the GDPR/U.K. GDPR. Likewise, to the extent any of our E.U./U.K. entities directly contract with E.U./U.K. customers for the provision of services, we will be directly subject to the GDPR/U.K. GDPR as a processor when processing this personal data;
•costs of localizing products and services;
•lack of acceptance of localized products and services;
•the need to make significant investments in people, solutions and infrastructure, typically well in advance of revenue generation;
•challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs;
•difficulties in maintaining our corporate culture with a dispersed and distant workforce;
•treatment of revenue from international sources, evolving domestic and international tax environments, and other potential tax issues, including with respect to our corporate operating structure and intercompany arrangements;
•different or weaker protection of our intellectual property, including increased risk of theft of our proprietary technology and other intellectual property;
•economic weakness or currency-related crises;
•compliance with multiple, conflicting, ambiguous or evolving governmental laws and regulations, including employment, tax, privacy, anti-corruption, import/export, antitrust, data transfer, storage and protection, and industry-specific laws and regulations, including rules related to compliance by our third-party resellers and our ability to identify and respond timely to compliance issues when they occur, and regulations applicable to us and our third-party data providers from whom we purchase and resell syndicated data;
•vetting and monitoring our third-party resellers in new and evolving markets to confirm they maintain standards consistent with our brand and reputation;
•generally longer payment cycles and greater difficulty in collecting accounts receivable;
•our ability to adapt to sales practices and customer requirements in different cultures;
•the lack of reference customers and other marketing assets in regional markets that are new or developing for us, as well as other adaptations in our market generation efforts that we may be slow to identify and implement;
•dependence on certain third parties, including resellers with whom we do not have extensive experience;
•natural disasters, acts of war, terrorism, or pandemics, including the ongoing COVID-19 pandemic;
•corporate espionage; and
•political instability and security risks in the countries where we are doing business and changes in the public perception of governments in the countries where we operate or plan to operate.
We have undertaken, and might undertake, additional corporate operating restructurings that involve our group of foreign country subsidiaries through which we do business abroad. We consider various factors in evaluating these restructurings, including the alignment of our corporate legal entity structure with our organizational structure and its objectives, the operational and tax efficiency of our group structure, and the long-term cash flows and cash needs of our business. Such restructurings increase our operating costs, and if ineffectual, could increase our income tax liabilities and our global effective tax rate.
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The U.S. enacted significant tax reform in December 2017, and we are continuing to evaluate its impact as new guidance and regulations are published. In addition, the Organization for Economic Co-operation and Development, or OECD, issued final action items or proposals related to its initiative to combat base erosion and profit shifting, or BEPS. The OECD urged its members to adopt the proposals to counteract the effects of taxpayers’ use of tax havens and preferential tax regimes globally. One BEPS proposal redefines a “permanent establishment” under treaty tax law, and changes how profits would be attributed to the permanent establishment. Some countries have incorporated the BEPS proposals into their laws and we expect other countries to follow suit, including the adoption of market-based, income sourcing provisions that assign a greater share of taxable income of a non-resident taxpayer to the country of its customer’s location than do traditional “arm’s length” income sourcing provisions. Some of the BEPS and related proposals, if enacted into law in the United States and in the foreign countries where we do business, could increase the burden and costs of our tax compliance. Moreover, such changes could increase the amount of taxes we incur in those jurisdictions, and in turn, increase our global effective tax rate.
We have experienced rapid growth in recent periods, and if we do not effectively manage our future growth, our business, operating results, and financial condition may be adversely affected.
We have experienced rapid revenue growth in recent periods, and we expect to continue to invest broadly across our organization to support our growth. For example, our headcount grew from over 450 employees as of February 1, 2020, to over 850 employees as of April 30, 2021. Although we have experienced rapid growth historically, we may not sustain our current growth rates, nor can we assure you that our investments to support our growth will be successful. The growth and expansion of our business will require us to invest significant financial and operational resources and the continuous dedication of our management team.
In addition, as we have grown, our number of customers has also increased significantly, and we have increasingly managed more complex deployments of our platform in more complex computing environments. The rapid growth and expansion of our business places a significant strain on our management, operational, and financial resources. To manage any future growth effectively, we must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems and controls, and our ability to manage headcount, capital, and processes in an efficient manner. Effectively managing our growth may also be more difficult to accomplish the longer that our employees must work remotely due to the COVID-19 pandemic.
We may not be able to successfully implement or scale improvements to our systems, processes, and controls in an efficient or timely manner. In addition, our existing systems, processes, and controls may not prevent or detect all errors, omissions, or fraud. We may also experience difficulties in managing improvements to our systems, processes, and controls or in connection with third-party software licensed to help us with such improvements. Any future growth will continue to add complexity to our organization and require effective coordination throughout our organization. Failure to manage any future growth effectively could result in increased costs, cause difficulty or delays in deploying new customers, reduce demand for our platform, cause difficulties in introducing new features or other operational difficulties, and any of these difficulties would adversely impact our business, operating results and financial condition.
Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.
Our revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for our platform, particularly with respect to large organizations and government entities. Customers often view the subscription to our platform as a significant strategic decision and, as a result, frequently require considerable time to evaluate, test and qualify our platform prior to entering into or expanding a relationship with us. Large enterprises and government entities in particular often undertake a significant evaluation process that further lengthens our sales cycle.
Our direct sales team develops relationships with our customers, and works with our channel partners on account penetration, account coordination, sales and overall market development. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce a sale. Security solution purchases are frequently subject to budget constraints, multiple approvals and unanticipated administrative, processing and other delays. As a result, it is difficult to predict whether and when a sale will be completed. The failure of our efforts to secure sales after investing resources in a lengthy sales process would adversely affect our business, operating results and financial condition.
The sales prices of our platform may decrease, or the mix of our sales may change, which may reduce our gross profits and adversely impact our financial results.
We have limited experience with respect to determining the optimal prices for our platform. As the market for endpoint security matures, or as new competitors introduce new products or services that are similar to or compete with ours, we may be unable to attract new customers at the same price or based on the same pricing model as we have used historically. Further, competition continues to increase in the market segments in which we participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors with more diverse product and service offerings may reduce the price of products or services that compete with ours or may bundle them with other products and services. This could lead customers to demand greater price concessions or additional functionality at the same price levels. As a result, in the future we may be required to reduce our prices or provide more features without corresponding increases in price, which would adversely affect our business, operating results, and financial condition.
Because we recognize revenue from subscriptions to our platform over the term of the subscription, downturns or upturns in new business will not be immediately reflected in our operating results.
We generally recognize revenue from customers ratably over the term of their subscription, which is generally one to three years. As a result, a substantial portion of the revenue we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, any increase or decrease in new sales or renewals in any one period will not be immediately reflected in our revenue for that period. Any such change, however, would affect our revenue in future periods. Accordingly, the effect of downturns or upturns in new sales and potential changes in our rate of renewals will not be fully reflected in our operating results until future periods. We may also be unable to timely reduce our cost structure in line with a significant deterioration in sales or renewals that would adversely affect our business, operating results and financial condition.
Adverse economic conditions or reduced information technology spending could adversely affect our business, operating results and financial condition.
Our business depends on the overall demand for information technology and on the economic health of our current and prospective customers. In addition, the purchase of our platform is often discretionary and may involve a significant commitment of capital and other resources. Weak global and regional economic conditions and spending environments, geopolitical instability and uncertainty, weak economic conditions in certain regions or a reduction in information technology spending regardless of macro-economic conditions, including the effects of the COVID-19 pandemic on the foregoing issues, could have adverse impacts on our business, operating results, and financial condition, including longer sales cycles, lower prices for our platform, higher default rates among our channel partners, reduced sales and slower or declining growth.
The COVID-19 pandemic could adversely affect our business, operating results, and financial condition.
The COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, operating results, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted.
We have experienced, and may continue to experience, a modest adverse impact on certain parts of our business following the implementation of shelter-in-place orders to mitigate the outbreak of the COVID-19 pandemic, including a lengthening of the sales cycle for some prospective customers and delays in the delivery of professional services and trainings to our customers.
We do not yet know the full extent of potential impacts on our business, operations or on the global economy as a whole, particularly if the COVID-19 pandemic continues and persists for an extended period of time. Potential impacts include:
•our customer prospects and our existing customers may experience slowdowns in their businesses, which in turn may result in reduced demand for our platform, lengthening of sales cycles, loss of customers, and difficulties in collections;
•substantially all of our employees are working from home and will likely continue to do so for the foreseeable future, which may result in decreased employee productivity and morale with increased unwanted employee attrition;
•we continue to incur fixed costs, particularly for real estate, and are deriving reduced or no benefit from those costs;
•we may continue to experience disruptions to our growth planning, such as for facilities and international expansion;
•we anticipate incurring costs in returning to work from our facilities around the world, including changes to the workplace, such as space planning, food service, and amenities;
•we may be subject to legal liability for safe workplace claims;
•our critical vendors could go out of business;
•substantially all of our in-person marketing events, including conferences, have been canceled and we may continue to experience prolonged delays in our ability to reschedule or conduct in-person events and other related activities; and
•our marketing, sales, and support organizations are accustomed to extensive face-to-face customer and partner interactions, and our ability to conduct business is largely unproven.
Any of the foregoing could adversely affect our business, financial condition, and operating results.
Moreover, due to the increasingly distributed nature of many workplaces as a result of shelter-in-place mandates, the demand for cybersecurity solutions like ours has increased during the COVID-19 pandemic. As a result, our business has experienced, and may continue to experience, a positive impact as a result of the COVID-19 pandemic. Moreover, we have seen slower growth in certain operating expenses due to reduced business travel, deferred hiring for some positions, and the virtualization or cancellation of customer and employee events. However, as a vaccine becomes widely available and people begin to return to offices and other workplaces, any positive impacts of the COVID-19 pandemic on our business may slow or decline once the impact of the pandemic tapers.
We provide service level commitments under some of our customer contracts. If we fail to meet these contractual commitments, we could be obligated to provide partial refunds or our customers could be entitled to terminate their contracts and our business would suffer.
Certain of our customer agreements contain service level commitments, which contain specifications regarding the availability of our platform and our support services. Failure of or disruption to our infrastructure could impact the performance of our platform and the availability of services to customers. If we are unable to meet our stated service level commitments or if we suffer extended periods of poor performance or unavailability of our platform, we may be contractually obligated to provide affected customers with partial refunds or termination rights. To date, there has not been a material failure to meet our service level commitments, and we do not currently have any material liabilities accrued on our consolidated balance sheets for such commitments. Our business, operating results and financial condition would be adversely affected if we suffer performance issues or downtime that exceeds the service level commitments under our agreements with our customers.
Our business is subject to the risks of warranty claims, product returns and product defects from real or perceived defects in our solutions or their misuse by our customers or third parties and indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
We may be subject to liability claims for damages related to errors or defects in our solution. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our platform will harm our business and operating results. Although we generally have limitation of liability provisions in our terms and conditions of sale, they may not fully or effectively protect us from claims as a result of federal, state or local laws or ordinances, or unfavorable judicial decisions in the United States or other countries. The sale and support of our platform also entails the risk of product liability claims.
Additionally, we typically provide indemnification to customers for certain losses suffered or expenses incurred as a result of third-party claims arising from our infringement of a third party’s intellectual property. We also provide unlimited liability for certain breaches of confidentiality, as defined in our terms of service. We also provide limited liability in the event of certain breaches of our terms of service. Certain of these contractual provisions survive termination or expiration of the applicable agreement. We have not to date received any indemnification claims from third parties. However, as we continue to grow, the possibility of these claims against us will increase.
If our customers or other third parties we do business with make intellectual property rights or other indemnification claims against us, we will incur significant legal expenses and may have to pay damages, license fees and/or stop using technology found to be in violation of the third party’s rights. We may also have to seek a license for the technology. Such license may not be available on reasonable terms, if at all, and may significantly increase our operating expenses or may require us to restrict our business activities and limit our ability to deliver certain solutions or features. We may also be required to develop alternative non-infringing technology, which could require significant effort and expense and/or cause us to alter our platform, which could harm our business. Large indemnity obligations, whether for intellectual property or in certain limited circumstances, other claims, would harm our business, operating results and financial condition.
Additionally, our platform may be used by our customers and other third parties who obtain access to our solutions for purposes other than for which our platform was intended.
Under certain circumstances our employees may have access to our customers’ platforms. An employee may take advantage of such access to conduct malicious activities. Any such misuse of our platform could result in negative press coverage and negatively affect our reputation, which could result in harm to our business, reputation and operating results.
We maintain insurance to protect against certain claims associated with the use of our platform, but our insurance coverage may not adequately cover any claim asserted against us. In addition, even claims that ultimately are unsuccessful could result in our expenditure of funds in litigation, divert management’s time and other resources, and harm our business and reputation. We have offered some of our customers a limited warranty, subject to certain conditions, and our potential liability under this warranty is provided by our insurance carrier to us. For example, in limited circumstances, we offer certain customers ransomware warranty in addition to their subscriptions, providing
coverage in the form of a limited monetary payment, if they are affected by a ransomware attack (as specified in our ransomware warranty agreement). The ransomware warranty coverage provides that we will pay $1,000 per endpoint affected by a ransomware-based breach subject to the terms and limitations of the warranty, and is further capped at $1 million for every consecutive 12 months in which the customer subscribes to the solutions with respect to the affected endpoint. Any failure or refusal of our insurance providers to provide the expected insurance benefits to us after we have paid the ransomware warranty claims would cause us to incur significant expense or cause us to cease offering this warranty which could damage our reputation, cause us to lose customers, expose us to liability claims by our customers, negatively impact our sales and marketing efforts, and have an adverse effect on our business, financial condition and operating results. Further, although the terms of the warranty do not allow those customers to use warranty claim payments to fund payments to persons on the U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC, list of Specially Designated Nationals and Blocked Persons or who are otherwise subject to U.S. sanctions, we cannot assure you that all of our customers will comply with our warranty terms or refrain from taking actions, in violation of our warranty and applicable law.
We may be adversely affected by natural disasters, pandemics and other catastrophic events, and by man-made problems such as terrorism, that could disrupt our business operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and could have an adverse effect on our business, operating results, and financial condition. Our business operations are also subject to interruption by fire, power shortages, and other events beyond our control. In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operating results to suffer. For example, the ongoing effects of the COVID-19 pandemic and the measures that we, our customers and governmental authorities have adopted have resulted in, and could continue to result in, customers not purchasing or renewing our products or services, significant delays or lengthening of our sales cycles, and reductions in average transaction sizes, and could negatively affect our customer success and sales and marketing efforts, result in difficulties or changes to our customer support, or create operational or other challenges, any of which would harm our business and operating results. In addition, our growth rate may actually slow or decline once the impact of the COVID-19 pandemic tapers, particularly as a vaccine becomes widely available and people begin to return to offices and other workplaces. Further, acts of terrorism and other geopolitical unrest could cause disruptions in our business or the businesses of our partners or the economy as a whole. In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in development of our platform, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results. For example, our corporate offices are located in California, a state that frequently experiences earthquakes and wildfires. Additionally, all the aforementioned risks will be further increased if we do not implement an effective disaster recovery plan or our partners’ disaster recovery plans prove to be inadequate.
Risks Related to our People
We rely on our management team and other key employees and will need additional personnel to grow our business, and the loss of one or more key employees or our inability to hire, integrate, train and retain qualified personnel, including members of our board of directors, could harm our business.
Our future success is dependent, in part, on our ability to hire, integrate, train, retain and motivate the members of our management team and other key employees throughout our organization. The loss of key personnel, including key members of our management team or members of our board of directors, as well as certain of our key marketing, sales, finance, support, product development, human resources, or technology personnel, could disrupt our operations and have an adverse effect on our ability to grow our business. In particular, we are highly dependent on the services of Tomer Weingarten, our co-founder, Chairman of the Board of Directors, President, and Chief Executive Officer, who is critical to the development of our technology, platform, future vision and strategic direction.
Competition for highly skilled personnel is intense, especially in the San Francisco Bay Area and in Israel, where we have a substantial presence and need for highly skilled personnel, and we may not be successful in hiring or retaining qualified personnel to fulfill our current or future needs. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. For example, in recent years, recruiting, hiring and retaining employees with expertise in the cybersecurity industry has become increasingly difficult as the demand for cybersecurity professionals has increased as a result of the recent cybersecurity attacks on global corporations and governments. Many of the companies with which we compete for experienced personnel have greater resources than we have. Our competitors also may be successful in recruiting and hiring members of our management team or other key employees, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. We have in the past, and may in the future, be subject to allegations that employees we hire have been improperly solicited, or that they have divulged proprietary or other confidential information or that their former employers own such employees’ inventions or other work product, or that they have been hired in violation of non-compete provisions or non-solicitation provisions.
In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity or equity awards declines, it may adversely affect our ability to retain highly skilled employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be severely harmed. Further, our competitors may be successful in recruiting and hiring members of our management team or other key employees, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be severely harmed.
If we do not effectively hire, integrate and train additional sales personnel, and expand our sales and marketing capabilities, we may be unable to increase our customer base and increase sales to our existing customers.
Our ability to increase our customer base and achieve broader market adoption of our platform will depend to a significant extent on our ability to continue to expand our sales and marketing operations. We plan to dedicate significant resources to sales and marketing programs and to expand our sales and marketing capabilities to target additional potential customers, but there is no guarantee that we will be successful in attracting and maintaining additional customers. If we are unable to find efficient ways to deploy our sales and marketing investments or if our sales and marketing programs are not effective, our business and operating results would be adversely affected.
Furthermore, we plan to continue expanding our sales force and there is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve revenue growth will depend, in part, on our success in hiring, integrating, training and retaining sufficient numbers of sales personnel to support our growth, particularly in international markets. New hires require significant training and may take significant time before they achieve full productivity. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. If we are unable to hire and train a sufficient number of effective sales personnel, or the sales personnel we hire are not successful in obtaining new customers or increasing sales to our existing customer base, our business, operating results and financial condition will be adversely affected.
Any inability to maintain a high-quality customer support organization could lead to a lack of customer satisfaction, which could hurt our customer relationships and have a material adverse effect on our business, financial condition and operating results.
Once our platform is deployed within our customers’ computing environments, our customers rely on our technical support services to assist with service customization and optimization and to resolve certain issues relating to the implementation and maintenance of our platform. If we do not effectively assist our customers in deploying our platform, succeed in helping our customers quickly resolve technical issues, or provide effective ongoing support, our ability to sell additional products and services as part of our platform to existing customers would be adversely affected and our reputation with potential customers could be damaged.
In addition, our sales process is highly dependent on our product and business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our services to existing and prospective customers, and our business, operating results and financial condition.
We believe that 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, and our business may be harmed.
We believe that our corporate culture has been a key contributor to our success. If we do not continue to develop our corporate culture as we grow and evolve, it could harm our ability to foster the innovation, creativity, and teamwork that we believe is important to support our growth. As our organization grows and we are required to implement more complex organizational structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture, which could negatively impact our future success.
Risks Related to Our Intellectual Property
Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our platform without compensating us.
We rely primarily on patent, trademark, copyright and trade secrets laws, and confidentiality procedures and contractual provisions to protect our technology. Valid patents may not issue from our pending applications, and the claims eventually allowed on any patents may not be sufficiently broad to protect our technology or platform. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages to us. Patent applications in the United States are typically not published until at least 18 months after filing, or, in some cases, not at all, and publications of discoveries in industry-related literature lag behind actual discoveries. We cannot be certain that we were the first to make the inventions claimed in our pending patent applications or that we were the first to file for patent protection. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, recent changes to the patent laws in the United States may bring into question the validity of certain software patents and may make it more difficult and costly to prosecute patent applications. Such changes may lead to uncertainties or increased costs and risks surrounding the prosecution, validity, ownership, enforcement, and defense of our issued patents and patent applications and other intellectual property, the outcome of third-party claims of infringement, misappropriation, or other violation of intellectual property brought against us and the actual or enhanced damages (including treble damages) that may be awarded in connection with any such current or future claims, and could have a material adverse effect on our business, operating results, and financial condition.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our platform or obtain and use information that we regard as proprietary. We generally enter into confidentiality or license agreements with our employees, consultants, vendors and customers, and generally limit access to and distribution of our proprietary information. However, such agreements may not be enforceable in full or in part in all jurisdictions and any breach could have a negative effect on our business and our remedy for such breach may be limited. 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. As such, we cannot guarantee that the steps taken by us will prevent misappropriation of our technology. Policing unauthorized use of our technology or platform is difficult. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States. For example, many foreign countries limit the enforceability of patents against certain third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Effective trade secret protection may also not be available in every country in which our products are available or where we have employees or independent contractors. The loss of trade secret protection could make it easier for third parties to compete with our products by copying functionality. In addition, any changes in, or unexpected interpretations of, the trade secret and employment
laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. From time to time, legal action by us may be necessary to enforce our patents and other IP rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results and financial condition. If we are unable to protect our proprietary rights (including aspects of our software and platform protected other than by patent rights), we will find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create our platform and other innovative products that have enabled us to be successful to date. Moreover, we may need to expend additional resources to defend our intellectual property rights in foreign countries, and our inability to do so could impair our business or adversely affect our international expansion.
Third parties may claim that our platform infringes their intellectual property rights and this may create liability for us or otherwise adversely affect our business, operating results and financial condition.
Third parties may claim that our current or future products and services infringe their intellectual property rights, and such claims may result in legal claims against our channel partners, our alliance partners, 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 to increase as the number of products and services and the level of competition in our market grows, as the functionality of our platform overlaps with that of other products and services, and as the volume of issued software patents and patent applications continues to increase. We generally agree in our customer contracts to indemnify customers for certain expenses or liabilities they incur as a result of third-party intellectual property infringement claims associated with our platform. To the extent that any claim arises as a result of third-party technology we have licensed for use in our platform, we may be unable to recover from the appropriate third party any expenses or other liabilities that we incur.
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, including certain of these leading companies, have invited us to license their patents and may, in the future, assert patent, copyright, trademark, or other intellectual property rights against us, our channel partners, our alliance 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 the enterprise software market. For example, we recently received a letter from International Business Machines Corporation, or IBM, alleging that we infringe on three U.S. patents held by IBM. To date, no litigation has been filed by IBM against us regarding the IBM patents. Based upon our preliminary review of these patents, we believe we have meritorious defenses to IBM’s allegations, although there can be no assurance that IBM will refrain from suing us, or that we will be successful in defending against these allegations or reaching a business resolution that is satisfactory to us.
There may be third-party intellectual property rights, including issued or pending patents, that cover significant aspects of our technologies or business methods. We may also face exposure to third-party intellectual property infringement, misappropriation, or violation actions if we engage software engineers or other personnel who were previously engaged by competitors or other third parties and those personnel inadvertently or deliberately incorporate proprietary technology of third parties into our products. In addition, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to develop, market, and support potential products or enhancements, which could severely harm our business. 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 platform and may be unable to compete effectively. Any of these results would adversely affect our business, operating results and financial condition.
We license technology from third parties, and our inability to maintain those licenses could harm our business.
We currently incorporate, and will in the future incorporate, technology that we license from third parties, including software, into our solutions. Licensing technologies from third parties exposes us 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. We cannot be certain that our licensors do not or will not infringe on the intellectual property rights of third parties or that our licensors have or will have sufficient rights to the licensed intellectual property in all jurisdictions in which we may sell our platform. Some of our agreements with our licensors may be terminated by them for convenience, or otherwise provide for a limited term. If we are unable to continue to license technology because of intellectual property infringement claims brought by third parties against our licensors or against us, or if we are unable to continue our license agreements or enter into new licenses on commercially reasonable terms, our ability to develop and sell solutions and services containing or dependent on that technology would be limited, and our business could be harmed. Additionally, if we are unable to license technology from third parties, we may be forced to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner, or at all, and may require us to use alternative technology of lower quality or performance standards. This could limit or delay our ability to offer new or competitive solutions and increase our costs. As a result, our business, operating results and financial condition would be adversely affected.
Some of our technology incorporates “open source” software, which could negatively affect our ability to sell our platform and subject us to possible litigation.
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 products and subscriptions. The use and distribution of open source software may entail greater risks than the use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Although we monitor our use of open source software in an effort both to comply with the terms of the applicable open source licenses and to avoid subjecting our products to conditions we do not intend, many of the risks associated with use of open source software cannot be eliminated and could negatively affect our business. In addition, the wide availability of source code used in our solutions could expose us to security vulnerabilities.
Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use. If we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public, including authorizing further modification and redistribution, or otherwise be limited in the licensing of our services, each of which could provide an advantage to our competitors or other entrants to the market, create security vulnerabilities in our solution, require us to re-engineer all or a portion of our platform, and reduce or eliminate the value of our services. This would allow our competitors to create similar products with lower development effort and time and ultimately could result in a loss of sales for us.
The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in ways that could impose unanticipated conditions or restrictions on our ability to commercialize products and subscriptions incorporating such software. Moreover, we cannot assure you that our processes for controlling our use of open source software in our products and subscriptions will be effective. From
time to time, we may face claims from third parties asserting ownership of, or demanding release of, the open source software or derivative works that we developed using such software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition, or require us to devote additional research and development resources to change our solution. Responding to any infringement or noncompliance claim by an open source vendor, regardless of its validity, discovering certain open source software code in our platform, or a finding that we have breached the terms of an open source software license, 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 that we would not normally find acceptable;
•causing delays in the deployment of our platform or service offerings to our customers;
•requiring us to stop offering certain services or features of our platform;
•requiring us to redesign certain components of our platform using alternative non-infringing or non-open source technology, which could require significant effort and expense;
•requiring us to disclose our software source code and the detailed program commands for our software; and
•requiring us to satisfy indemnification obligations to our customers.
Risks Related to Legal and Regulatory Matters
We are subject to laws and regulations, including governmental export and import controls, sanctions and anti-corruption laws, that could impair our ability to compete in our markets and subject us to liability if we are not in full compliance with applicable laws.
We are subject to laws and regulations, including governmental export controls, that could subject us to liability or impair our ability to compete in our markets. Our platform and related technology is subject to U.S. export controls, including the U.S. Department of Commerce’s Export Administration Regulations, and we and our employees, representatives, contractors, agents, intermediaries and other third parties are also subject to various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control, or OFAC. We incorporate standard encryption algorithms into our platform, which, along with the underlying technology, may be exported outside of the U.S. only with the required export authorizations, including by license, license exception or other appropriate government authorizations, which may require the filing of an encryption registration and classification request. We also offer certain customers a ransomware warranty in addition to their subscriptions, providing coverage in the form of a limited monetary payment, if they are affected by a ransomware attack (as specified in our ransomware warranty agreement), and though the terms of the warranty do not allow those customers to use warranty claim payments to fund payments to persons on OFAC’s list of Specially Designated Nationals and Blocked Persons or who are otherwise subject to U.S. sanctions, we cannot assure you that all of our customers will comply with our warranty terms or refrain from taking actions, in violation of our warranty and applicable law. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain cloud-based solutions to countries, governments and persons targeted by U.S. sanctions. We also collect information about cyber threats from open sources, intermediaries and third parties that we make available to our customers in our threat industry publications. While we have implemented certain procedures to facilitate compliance with applicable laws and regulations in connection with the collection of this information, we cannot assure you that these procedures have been effective or that we, or third parties who we do not control, have complied with all laws or regulations in this regard. Failure by our employees, representatives, contractors, channel partners, agents, intermediaries or other third parties to comply with applicable laws and regulations in the collection of this
information also could have negative consequences to us, including reputational harm, government investigations and penalties.
Although we take precautions to prevent our information collection practices and services from being provided in violation of such laws, our information collection practices and services may have been in the past, and could in the future be, provided in violation of such laws. If we or our employees, representatives, contractors, channel partners, agents, intermediaries or other third parties fail to comply with these laws and regulations, we could be subject to civil or criminal penalties, including the possible loss of export privileges and fines. We may also be adversely affected through reputational harm, loss of access to certain markets or otherwise. Obtaining the necessary authorizations, including any required license, for a particular transaction may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities.
Various countries regulate the import of certain encryption technology, including through import permit and license requirements, and have enacted laws that could limit our ability to distribute our platform or could limit our customers’ ability to implement our platform in those countries. Changes in our platform or changes in export and import regulations may create delays in the introduction of our platform into international markets, prevent our customers with international operations from deploying our platform globally or, in some cases, prevent the export or import of our platform to certain countries, governments or persons altogether. Any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell our platform to, existing or potential customers with international operations. Any decreased use of our platform or limitation on our ability to export or sell our platform would adversely affect our business, operating results and financial condition.
We are also subject to the United States Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the United Kingdom Bribery Act 2010, or the Bribery Act, and other anti-corruption, sanctions, anti-bribery, anti-money laundering and similar laws in the United States and other countries in which we conduct activities. Anti-corruption and anti-bribery laws, which have been enforced aggressively and are interpreted broadly, prohibit companies and their employees, agents, intermediaries and other third parties from promising, authorizing, making or offering improper payments or other benefits to government officials and others in the private sector. We leverage third parties, including intermediaries, agents and channel partners, to conduct our business in the United States and abroad, to sell subscriptions to our platform and to collect information about cyber threats. We and these third parties may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we 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, agents, intermediaries and other third parties, even if we do not explicitly authorize such activities. While we have policies and procedures to address compliance with FCPA, Bribery Act and other anti-corruption, sanctions, anti-bribery, anti-money laundering and similar laws, we cannot assure you that they will be effective, or that all of our employees, representatives, contractors, channel partners, agents, intermediaries or other third parties have not taken, or will not take actions, in violation of our policies and applicable law, for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws may increase. Noncompliance with these laws could subject us to investigations, severe criminal or civil sanctions, settlements, prosecution, loss of export privileges, suspension or debarment from U.S. government contracts, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, whistleblower complaints, adverse media coverage and other consequences. Any investigations, actions or sanctions could harm our reputation, business, operating results and financial condition.
If we fail to adequately protect personal information or other information we process or maintain, our business, financial condition and operating results could be adversely affected.
We receive, store, and process personal information from our employees, customers, and the employees of our customers, our end users. A wide variety of state, national, and international laws, as well as regulations and industry standards apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal information and other information, the scope of which are changing, subject to differing interpretations, and may be inconsistent across countries or conflict with other rules. Additionally, laws, regulations, and standards
covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, may be applicable to our business, such as the Controlling the Assault of Non-Solicited Pornography And Marketing Act, or CAN-SPAM, and similar state consumer protection laws. Evolving and changing definitions of personal data and personal information within the E.U., the U.S., and elsewhere, may limit or inhibit our ability to operate or expand our business. Data protection and privacy-related laws and regulations are evolving and may result in ever increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.
With respect to E.U. and U.K. employees, contractors and other personnel, as well as for our customers’ and prospective customers’ personal data, such as contact information, we are subject to the E.U. General Data Protection Regulation, or the GDPR, and the U.K. General Data Protection Regulation and U.K. Data Protection Act 2018, or the U.K. GDPR, respectively. We are a controller with respect to this data.
Additionally, by expanding into the E.U. and U.K., we may also trigger Article 3(2) of the GDPR/U.K. GDPR directly as we may be considered to be monitoring data subjects. To the extent we process personal data on behalf of our customers for the provision of services, we may also be required to enter into data processing agreements which comply with Article 28 of the GDPR/U.K. GDPR.
The GDPR/U.K. GDPR imposes more stringent data protection requirements than previously effective data protection law and, where we are acting as a controller, includes requirements to provide detailed disclosures about how personal data is collected and processed (in a concise, intelligible and easily accessible form); demonstrating that an appropriate legal basis is in place or otherwise exists to justify data processing activities; granting new rights for data subjects in regard to their personal data (including the right to be “forgotten” and the right to data portability), as well as enhancing data subject rights, such as data subject access requests; introducing the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals) of significant data breaches; defining for the first time pseudonymized (key-coded) data; imposing limitations on retention of personal data; maintaining a record of data processing; and complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit. Where we act as a processor and process personal data on behalf of our customers, we are required to execute mandatory data processing clauses with those customers. The GDPR/U.K. GDPR provides for penalties for noncompliance of up to the greater of €20 million or 4% of worldwide annual revenues (in the case of the GDPR) or £17 million and 4% of worldwide annual revenue (in the case of the U.K. GDPR). As we are required to comply with both the GDPR and the U.K. GDPR, we could be subject to parallel enforcement actions with respect to breaches of the GDPR/U.K. GDPR which affect both E.U. and U.K. data subjects. In addition to the foregoing, a breach of the GDPR or U.K. GDPR could result in regulatory investigations, reputational damage, orders to cease or change our processing of our data, enforcement notices, and/or assessment notices (for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm.
The GDPR and U.K. GDPR requires, among other things, that personal information only be transferred outside of the European Economic Area, or the EEA, or the U.K., respectively to jurisdictions that have not been deemed adequate by the European Commission or by the U.K. data protection regulator, respectively, including the United States, if steps are taken to legitimize those data transfers. Recent legal developments in the E.U. have created complexity and uncertainty regarding such transfers. For example, on July 16, 2020, the European Court of Justice, or the CJEU, invalidated the E.U.-U.S. Privacy Shield framework, or the Privacy Shield, upon which we relied to provide a mechanism for the transfer of data from E.U. Member States to the United States, on the grounds that the Privacy Shield failed to offer adequate protections to E.U. personal information transferred to the United States. Further, the CJEU also advised that the Standard Contractual Clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism and potential alternative to the Privacy Shield) were not alone sufficient to protect data transferred to the United States or other Third Countries. Use of the data transfer mechanisms must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals, and additional measures and/or contractual provisions may need to be put in place. The European Data Protection Board issued additional guidance regarding the Court of Justice’s decision in November 2020, which imposes higher burdens on the use of data transfer mechanisms, such as the Standard Contractual Clauses, for cross-border data
transfers. The CJEU also stated that if a competent supervisory authority believes that the standard contractual clauses cannot be complied with in the destination country and that the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer. We previously relied on our own, as well as our vendors’, Privacy Shield certification for the purposes of transferring personal data from the EEA to the United States in compliance with the GDPR/U.K. GDPR’s data export conditions. These recent developments require us to review and amend the legal mechanisms by which we make or receive personal data transfers to the United States and we may need to implement additional safeguards to further enhance the security of data transferred out of the EEA and the U.K., which could increase our compliance costs, expose us to further regulatory scrutiny and liability, and adversely affect our business. Further, the European Commission has published new versions of the Standard Contractual Clauses for public consultation. While the consultation period ended in December 2020, the European Commission is yet to publish its final, updated Standard Contractual Clauses. In addition, the U.K.’s withdrawal from the E.U. means that the U.K. will become a “third country” for the purposes of data transfers from the E.U. to the U.K. following the expiration of the six-month personal data transfer grace period (from January 1, 2021) set out in the E.U. and U.K. Trade and Cooperation Agreement, unless a relevant adequacy decision is adopted in favor of the U.K. (which would allow data transfers without additional measures). The European Commission issued a draft adequacy decision for personal information transfers from the EEA to the U.K. in February 2021. If this adequacy decision is not passed by representatives from each of the E.U. member states, we must implement protection measures such as the Standard Contractual Clauses for data transfers between the E.U. and the U.K. or find alternative solutions for the compliant transfer of personal data from the E.U. into the U.K. As supervisory authorities continue to issue further guidance on personal information (including regarding data export and circumstances in which we cannot use the standard contractual clauses), we could suffer additional costs, complaints, or regulatory investigations or fines, and if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results. Loss, retention or misuse of certain information and alleged violations of laws and regulations relating to privacy and data security, and any relevant claims, may expose us to potential liability and may require us to expend significant resources on data security and in responding to and defending such allegations and claims.
We are also subject to evolving E.U. and U.K. privacy laws on cookies and e-marketing. In the E.U. and the U.K., regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an E.U. regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance. In the E.U. and the U.K., informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies and tracking technologies. If regulators start to enforce the strict approach in recent guidance, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject us to additional liabilities. Regulation of cookies and similar technologies, and any decline of cookies or similar online tracking technologies as a means to identify and potentially target users, may lead to broader restrictions and impairments on our marketing and personalization activities and may negatively impact our efforts to understand users.
We depend on a number of third parties in relation to the operation of our business, a number of which process personal data on our behalf or as our sub-processor. To the extent required by applicable law, we attempt to mitigate the associated risks of using third parties by performing security assessments and detailed due diligence, entering into contractual arrangements to ensure that providers only process personal data according to our instructions or comparable instructions to the instructions of our customer (as applicable), and that they have sufficient technical and organizational security measures in place. Where we transfer personal data outside the E.U. or the U.K. to such third parties, we do so in compliance with the relevant data export requirements, as described above. There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of
data or security laws by our third-party processors could have a material adverse effect on our business and result in the fines and penalties under the GDPR and the UK GDPR outlined above.
Additionally, although not effective until January 1, 2023, the California Privacy Rights Act, or the CPRA, which expands upon the CCPA, was passed in the recent election on November 3, 2020. The CCPA requires (and the CPRA will require) covered companies to, among other things, provide new disclosures to California consumers, and affords such consumers new privacy rights such as the ability to opt-out of certain sales of personal information and expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used and shared. The CCPA provides for civil penalties for violations, as well as a private right of action for security breaches that may increase security breach litigation. Further, Virginia enacted the Virginia Consumer Data Protection Act, or the CDPA, another comprehensive state privacy law, that will also be effective January 1, 2023. The CCPA, CPRA, and CDPA may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal information, our financial condition, the results of our operations or prospects. The CCPA has also prompted a number of proposals for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and adversely affect our business. Changing definitions of personal information 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 damage to our reputation, any of which may have an adverse effect on our business and operating results.
We generally seek to comply with industry standards and are subject to the terms of our privacy policies and privacy-related obligations to third parties. We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection to the extent possible. However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us to comply with applicable privacy and data security laws and regulations, our privacy policies, or our privacy-related obligations to users or other third parties, or any compromise of security that results in the unauthorized release or transfer of personal information or other customer data, may result in governmental enforcement actions, litigation, or public statements against us by consumer advocacy groups or others and could cause our users to lose trust in us, which would have an adverse effect on our reputation and business. For example, in 2017, we reached a consent agreement with the Federal Trade Commission, or the FTC, to resolve an investigation relating to certain disclosures in our privacy policy. The consent agreement requires us, among other things, to provide information about our compliance with the FTC order and about representations made in our marketing materials. We have remedied the matter that led to the FTC order and implemented controls designed to prevent similar issues in the future, and have not received any inquiries from the FTC to date. However, we may be subject to future investigations and legal proceedings by the FTC or other regulators. It is possible that a regulatory inquiry might result in changes to our policies or business practices. Violation of existing or future regulatory orders or consent decrees could subject us to substantial monetary fines and other penalties that could negatively affect our financial condition and operating results. In addition, it is possible that future orders issued by, or enforcement actions initiated by, regulatory authorities could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.
Any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of our users’ data, or regarding the manner in which the express or implied consent of users for the use and disclosure of such data is obtained – or in how these applicable laws, regulations or industry practices are interpreted and enforced by state, federal and international privacy regulators – could require us to modify our services and features, possibly in a material manner, may subject us to regulatory enforcement actions and fines, and may limit our ability to develop new services and features that make use of the data that our users voluntarily share with us.
We may become involved in litigation that may adversely affect us.
From time to time, we have been subject to claims, suits and other proceedings. For example, we are currently the subject of litigation with Cylance, Inc. For additional information regarding this litigation, see the section titled “Business—Legal Proceedings.” Regardless of the outcome, legal proceedings can have an adverse impact on us because of legal costs and diversion of management attention and resources, and could cause us to incur significant expenses or liability, adversely affect our brand recognition or require us to change our business practices. The expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change and could adversely affect our business, operating results and financial condition. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines and penalties that would adversely affect our business, consolidated financial condition, operating results or cash flows in a particular period. These proceedings could also result in reputational harm, sanctions, consent decrees or orders requiring a change in our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, financial condition, operating results and prospects. Any of these consequences could adversely affect our business, operating results and financial condition.
Risks Related to Financial and Accounting Matters
If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of the New York Stock Exchange, or the NYSE. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure information required to be disclosed by us in our financial statements and in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
Our current controls and any new controls we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results, may result in a restatement of our financial statements for prior periods, cause us to fail to meet our reporting obligations, and could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in the periodic reports we will file with the SEC. However, while we remain an “emerging growth company,” we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our Class A common stock. We are not currently required to comply with the SEC rules that implement Sections 302 and 404 of the Sarbanes-Oxley Act, and we are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.
Upon becoming a public company, and particularly after we are no longer an “emerging growth company,” significant resources and management oversight will be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition and operating results.
We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our Class A common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements and (iii) exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not approved previously. In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two years of selected financial data in this prospectus.
We could be an emerging growth company for up to five fiscal years following the completion of this offering. However, certain circumstances could cause us to lose that status earlier, including the date on which we are deemed to be a “large accelerated filer,” under applicable SEC rules, if we have total annual gross revenue of $1.07 billion or more, or if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act, upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
We will incur significant increased costs and management resources as a result of operating as a public company.
As a public company, we will incur significant legal, accounting, compliance and other expenses that we did not incur as a private company and these expenses will increase even more after we are no longer an “emerging growth company.” Our management and other personnel will need to devote a substantial amount of time and incur significant expense in connection with compliance initiatives. For example, in anticipation of becoming a public company, we will need to adopt additional internal controls and disclosure controls and procedures, retain a transfer agent and adopt an insider trading policy. As a public company, we will bear all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws.
In addition, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act, and the related rules and regulations implemented by the SEC and the NYSE have increased legal and financial compliance costs and will make some compliance activities more time-consuming. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative expenses and may divert management’s time and attention from our other business 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 practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. In connection with this offering, we intend to increase our directors’ and officers’ insurance coverage, which will increase our insurance cost. In the future, it may be more expensive or more difficult 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 would also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value and adversely affect our business, operating results and financial condition.
As part of our business strategy, we have in the past and expect to continue to make investments in and/or acquire complementary companies, services or technologies. For example, in February 2021, we acquired Scalyr, a data analytics firm. Our ability as an organization to acquire and integrate other companies, services or technologies in a successful manner in the future is not guaranteed. We may not be able to find suitable acquisition candidates, and we may not be able to complete such acquisitions on favorable terms, if at all. If we do complete acquisitions, we may not ultimately strengthen our competitive position or ability to achieve our business objectives, and any acquisitions we complete could be viewed negatively by our end customers or investors. In addition, if we are unsuccessful at integrating such acquisitions, or the technologies associated with such acquisitions, into our company, the revenue and operating results of the combined company could be adversely affected. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could adversely affect our financial condition and the market price of our Class A common stock. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.
Additional risks we may face in connection with acquisitions include:
•diversion of management time and focus from operating our business to addressing acquisition integration challenges;
•coordination of research and development and sales and marketing functions;
•integration of product and service offerings;
•retention of key employees from the acquired company;
•changes in relationships with strategic partners as a result of product acquisitions or strategic positioning resulting from the acquisition;
•cultural challenges associated with integrating employees from the acquired company into our organization;
•integration of the acquired company’s accounting, management information, human resources and other administrative systems;
•the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies;
•additional legal, regulatory or compliance requirements;
•financial reporting, revenue recognition or other financial or control deficiencies of the acquired company that we don’t adequately address and that cause our reported results to be incorrect;
•liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;
•unanticipated write-offs or charges; and
•litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.
Our failure to address these risks or other problems encountered in connection with acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally.
We could be subject to additional tax liabilities and United States federal income tax reform could adversely affect us.
We are subject to U.S. federal, state, local and sales taxes in the United States and foreign income taxes, withholding taxes and transaction taxes in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and our worldwide provision for income taxes. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain. In addition, our future income tax obligations could be adversely affected by changes in, or interpretations of, tax laws in the United States or in other jurisdictions in which we operate.
For example, in December 2017, the United States adopted new tax law legislation commonly referred to as the Tax Cuts and Jobs Act of 2017, or the Tax Act (as modified by the Coronavirus Aid, Relief, and Economic Security Act), which significantly reforms the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. The Tax Act, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest and the use of net operating losses generated in tax years beginning after December 31, 2017, allows for the expensing of certain capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a largely territorial system. Further changes to U.S. tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits, 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 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 operating results and financial condition. The enactment of legislation implementing changes in the U.S. taxation of international business activities or the adoption of other tax reform policies could adversely impact our operating results and financial condition.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of January 31, 2021, we had aggregate U.S. federal and state net operating loss carryforwards of $20.7 million and $74.0 million, respectively, which may be available to offset future taxable income for U.S. income tax purposes. If not utilized, the federal net operating loss carryforwards will begin to expire in 2034, and the state net operating loss carryforwards will begin to expire in 2027. In addition, we had federal research and development credit carryforwards of $0.1 million, which will begin to expire in 2039, and state research and development credit carryforwards of $0.2 million, which do not expire. We also had foreign net operating loss carryforwards of $266.8 million, which do not expire. Realization of these net operating loss and research and development credit carryforwards depends on future income, and there is a risk that certain of our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our operating results and financial condition.
In addition, under Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in ownership by “5 percent shareholders” over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss carryovers and other pre-change tax attributes, such as research and development credits, to offset its post-change income or taxes may be limited. Similar rules apply under U.S. state tax laws. We may have experienced ownership changes in the past and we may experience an ownership change in the future as a result of shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change U.S. net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.
We could be required to collect additional sales, use, value added, digital services, or other similar taxes or be subject to other liabilities that may increase the costs our customers would have to pay for our solutions and adversely affect our business, operating results, and financial condition.
We collect sales, use, value added, digital services, and other similar taxes in a number of jurisdictions. One or more U.S. states or countries may seek to impose incremental or new sales, use, value added, digital services, or other tax collection obligations on us. Further, an increasing number of U.S. states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Additionally, the Supreme Court of the United States ruled in South Dakota v. Wayfair, Inc. et al, or Wayfair, that online sellers can be required to collect sales and use tax despite not having a physical presence in the state of the customer. In response to Wayfair, or otherwise, U.S. states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. A successful assertion by one or more U.S. states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial liabilities, including taxes on past sales, as well as interest and penalties. Furthermore, certain jurisdictions, such as the U.K. and France, have recently introduced a digital services tax, which is generally a tax on gross revenue generated from users or customers located in in those jurisdictions, and other jurisdictions have enacted or are considering enacting similar laws. A successful assertion by a U.S. state or local government, or other country or jurisdiction that we should have been or should be collecting additional sales, use, value added, digital services or other similar taxes could, among other things, result in substantial tax payments, create significant administrative burdens for us, discourage potential customers from subscribing to our platform due to the incremental cost of any such sales or other related taxes, or otherwise harm our business.
Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, and we could be obligated to pay additional taxes, which would harm our operating results and financial condition.
We are expanding our international operations and staff to support our business in international markets. We generally conduct our international operations through wholly-owned subsidiaries and are or may be required to report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions in which we operate with potentially divergent tax laws. The amount of taxes we pay in different jurisdictions will depend on the application of the tax laws of the various jurisdictions, including the United States, to our international business activities, changes in tax rates, new or revised tax laws or interpretations of existing tax laws and policies by taxing authorities and courts in various jurisdictions, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. It is not uncommon for tax authorities in different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied for transfer pricing purposes, the transfer pricing and charges for intercompany services and other transactions, or with respect to the valuation of intellectual property. If taxing authorities in any of the jurisdictions in which we conduct our international operations were to successfully challenge our transfer pricing, we could be required to reallocate part or all of our income to reflect transfer pricing adjustments, which could result in an increased tax liability to us. In such circumstances, if the country from where the income was reallocated did not agree to the reallocation, we could become subject to tax on the same income in both countries, resulting in double taxation. Furthermore, the relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.
We are subject to federal, state and local income, sales and other taxes in the United States and income, withholding, transaction and other taxes in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and our worldwide provision for income 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 recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings 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 including in jurisdictions in which we are not currently filing, may assess new or additional taxes, sales taxes and value added 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 an adverse effect on our operating results or cash flows in the period or periods for which a determination is made.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our operating results 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 our 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 discussed 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 but are not limited to those related to the valuation of common stock and stock-based awards, the period of benefit for deferred contract acquisition costs, standalone selling prices for each performance obligation, useful lives of long-lived assets, and accounting for income taxes. Additionally, as a result of the COVID-19 pandemic, many of management’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of industry or financial analysts and investors, resulting in a potential decline in the market price of our Class A common stock.
Additionally, we regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards and changes in their interpretation, we might be required to change our accounting policies, alter our operational policies and implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or we may be required to restate our published financial statements. Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial condition and profit, or cause an adverse deviation from our revenue and operating profit target, which may negatively impact our financial results.
We are exposed to fluctuations in currency exchange rates, which could negatively affect our business, operating results and financial condition.
Our sales contracts are denominated in U.S. dollars, and therefore our revenue is not subject to foreign currency risk. However, strengthening of the U.S. dollar increases the real cost of our platform to our customers outside of the United States, which could lead to delays in the purchase of our platform and the lengthening of our sales cycle. If the U.S. dollar continues to strengthen, this could adversely affect our financial condition and operating results. In addition, increased international sales in the future, including through our channel partners and other partnerships, may result in greater foreign currency denominated sales, increasing our foreign currency risk.
Our operating expenses incurred outside the U.S. and denominated in foreign currencies are increasing and are subject to fluctuations due to changes in foreign currency exchange rates. These expenses are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates. We do not currently hedge against the risks associated with currency fluctuations but may do so in the future.
We may require additional capital to fund our business and support our growth, and any inability to generate or obtain such capital may adversely affect our operating results and financial condition.
In order to support our growth and respond to business challenges, such as developing new features or enhancements to our platform to stay competitive, acquiring new technologies, and improving our infrastructure, we have made significant financial investments in our business and we intend to continue to make such investments. As
a result, we may need to engage in additional equity or debt financings to provide the funds required for these investments and other business endeavors. If we raise additional funds through equity or convertible debt issuances, our existing stockholders may suffer significant dilution and these securities could have rights, preferences, and privileges that are superior to those of holders of our Class A common stock. If we obtain additional funds through debt financing, we may not be able to obtain such financing on terms favorable to us. Such terms may involve restrictive covenants making it difficult to engage in capital raising activities and pursue business opportunities, including potential acquisitions. The trading prices of technology companies have been highly volatile as a result of the COVID-19 pandemic, which may reduce our ability to access capital on favorable terms or at all. In addition, a recession, depression, or other sustained adverse market event resulting from the spread of the COVID-19 pandemic could adversely affect our business and the value of our Class A common stock. 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, requiring us to delay, reduce, or eliminate some or all of our operations.
Risks Related to the Offering and Ownership of Our Class A Common Stock
The market price of our Class A common stock may be volatile, and you could lose all or part of your investment.
We cannot predict the prices at which our Class A common stock will trade. The initial public offering price of our Class A common stock has been determined by negotiations between us and the underwriters and may not bear any relationship to the market price at which our Class A common stock will trade after this offering or to any other established criteria of the value of our business and prospects and the market price of our Class A common stock following this offering may fluctuate substantially and may be lower than the initial public offering price. The market price of our Class A common stock following this offering will depend on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. In addition, the limited public float of our Class A common stock following this offering will tend to increase the volatility of the trading price of our Class A common stock. These fluctuations could cause you to lose all or part of your investment in our Class A common stock, since you might not be able to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations in the market price of our Class A common stock include the following:
•actual or anticipated changes or fluctuations in our operating results;
•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
•announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments;
•industry or financial analyst or investor reaction to our press releases, other public announcements and filings with the SEC;
•rumors and market speculation involving us or other companies in our industry;
•price and volume fluctuations in the overall stock market from time to time;
•changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
•the expiration of market standoff or contractual lock-up agreements and sales of shares of our Class A common stock by us or our stockholders;
•failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
•actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
•litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;
•developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights;
•announced or completed acquisitions of businesses or technologies by us or our competitors;
•new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
•any major changes in our management or our board of directors;
•effects of public health crises, pandemics, and epidemics, such as the COVID-19 pandemic;
•general economic conditions and slow or negative growth of our markets; and
•other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
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 Class A common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market prices of a particular company’s securities, securities class action litigation has often been instituted against that company. Securities litigation, if instituted against us, could result in substantial costs and divert our management’s attention and resources from our business. This could have an adverse effect on our business, operating results and financial condition.
No public market for our Class A common stock currently exists, and an active public trading market may not develop or be sustained following this offering.
Prior to this offering, there has been no public market or active private market for our Class A common stock. We have applied to list our Class A common stock on the NYSE. However, an active trading market may not develop following the completion of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the market price of your shares of Class A common stock. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
Sales of substantial amounts of our Class A common stock in the public markets, or the perception that they might occur, could cause the market price of our Class A common stock to decline.
Sales of a substantial number of shares of our Class A common stock into the public market, particularly sales by our directors, executive officers, and principal stockholders, or the perception that these sales might occur, could cause the market price of our Class A common stock to decline. Based on zero shares of our Class A common stock and 219,942,711 shares of our Class B common stock outstanding as of April 30, 2021, we will have shares ( shares if the underwriters exercise their over-allotment option in full) of our Class A common stock and 219,942,711 shares of our Class B common stock outstanding after this offering.
All of the shares of Class A common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act (including any shares that may be purchased by any of our affiliates in this offering). The remaining shares of our common stock are subject to the lock-up agreement or market standoff agreements described below.
In addition, as of April 30, 2021, we had options outstanding that, if fully exercised, would result in the issuance of 49,719,846 shares of Class B common stock and outstanding warrants exercisable for the purchase of 954,844
shares of Class B common stock. We also granted 759,131 options to purchase shares of our Class B common stock subsequent to April 30, 2021. All of the shares of Class B common stock issuable upon the exercise or settlement of stock options, and the shares reserved for future issuance under our equity incentive plans, will be registered for public resale under the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance subject to existing lock-up or market standoff agreements and applicable vesting requirements.
We and all of our directors, executive officers, and certain other record holders that together represent a substantial majority of our outstanding common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock will be subject to lock-up agreements with the underwriters and are subject to market standoff agreements with us that restrict their ability to transfer such shares of common stock and such securities, including any hedging transactions, during the period ending on the opening of trading on the second trading day immediately following our public release of earnings for the third quarter of 2021, as further described in the section titled “Shares Eligible for Future Sale.”
In addition, as further described in the section titled “Shares Eligible for Future Sale,” up to approximately shares of our Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock may be sold for a seven-trading day period beginning at the commencement of trading on the 91st day after the date of this prospectus, as described in the section titled “Shares Eligible for Future Sale.”
Upon the expiration of the restricted period described above, all of the securities subject to such lock-up and market standoff restrictions will become eligible for sale, subject to compliance with applicable securities laws. Furthermore, Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC may waive the lock-up agreements entered into by our executive officers, directors, and holders of our securities before they expire.
Sales of a substantial number of such shares upon expiration of the lock-up and market standoff agreements, or the perception that such sales may occur, or early release of these agreements, could cause our market price to fall or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.
Immediately following this offering (and assuming the Capital Stock Conversion occurs on April 30, 2021), the holders of 179,239,257 shares of our capital stock have rights, subject to some conditions, to require us to file registration statements for the public resale of such capital stock or to include such shares in registration statements that we may file for us or other stockholders.
We may also issue our shares of our capital stock or securities convertible into shares of our capital stock from time to time in connection with a financing, acquisition, investment, or otherwise.
The dual class structure of our common stock will have the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of this offering, including our directors, executive officers, and beneficial owners of 5% or greater of our outstanding capital stock who will hold in the aggregate % of the voting power of our capital stock following the completion of this offering, which will limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.
Our Class B common stock has 20 votes per share, and our Class A common stock, which is the stock we are offering, has one vote per share. Following this offering, the holders of our outstanding Class B common stock will hold % of the voting power of our outstanding capital stock, with our directors, executive officers, and holders of more than 5% of our common stock, and their respective affiliates, holding in the aggregate of % of the voting power of our capital stock. Because of the twenty-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore will be able to control all matters submitted to our stockholders for approval until the earlier of (i) the date specified by a vote of the holders of 66 2/3% of the then outstanding shares of Class B common stock, (ii) seven years from the date of this prospectus, (iii) the first date following the completion of this offering on which the number of shares of outstanding Class B common stock (including shares of Class B common stock subject to outstanding stock options) held by Tomer Weingarten, including certain permitted entities that Mr. Weingarten controls, is less than 25% of the number of shares of
outstanding Class B common stock (including shares of Class B common stock subject to outstanding stock options) that Mr. Weingarten originally held as of the date of this prospectus, (iv) the date fixed by our board of directors, following the first date following the completion of this offering when Mr. Weingarten is no longer providing services to us as an officer, employee, consultant or member of our board of directors, (v) the date fixed by our board of directors following the date on which, if applicable, Mr. Weingarten is terminated for cause, as defined in our restated certificate of incorporation, and (vi) the date that is 12 months after the death or disability, as defined in our restated certificate of incorporation, of Mr. Weingarten. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders.
Future transfers by holders of our Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of our Class B common stock who retain their shares in the long term. See the section titled “Description of Capital Stock—Anti-Takeover Provisions” for additional information.
The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A common stock, adverse publicity, or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multi-class share structures in certain of their indices. In July 2017, FTSE Russell announced that it plans to require new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multi-class share structures to certain of its indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Also in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices and in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under such announced policies, the dual class structure of our common stock would make us ineligible for inclusion in certain indices and may discourage such indices from selecting us for inclusion, notwithstanding this automatic termination provision. As a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to track those indices would not invest in our Class A common stock. It is unclear what effect, if any, these policies will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.
If industry or financial analysts do not publish research or reports about our business, or if they issue inaccurate or unfavorable research regarding our Class A common stock, our stock price and trading volume could decline.
The trading market for our Class A common stock will be influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. As a new public company, we may be slow to attract research coverage and the analysts who publish information about our Class A common stock will have had relatively little experience with our company, which could affect their ability to accurately forecast our results and make it more likely that we fail to meet their estimates. In the event we obtain industry or financial analyst coverage, if any of the analysts who cover us issues an inaccurate or unfavorable opinion regarding our stock price, our stock price would likely decline. In addition, the stock prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies
or the expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors, analysts could downgrade our Class A common stock or publish unfavorable research about us. If one or more of these analysts cease coverage of our Class A common stock or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause our stock price or trading volume to decline.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business, operating results, or financial condition. Additionally, the dramatic increase in the cost of directors’ and officers’ liability insurance may cause us to opt for lower overall policy limits or to forgo insurance that we may otherwise rely on to cover significant defense costs, settlements, and damages awarded to plaintiffs.
We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.
We will have broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described in the section titled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition, operating results, and prospects could be harmed, and the market price of our Class A common stock could decline. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government that may not generate a high yield for our stockholders. These investments may not yield a favorable return to our investors.
We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Additionally, our ability to pay dividends is limited by restrictions on our ability to pay dividends or make distributions under the terms of our loan and security agreement. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Because the initial public offering price of our Class A common stock will be substantially higher than the pro forma net tangible book value per share of our outstanding common stock following this offering, new investors will experience immediate and substantial dilution.
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 Class A common stock in this offering, based on the midpoint of the offering price range set forth on the cover page of this prospectus, and the issuance of shares of Class A common stock in this offering, you will experience immediate dilution of $ per share, the difference between the price per share you pay for our Class A common stock and its pro forma net tangible book value per share as of April 30, 2021. Furthermore, if the underwriters exercise their over-allotment option, if outstanding stock options are exercised, if we issue awards to our employees under our equity incentive plans, or if we otherwise issue additional shares of our Class A common stock, you could experience further dilution. See the section titled “Dilution” for additional information.
Provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may limit attempts by our stockholders to replace or remove our current management.
Provisions in our restated certificate of incorporation and restated bylaws may have the effect of delaying or preventing a merger, acquisition or other change of control of SentinelOne that the stockholders may consider favorable. In addition, because our board of directors is responsible for appointing the members of our management team, 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. Among other things, our restated certificate of incorporation and restated bylaws include provisions that:
•provide that our board of directors is classified into three classes of directors with staggered three-year terms;
•permit our board of directors to establish the number of directors and fill any vacancies and newly created directorships;
•require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws;
•authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
•provide that only our chief executive officer or a majority of our board of directors will be authorized to call a special meeting of stockholders;
•eliminate the ability of our stockholders to call special meetings of stockholders;
•do not provide for cumulative voting;
•provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;
•provide for a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and other significant corporate transactions, such as a merger or other sale of our company or its assets;
•prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
•provide that our board of directors is expressly authorized to make, alter, or repeal our bylaws; and
•establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Moreover, Section 203 of the Delaware General Corporation Law, or DGCL, may discourage, delay, or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock.
Our restated certificate of incorporation contains exclusive forum provisions for certain claims, which may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, will be the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the
DGCL, our restated certificate of incorporation, or our restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine.
Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Our restated certificate of incorporation provides that the federal district courts of the United States will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or Federal Forum Provision. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. In addition, the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court.
Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholders’ ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or employees, which may discourage lawsuits against us and our directors, officers, and employees. Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation or restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, and operating results.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future operating results and financial condition, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “target,” “plan,” “expect,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
•our future financial performance, including our expectations regarding our total revenue, cost of revenue, gross profit or gross margin, operating expenses, including changes in operating expenses and our ability to achieve and maintain future profitability;
•the impact of the COVID-19 pandemic on our operations, financial results, and liquidity and capital resources, including on customers, sales, expenses, and employees;
•our business plan and our ability to effectively manage our growth;
•our total market opportunity;
•anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
•market acceptance of our platform and our ability to increase adoption of our platform;
•beliefs and objectives for future operations;
•our ability to further penetrate our existing customer base and attract, retain, and expand our customer base;
•our ability to timely and effectively scale and adapt our platform;
•our ability to develop new products and services and bring them to market in a timely manner and make enhancements to our platform;
•our expectations concerning relationships with third parties;
•our ability to maintain, protect, and enhance our intellectual property;
•our ability to continue to expand internationally;
•the effects of increased competition in our markets and our ability to compete effectively;
•future acquisitions or investments in complementary companies, products, services, or technologies;
•our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
•economic and industry trends, projected growth, or trend analysis;
•increased expenses associated with being a public company; and
•other statements regarding our future operations, financial condition, and prospects and business strategies.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, 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 any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this prospectus or to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
INDUSTRY, MARKET, AND OTHER DATA
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity, and market size, is based on information from various sources, as well as assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets for our platform. This information involves important assumptions and limitations, is inherently imprecise, and you are cautioned not to give undue weight to such estimates. 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.
This prospectus contains statistical data, estimates, and forecasts that are based on publications or reports generated by third parties, including a report prepared by Forrester Research, Inc., or Forrester, that we commissioned, or other publicly available information, as well as other information based on our internal sources.
The source of, and selected additional information contained in, the independent industry and other publications related to the information so identified are provided below.
•International Data Corporation, Worldwide Global DataSphere IoT Device and Data Forecast, 2020-2024, July 2020;
•International Data Corporation, Worldwide Whole Cloud Forecast, 2020-2024, October 2020;
•International Data Corporation, MarketScape Worldwide Unified Endpoint Management Software for Apple Devices 2021 Vendor Assessment, January 2021;
•International Data Corporation, IDC’s Global DataSphere Forecast Shows Continued Steady Growth in the Creation and Consumption of Data, May 2020;
•International Data Corporation, Worldwide IT Operations Management Software Forecast, 2021-2025, February 2021;
•International Data Corporation, Security Spending Guide, February 2021;
•Cybersecurity Ventures, Cyberwarfare In The C-Suite Cybersecurity Magazine, January 2021;
•ESG, a division of TechTarget, Research Report, The Life and Times of Cybersecurity Professionals 2020, July 2020;
•Forrester Research, Inc., The Total Economic Impact of SentinelOne Cybersecurity Platform, October 2020 (SentinelOne commissioned);
•Gartner, Gartner Peer Insights ‘Voice of the Customer’: Endpoint Detection and Response Solutions, May 2020;
•Gartner Press Release, Gartner Survey Reveals 82% of Company Leaders Plan to Allow Employees to Work Remotely Some of the Time, July 2020;
•Gartner, Magic Quadrant for Endpoint Protection Platforms, 5 May 2021;
•Gartner, Critical Capabilities for Endpoint Protection Platforms, 6 May 2021;
•Ponemon Institute sponsored by IBM Security, Cost of a Data Breach Report 2020, August 2020;
•Ponemon Institute sponsored by Keeper Security, Cybersecurity in the Remote Work Era: A Global Risk Report, October 2020; and
•(ISC)², Cybersecurity Workforce Study 2020, November 2020.
Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
USE OF PROCEEDS
We estimate that the net proceeds from our sale of shares of our Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses, will be approximately $ million, or $ million if the underwriters’ over-allotment option is exercised in full.
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the 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 of our Class A common stock offered by us remains the same and after deducting estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of our Class A common stock offered would increase (decrease) the net proceeds from this offering by approximately $ million, assuming that the assumed initial public offering price of $ remains the same, and after deducting the estimated underwriting discounts and commissions.
The principal purposes of this offering are to create a public market for our Class A common stock, increase our visibility in the marketplace, obtain additional capital and increase our capitalization and financial flexibility. We currently intend to use the net proceeds we receive from this offering primarily for working capital and other general corporate purposes, which may include product development, general and administrative matters, and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions, or businesses that complement our business. However, we do not have agreements or commitments for any acquisitions or investments outside the ordinary course of business at this time.
We will have broad discretion over the uses of the net proceeds of this offering. Pending these uses, we intend to invest the net proceeds from this offering in short-term, investment-grade interest-bearing securities, such as money market funds, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government.
DIVIDEND POLICY
We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our capital stock in the foreseeable future. Additionally, our ability to pay dividends or make distributions is limited by certain restrictions in connection with our loan and security agreement. For additional information regarding our loan and security agreement, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Debt Obligations.” Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.
CAPITALIZATION
The following table sets forth our cash, cash equivalents, and short-term investments and our capitalization as of April 30, 2021, on:
•an actual basis;
•a pro forma basis, which reflects (i) the Capital Stock Conversion as if such conversion had occurred on April 30, 2021, (ii) the redesignation of our outstanding common stock as Class B common stock as if such redesignation had occurred on April 30, 2021, and (iii) the filing and effectiveness of our restated certificate of incorporation that will become effective immediately prior to the completion of this offering; and
•a pro forma as adjusted basis, which reflects (i) the pro forma adjustments set forth above and (ii) the sale and issuance of shares of our Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses.
The information below is illustrative only and our capitalization following this offering will be adjusted based on the actual initial public offering price and other terms of the offering determined at pricing. You should read this table together with our consolidated financial statements and the accompanying notes, and the sections titled “Selected Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” that are included elsewhere in this prospectus.
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As of April 30, 2021
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Actual
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Pro Forma
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Pro Forma as
Adjusted(1)
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(in thousands, except share and
per share data)
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Cash, cash equivalents, and short-term investments
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$
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362,555
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$
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362,555
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$
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Long-term debt
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$
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19,662
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$
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19,662
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|
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$
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Redeemable convertible preferred stock; $0.0001 par value; 168,985,413 shares authorized, 167,058,113 shares issued and outstanding, actual; no shares authorized, issued, and outstanding, pro forma and pro forma as adjusted
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621,139
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—
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Stockholders’ (deficit) equity:
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Preferred stock; $0.0001 par value; no shares authorized, issued, and outstanding, actual; 50,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted
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—
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—
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Common stock; $0.0001 par value; 276,300,000 shares authorized, 50,504,590 shares issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted
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3
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—
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Class A common stock; $0.0001 par value; no shares authorized, issued, and outstanding, actual; 1,500,000,000 shares authorized, pro forma and pro forma as adjusted; no shares issued and outstanding, pro forma; shares issued and outstanding, pro forma as adjusted
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—
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—
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Class B common stock; $0.0001 par value; no shares authorized, issued, and outstanding, actual; 300,000,000 shares authorized, 219,942,711 shares issued and outstanding, pro forma and pro forma as adjusted
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—
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20
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Additional paid-in capital
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166,974
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788,096
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Accumulated other comprehensive loss
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355
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355
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Accumulated deficit
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(413,206)
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(413,206)
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Total stockholders’ (deficit) equity
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(245,874)
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375,265
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Total capitalization
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$
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394,927
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$
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394,927
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$
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__________________
(1) Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted cash, cash equivalents, and short-term investments, additional paid-in capital, total stockholders’ (deficit) equity, and total capitalization by $ 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 the estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of our Class A common stock offered by us would increase (decrease) the amount of our pro forma as adjusted cash, cash equivalents, and short-term investments, additional paid-in capital, total stockholders’ (deficit) equity, and total capitalization by $ million, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions. If the underwriters’ over-allotment option is exercised in full, the pro forma as adjusted amount of each of cash, cash equivalents, and short-term investments, additional paid-in capital, total stockholders’ (deficit) equity, and total capitalization would increase by $ million, and after deducting estimated underwriting discounts and commissions, and we would have shares of our Class A common stock and shares of our Class B common stock issued and outstanding, pro forma as adjusted.
The number of shares of our Class A common stock and Class B common stock that will be outstanding after this offering is based on zero shares of our Class A common stock outstanding and 219,942,711 shares of our Class
B common stock outstanding (after giving effect to the Capital Stock Conversion), in each case, as of April 30, 2021, and excludes:
•48,644,223 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock outstanding as of April 30, 2021 under our 2013 Plan with a weighted-average exercise price of $3.77 per share;
•759,131 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock granted after April 30, 2021 under our 2013 Plan with a weighted-average exercise price of $16.19 per share;
•1,075,623 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock outstanding under our 2011 Plan, which we assumed in connection with our acquisition of Scalyr in February 2021, with a weighted-average exercise price of $1.72 per share;
•954,884 shares of our Class B common stock issuable upon the exercise of warrants to purchase shares of our Class B common stock outstanding as of April 30, 2021 with an exercise price of $0.62 per share; and
•46,613,004 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (i) 4,275,089 shares of our Class B common stock reserved for future issuance under our 2013 Plan, as of April 30, 2021 (which number of shares is prior to the stock options to purchase shares of our Class B common stock granted after April 30, 2021), (ii) 35,281,596 shares of our Class A common stock reserved for future issuance under our 2021 Plan, which will become effective on the date immediately prior to the date of this prospectus, and (iii) 7,056,319 shares of our Class A common stock reserved for issuance under our 2021 ESPP, which will become effective on the date of this prospectus.
On the date of this prospectus, any remaining shares of Class B common stock available for issuance under our 2013 Plan will be added to the shares of our Class A common stock reserved for issuance under our 2021 Plan, and we will cease granting awards under the 2013 Plan. Our 2021 Plan and 2021 ESPP also provide for automatic annual increases in the number of shares reserved thereunder. For additional information, see the section titled “Executive Compensation—Employee Benefit and Stock Plans.”
DILUTION
If you invest in our Class A common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma as adjusted net tangible book value per share of our Class A common stock immediately after this offering.
As of April 30, 2021, our pro forma net tangible book value was $208.9 million, or $0.95 per share of our common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of our common stock outstanding as of April 30, 2021, after giving effect to (i) the Capital Stock Conversion and (ii) the filing and effectiveness of our restated certificate of incorporation that will become effective immediately prior to the completion of this offering.
After giving effect to the sale of shares of our Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of April 30, 2021 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 as adjusted net tangible book value of $ per share to investors purchasing shares of our Class A 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 April 30, 2021
|
$
|
0.95
|
|
|
|
|
Increase in pro forma net tangible book value per share attributable to new investors purchasing shares of our common stock in this offering
|
|
|
|
|
Pro forma as adjusted net tangible book value per share immediately after this offering
|
|
|
|
|
Dilution in pro forma as adjusted net tangible book value per share to new investors in this offering
|
|
|
$
|
The dilution information discussed above is illustrative only and will change based on the actual initial offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $ per share and would increase (decrease) the dilution per share to new investors in this offering by $ per share, assuming the number of shares of Class A common stock 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. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of Class A common stock offered would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by $ per share and would increase (decrease) the dilution to new investors by $ per share, assuming the assumed initial public offering price, which is the midpoint of the offering price range set forth on the cover page of this prospectus, 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 of our Class A common stock after giving effect to this offering would be $ per share, and the dilution in pro forma as adjusted net tangible book value per share to investors in this offering would be $ per share.
The following table summarizes, on a pro forma as adjusted basis as of April 30, 2021, after giving effect to the pro forma adjustments described above, the difference between existing stockholders and new investors purchasing shares of Class A common stock in this offering with respect to the number of shares purchased from us, the total consideration paid to us, and the average price per share paid by our existing stockholders or to be paid by investors purchasing shares in this offering at an assumed offering price of $ per share, which is the midpoint of the
offering price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
Total Consideration
|
|
Average Price Per Share
|
|
|
Number
|
|
Percent
|
|
Amount
|
|
Percent
|
|
|
Existing stockholders
|
|
|
%
|
|
$
|
|
%
|
|
$
|
|
New public investors
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
$
|
|
100
|
%
|
|
|
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, would increase (decrease) 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 the estimated underwriting discounts and commissions.
Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ over-allotment option. If the underwriters’ over-allotment option is exercised in full, our existing stockholders would own % and our new investors would own % of the total number of shares of our Class A common stock outstanding upon completion of this offering.
In addition, to the extent we issue any additional stock options or any outstanding stock options or warrants are exercised, or we issue any other securities or convertible debt in the future, investors will experience further dilution.
The number of shares of our Class A common stock and Class B common stock that will be outstanding after this offering is based on zero shares of our Class A common stock outstanding and 219,942,711 shares of our Class B common stock outstanding (after giving effect to the Capital Stock Conversion), in each case, as of April 30, 2021, and excludes:
•48,644,223 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock outstanding as of April 30, 2021 under our 2013 Plan with a weighted-average exercise price of $3.77 per share;
•759,131 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock granted after April 30, 2021 under our 2013 Plan with a weighted-average exercise price of $16.19 per share;
•1,075,623 shares of our Class B common stock issuable upon the exercise of stock options to purchase shares of our Class B common stock outstanding under our 2011 Plan, which we assumed in connection with our acquisition of Scalyr in February 2021, with a weighted-average exercise price of $1.72 per share;
•954,884 shares of our Class B common stock issuable upon the exercise of warrants to purchase shares of our Class B common stock outstanding as of April 30, 2021 with an exercise price of $0.62 per share; and
•46,613,004 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of (i) 4,275,089 shares of our Class B common stock reserved for future issuance under our 2013 Plan, as of April 30, 2021 (which number of shares is prior to the stock options to purchase shares of our Class B common stock granted after April 30, 2021), (ii) 35,281,596 shares of our Class A common stock reserved for future issuance under our 2021 Plan, which will become effective on the date immediately prior to the date of this prospectus, and (iii) 7,056,319 shares of our Class A common stock reserved for issuance under our 2021 ESPP, which will become effective on the date of this prospectus.
On the date of this prospectus, any remaining shares of Class B common stock available for issuance under our 2013 Plan will be added to the shares of our Class A common stock reserved for issuance under our 2021 Plan, and we will cease granting awards under the 2013 Plan. Our 2021 Plan and 2021 ESPP also provide for automatic annual increases in the number of shares reserved thereunder. For additional information, see the section titled “Executive Compensation—Employee Benefit and Stock Plans.”
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables present selected historical consolidated financial and other data for our business. We derived the selected consolidated statements of operations data for the years ended January 31, 2020 and 2021 (except for pro forma basic and diluted net loss per share attributable to common stockholders and weighted-average shares used in computing pro forma basic and diluted net loss per share attributable to common stockholders) and the consolidated balance sheet data as of January 31, 2020 and 2021 from our audited consolidated financial statements that are included elsewhere in this prospectus. We derived the selected consolidated statements of operations data for the three months ended April 30, 2020 and 2021 (except for pro forma basic and diluted net loss per share attributable to common stockholders and weighted-average shares used in computing pro forma basic and diluted net loss per share attributable to common stockholders) and the consolidated balance sheet data as of April 30, 2021 from our unaudited interim consolidated financial statements that are included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair statement of such data. Our historical results are not necessarily indicative of the results that may be expected in the future, and our interim results are not necessarily indicative of results to be expected for the full year or any other period. You should read the following selected consolidated financial and other data below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, the accompanying notes and other financial information included elsewhere in this prospectus. Our fiscal year end is January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31. Our fiscal years ended January 31, 2020 and 2021 are referred to herein as fiscal 2020 and fiscal 2021, respectively.
Consolidated Statements of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
(in thousands, except share and per share data)
|
|
Revenue:
|
$
|
46,474
|
|
|
$
|
93,056
|
|
|
$
|
17,957
|
|
|
$
|
37,395
|
|
|
Cost of revenue(1)
|
18,331
|
|
|
39,332
|
|
|
7,613
|
|
|
18,283
|
|
|
Gross profit
|
28,143
|
|
|
53,724
|
|
|
10,344
|
|
|
19,112
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development(1)
|
36,683
|
|
|
62,444
|
|
|
13,865
|
|
|
27,820
|
|
|
Sales and marketing(1)
|
51,322
|
|
|
77,740
|
|
|
17,751
|
|
|
36,180
|
|
|
General and administrative(1)
|
15,122
|
|
|
29,059
|
|
|
4,957
|
|
|
16,724
|
|
|
Total operating expenses
|
103,127
|
|
|
169,243
|
|
|
36,573
|
|
|
80,724
|
|
|
Loss from operations
|
(74,984)
|
|
|
(115,519)
|
|
|
(26,229)
|
|
|
(61,612)
|
|
|
Interest income
|
886
|
|
|
231
|
|
|
150
|
|
|
23
|
|
|
Interest expense
|
(2,015)
|
|
|
(1,401)
|
|
|
(300)
|
|
|
(303)
|
|
|
Other income (expense), net
|
(217)
|
|
|
(424)
|
|
|
(193)
|
|
|
(593)
|
|
|
Loss before provision for income taxes
|
(76,330)
|
|
|
(117,113)
|
|
|
(26,572)
|
|
|
(62,485)
|
|
|
Provision for income taxes
|
237
|
|
|
460
|
|
|
66
|
|
|
149
|
|
|
Net loss
|
$
|
(76,567)
|
|
|
$
|
(117,573)
|
|
|
$
|
(26,638)
|
|
|
$
|
(62,634)
|
|
|
Net loss per share attributable to common stockholders, basic and diluted(2)
|
$
|
(2.34)
|
|
|
$
|
(3.31)
|
|
|
$
|
(0.78)
|
|
|
$
|
(1.37)
|
|
|
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted(2)
|
32,712,350
|
|
|
35,482,444
|
|
|
33,973,809
|
|
|
45,725,703
|
|
|
Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(3)
|
|
|
$
|
(0.58)
|
|
|
|
|
$
|
(0.29)
|
|
|
Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(3)
|
|
|
204,433,503
|
|
|
|
|
215,163,824
|
|
__________________
(1)Includes stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
(in thousands)
|
|
Cost of revenue
|
$
|
138
|
|
|
$
|
308
|
|
|
$
|
70
|
|
|
$
|
383
|
|
|
Research and development
|
1,686
|
|
|
6,590
|
|
|
2,763
|
|
|
7,139
|
|
|
Sales and marketing
|
1,034
|
|
|
3,835
|
|
|
461
|
|
|
2,047
|
|
|
General and administrative
|
1,488
|
|
|
5,179
|
|
|
357
|
|
|
3,868
|
|
|
Total
|
$
|
4,346
|
|
|
$
|
15,912
|
|
|
$
|
3,651
|
|
|
$
|
13,437
|
|
Stock-based compensation expense includes $2.5 million, $8.7 million, $2.5 million, and $0.2 million of expense related to secondary stock sales described in Note 11 to our consolidated financial statements included elsewhere in this prospectus for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021, respectively.
(2)See Notes 2 and 13 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculation of our basic and diluted net loss per share attributable to common stockholders.
(3)Basic and diluted pro forma net loss per share attributable to common stockholders for fiscal 2021 and the three months ended April 30, 2021 gives effect to the Capital Stock Conversion as though the conversion had occurred as of the beginning of the period.
The following table sets forth the computation of unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the periods presented (in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31, 2021
|
|
Three Months Ended April 30, 2021
|
|
Numerator:
|
|
|
|
|
Net loss and pro forma net loss
|
$
|
(117,573)
|
|
|
$
|
(62,634)
|
|
|
Denominator:
|
|
|
|
|
Weighted-average shares used in computing net loss per share
|
35,482,444
|
|
|
45,725,703
|
|
|
Pro forma adjustment to reflect conversion of convertible redeemable preferred stock into common stock
|
168,951,059
|
|
|
169,438,121
|
|
|
Weighted-average shares used in computing pro forma net loss per share attributable to common stockholders, basic and diluted
|
204,433,503
|
|
|
215,163,824
|
|
|
Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)
|
$
|
(0.58)
|
|
|
$
|
(0.29)
|
|
Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
As of April 30,
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
(in thousands)
|
|
Cash, cash equivalents, and short-term investments
|
$
|
45,700
|
|
|
$
|
395,836
|
|
|
$
|
362,555
|
|
|
Working capital(1)
|
16,980
|
|
|
335,151
|
|
|
280,187
|
|
|
Total assets
|
112,454
|
|
|
520,560
|
|
|
619,969
|
|
|
Long-term debt
|
19,598
|
|
|
19,621
|
|
|
19,662
|
|
|
Redeemable convertible preferred stock
|
201,826
|
|
|
621,139
|
|
|
621,139
|
|
|
Additional paid-in capital
|
8,986
|
|
|
29,869
|
|
|
166,974
|
|
|
Accumulated deficit
|
(232,999)
|
|
|
(350,572)
|
|
|
(413,206)
|
|
|
Total stockholders’ deficit
|
(224,213)
|
|
|
(320,536)
|
|
|
(245,874)
|
|
__________________
(1)Working capital is defined as current assets less current liabilities.
Key Business Metrics and Non-GAAP Financial Measures
We review a number of operating and financial metrics, including the following key metrics and non-GAAP financial measures to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. See the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics” for additional information regarding our key business metrics and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations—Non-GAAP Financial Measures” for additional information and reconciliations of our non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or For the Year Ended
January 31,
|
|
As of or For the Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
(dollars in thousands)
|
|
Annualized recurring revenue (ARR)
|
$
|
66,764
|
|
|
$
|
130,825
|
|
|
$
|
74,845
|
|
|
$
|
161,323
|
|
|
Customers with ARR of $100,000 or more
|
104
|
|
|
219
|
|
|
122
|
|
|
277
|
|
|
Dollar-based net retention rate
|
119
|
%
|
|
117
|
%
|
|
122
|
%
|
|
124
|
%
|
|
Gross profit
|
$
|
28,143
|
|
|
$
|
53,724
|
|
|
$
|
10,344
|
|
|
$
|
19,112
|
|
|
Non-GAAP gross profit
|
$
|
28,281
|
|
|
$
|
54,032
|
|
|
$
|
10,414
|
|
|
$
|
19,986
|
|
|
Gross margin
|
61
|
%
|
|
58
|
%
|
|
58
|
%
|
|
51
|
%
|
|
Non-GAAP gross margin
|
61
|
%
|
|
58
|
%
|
|
58
|
%
|
|
53
|
%
|
|
Loss from operations
|
$
|
(74,984)
|
|
|
$
|
(115,519)
|
|
|
$
|
(26,229)
|
|
|
$
|
(61,612)
|
|
|
Non-GAAP loss from operations
|
$
|
(70,638)
|
|
|
$
|
(99,607)
|
|
|
$
|
(22,578)
|
|
|
$
|
(47,501)
|
|
|
Operating margin
|
(161)
|
%
|
|
(124)
|
%
|
|
(146)
|
%
|
|
(165)
|
%
|
|
Non-GAAP operating margin
|
(152)
|
%
|
|
(107)
|
%
|
|
(126)
|
%
|
|
(127)
|
%
|
|
Net cash used in operating activities
|
$
|
(44,424)
|
|
|
$
|
(66,570)
|
|
|
$
|
(11,795)
|
|
|
$
|
(30,798)
|
|
|
Net cash used in investing activities
|
$
|
(3,187)
|
|
|
$
|
(6,265)
|
|
|
$
|
(925)
|
|
|
$
|
(5,242)
|
|
|
Net cash provided by financing activities
|
$
|
52,770
|
|
|
$
|
423,978
|
|
|
$
|
153,179
|
|
|
$
|
1,917
|
|
|
Free cash flow
|
$
|
(47,077)
|
|
|
$
|
(72,611)
|
|
|
$
|
(12,720)
|
|
|
$
|
(32,591)
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and operating results should be read in conjunction with the section titled “Selected Consolidated Financial and Other Data” and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus. Our fiscal year ends on January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31. Our fiscal years ended January 31, 2020 and January 31, 2021 are referred to herein as fiscal 2020 and fiscal 2021, respectively.
Overview
We founded SentinelOne in 2013 with a dramatically new approach to cybersecurity.
We pioneered the world’s first purpose-built AI-powered extended detection and response, or XDR, platform to make cybersecurity defense truly autonomous, from the endpoint and beyond. Our Singularity Platform instantly defends against cyberattacks - performing at a faster speed, greater scale, and higher accuracy than otherwise possible from a human-powered approach.
Our Singularity Platform ingests, correlates, and queries petabytes of structured and unstructured data from a myriad of disparate external and internal sources in real-time. We build rich context by constructing a dynamic representation of data across an organization. As a result, our AI models are highly accurate, actionable, and autonomous. Our distributed AI models run both locally on every endpoint and every cloud workload, as well as on our cloud platform. Our Static and vector-agnostic Behavioral AI models, which run on the endpoints themselves, provide our customers with protection even when their devices are not connected to the cloud. In the cloud, our Streaming AI detects anomalies that surface when multiple data feeds are correlated. By providing visibility across an organization’s digital assets through one console, our platform makes it very fast for analysts to easily search through petabytes of data to investigate incidents and proactively hunt threats. We have extended our control and visibility planes beyond the traditional endpoint to unmanaged IoT devices.
Our Singularity Platform can be flexibly deployed on the environments that our customers choose, including public, private, or hybrid clouds. Our feature parity across Windows, macOS, Linux, and Kubernetes offers best-of-breed protection, visibility, and control across today’s heterogeneous IT environments. Together, these capabilities make our platform the logical choice for organizations of all sizes, industry verticals, and compliance requirements. Our platform offers true multi-tenancy, which enables the world’s largest organizations and our managed security providers and incident response partners the best management experience. Our customers realize improved cybersecurity outcomes with fewer people, producing an attractive return on investment.
Since we began selling our Behavioral AI model in 2015, we have achieved the following milestones:
We generate substantially all of our revenue by selling subscriptions to our Singularity Platform. Our subscription tiers include Singularity Core, Singularity Control, and Singularity Complete. Additionally, customers can extend the functionality of our platform through our eight subscription Singularity Modules. We generally price our subscriptions and modules on a per agent basis, and each agent generally corresponds with an endpoint, server, virtual machine, or container.
Our subscription contracts typically range from one to three years. We recognize subscription revenue ratably over the term of a contract. Most of our contracts are for terms representing annual increments, therefore contracts generally come up for renewal in the same period in subsequent years. The timing of large multi-year enterprise contracts can create some variability in subscription order levels between periods, though the impact to our revenue in any particular period is limited as a result of ratable revenue recognition.
Our go-to-market strategy is focused on acquiring new customers and driving expanded usage of our platform by existing customers. Our sales organization is comprised of our enterprise sales, inside sales and customer solutions engineering teams. It leverages our global network of ISVs, alliance partners, and channel partners for prospect access. Additionally, our sales teams work closely with our customers, channel partners, and alliance partners to drive adoption of our platform, and our software solutions are fulfilled through our channel partners. Our channel partners include some of the world’s largest resellers and distributors, MSPs, MSSPs, MDRs, OEMs, and IR firms. Once customers experience the benefits of our platform, they often upgrade their subscriptions to benefit from the full range of our XDR and IT and security operations capabilities. Additionally, many of our customers adopt Singularity Modules over time to extend the functionality of our platform and increase their coverage footprint. The combination of platform upgrades and extended modules drives our powerful land-and-expand motion.
Our Singularity Platform is used globally by organizations of all sizes across a broad range of industries. As of April 30, 2021, we had over 4,700 customers, increasing from over 2,700 as of April 30, 2020. Our AI and automation driven approach to cybersecurity has been adopted by some of the world’s largest and most demanding organizations. As of April 30, 2021, our customers included three of the Fortune 10, 37 of the Fortune 500, and 66 of the Global 2000. As of April 30, 2021, all of our Fortune 10 customers, 25 of our 37 Fortune 500 customers, and 43 of our 66 Global 2000 customers generated ARR greater than or equal to $100,000. As of April 30, 2021, no single end customer accounted for more than 3% of our ARR. We define ARR as the annualized revenue run rate of our subscription contracts at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under subscription contracts with us. Our ARR outside of the United States represented 27% and 28% for fiscal 2020 and fiscal 2021, respectively, and 27% and 32% for the three months ended April 30, 2020 and 2021, respectively, illustrating the global nature of our solutions.
We continue to increase the number of customers who have entered into larger subscriptions with us. We had 277 customers with ARR of $100,000 or more as of April 30, 2021, up from 122 as of April 30, 2020. Further, as of April 30, 2021, we had 17 customers with ARR of $1 million or more, up from six as of April 30, 2020. We believe that the number of customers with ARR of $100,000 or more and ARR of $1 million or more indicates our ability to scale with customers and the strategic importance of our platform for large enterprises and governments.
We have grown rapidly since our inception. Our revenue was $46.5 million and $93.1 million for fiscal 2020 and fiscal 2021, respectively, representing year-over-year growth of 100%. Our revenue was $18.0 million and $37.4 million for the three months ended April 30, 2020 and 2021, respectively, representing year-over-year growth of 108%. During this period, we continued to invest in growing our business to capitalize on our market opportunity. As a result, our net loss for fiscal 2020 and fiscal 2021 was $76.6 million and $117.6 million, respectively, and our net loss for the three months ended April 30, 2020 and 2021 was $26.6 million and $62.6 million, respectively.
Key Factors Affecting Our Performance
We believe that the growth and future success of our business depends on many factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our operating results.
New Customer Acquisition
Our business model relies on rapidly and efficiently engaging with new customers and expanding our relationship with our customers over time. To drive customer acquisition, we have invested, and expect to continue to invest, heavily in our sales and marketing efforts. While we cannot predict customer adoption rates and demand, the future growth rate and size of the market for endpoint security solutions, or the introduction of competitive products and services, our business and operating results will be significantly affected by the degree and speed with which organizations adopt endpoint security solutions and our platform.
Expansion Within Our Existing Customers
Our growing base of customers represents a significant opportunity for further adoption of our platform. As of April 30, 2021, we had over 4,700 customers. Our customers may start with just the Singularity Core version of our platform and upgrade to our Singularity Control and Singularity Complete versions, add Singularity Modules such
as Cloud Workload Security and Ranger IoT, or increase the number of protected endpoints and cloud workloads as well as mapped IoT devices. Several of our largest enterprise and government customers have deployed our platform across tens of thousands of endpoints and cloud workloads, running tens of thousands of applications. Our ability to expand within our customer base, particularly large enterprise and government customers, will depend on a number of factors, including platform performance, our customers’ satisfaction with our platform, competitive offerings, pricing, overall changes in our customers’ spending levels, and the effectiveness of our efforts to help our customers realize the benefits of our platform.
As of January 31, 2021, our dollar-based gross retention rate, or GRR, was 97% and our dollar-based net retention rate, or NRR, was 117%. As of April 30, 2021, our GRR was 97% and our NRR was 124%. To calculate these metrics, we first determine Prior Period ARR, which is ARR from the population of our customers as of 12 months prior to the end of a particular reporting period. We calculate Gross Retention ARR by subtracting from the total Prior Period ARR the portion of Prior Period ARR accounted for by the subset of those customers that are no longer active at the end of that reporting period. GRR is the quotient obtained by dividing Gross Retention ARR by Prior Period ARR. GRR takes into account customer attrition but does not reflect customer contraction. We calculate Net Retention ARR as the total ARR at the end of a particular reporting period from the set of customers that is used to determine Prior Period ARR. Net Retention ARR includes any expansion, and is net of contraction and attrition associated with that set of customers. NRR is the quotient obtained by dividing Net Retention ARR by Prior Period ARR. We expect both our GRR and NRR to fluctuate over time.
Investing for Growth
We plan to continue investing in our business so that we can capitalize on our market opportunity. We intend to continue to add headcount to our global sales and marketing team to acquire new customers and to increase sales to existing customers. We intend to continue to invest in building additional functionality for our Singularity Platform that will extend our capabilities as our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to further accelerate our product capabilities. For example, we recently acquired Scalyr to advance our data ingestion, search, and retention capabilities.
We believe that the global opportunity for our Singularity Platform is significant. Our revenue outside of the United States represented 30% of our revenue for both fiscal 2021 and the three months ended April 30, 2021. We have made, and plan to continue to make, significant investments to expand geographically, particularly in Europe, the Middle East, and Africa, or EMEA, Latin America, and Asia Pacific, or APAC.
Although our investments in growth may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth. If our near-term investments do not lead to the expected revenue growth over time, we may not achieve or maintain profitability or our growth rates may slow.
Key Business Metrics
We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions.
Annualized Recurring Revenue
We believe that ARR is a key operating metric to measure our business because it is driven by our ability to acquire new subscription customers and to maintain and expand our relationship with existing subscription customers. ARR represents the annualized revenue run rate of our subscription contracts at the end of a reporting period, assuming contracts are renewed on their existing terms for customers that are under subscription contracts
with us. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates.
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As of January 31,
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As of April 30,
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2020
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2021
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2020
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2021
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(in thousands)
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Annualized recurring revenue (ARR)
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$
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66,764
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$
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130,825
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$
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74,845
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$
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161,323
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Customers with ARR of $100,000 or More
We believe that our ability to increase the number of customers with ARR of $100,000 or more is an indicator of our market penetration and strategic demand for our platform. We define a customer as an entity that has an active subscription for access to our platform. We count MSPs, MSSPs, MDRs, and OEMs, who may purchase our products on behalf of multiple companies, as a single customer. We do not count our reseller or distributor channel partners as customers.
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As of January 31,
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As of April 30,
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2020
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2021
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2020
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2021
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Customers with ARR of $100,000 or more
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104
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219
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122
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277
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Dollar-Based Net Retention Rate
We believe that our ability to retain and expand our revenue generated from our existing customers is an indicator of the long-term value of our customer relationships and our potential future business opportunities. Dollar-based net retention rate measures the percentage change in our ARR derived from our customer base at a point in time.
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As of January 31,
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As of April 30,
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2020
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2021
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2020
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2021
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Dollar-based net retention rate
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119
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%
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117
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%
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122
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%
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124
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%
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Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. In addition, the utility of free cash flow as a measure of our liquidity is limited as it does not represent the total increase or decrease in our cash balance for a given period.
A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding stock-based compensation expense and amortization of acquired intangible assets. We
believe non-GAAP gross profit and non-GAAP gross margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these measures eliminate the effects of certain variables unrelated to our overall operating performance.
The following table provides a reconciliation of our GAAP gross profit to our non-GAAP gross profit and of our GAAP gross margin to our non-GAAP gross margin, for each of the periods presented:
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Year Ended January 31,
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Three Months Ended April 30,
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2020
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2021
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2020
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2021
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(dollars in thousands)
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Revenue
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$
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46,474
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$
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93,056
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$
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17,957
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$
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37,395
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Gross profit
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$
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28,143
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$
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53,724
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$
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10,344
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$
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19,112
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Add: Stock-based compensation expense
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138
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308
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70
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383
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Add: Amortization of acquired intangible assets
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—
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—
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—
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491
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Non-GAAP gross profit
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$
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28,281
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$
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54,032
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$
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10,414
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$
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19,986
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Gross margin
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61
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%
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|
58
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%
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58
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%
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51
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%
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Non-GAAP gross margin
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61
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%
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58
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%
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58
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%
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53
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%
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Rapid expansion of our Singularity Platform drove the need to expand our cloud infrastructure to meet advanced platform requirements and increased market demands, causing gross margin to decline in fiscal 2021 and the three months ended April 30, 2021. We continue to invest in the efficiency of our platform and infrastructure through technological improvements, but our gross margin can fluctuate depending on the timing of new module releases, sales of new modules to existing customers, the acquisitions of new customers, and the compute usage of our customers. We actively engage with cloud service providers to discuss and evaluate our agreements. For example, we recently amended our agreement with AWS to reflect our increased scale. We believe we can continue to identify and drive further economies of scale with efforts like this which we believe will enable us to increase our gross margin over time.
Non-GAAP Loss from Operations and Non-GAAP Operating Margin
We define non-GAAP loss from operations and non-GAAP operating margin as GAAP loss from operations and GAAP operating margin, respectively, excluding stock-based compensation expense and amortization of acquired intangible assets. We believe non-GAAP loss from operations and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables unrelated to our overall operating performance.
The following table provides a reconciliation of GAAP loss from operations to non-GAAP loss from operations and GAAP operating margin to non-GAAP operating margin, for each of the periods presented:
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Year Ended January 31,
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Three Months Ended April 30,
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2020
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2021
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2020
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2021
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(dollars in thousands)
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Revenue
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$
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46,474
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$
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93,056
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$
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17,957
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$
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37,395
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Loss from operations
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$
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(74,984)
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$
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(115,519)
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$
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(26,229)
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$
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(61,612)
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Add: Stock-based compensation expense
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4,346
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15,912
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3,651
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13,437
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Add: Amortization of acquired intangible assets
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—
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—
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—
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674
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Non-GAAP loss from operations
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$
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(70,638)
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$
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(99,607)
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$
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(22,578)
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$
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(47,501)
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Operating margin
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(161)
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%
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(124)
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%
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(146)
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%
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(165)
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%
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Non-GAAP operating margin
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(152)
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%
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(107)
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%
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(126)
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%
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(127)
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%
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Free Cash Flow
Free cash flow is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities less cash used for purchases of property and equipment and capitalized internal-use software. We believe that free cash flow is a useful indicator of liquidity that provides information to management and investors, even if negative, as it provides useful information about the amount of cash generated (or consumed) by our operating activities that is available (or not available) to be used for other strategic initiatives. For example, if free cash flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. While we believe that free cash flow is useful in evaluating our business, free cash flow is a non-GAAP financial measure that has limitations as an analytical tool, and free cash flow should not be considered as an alternative to, or substitute for, net cash provided by (used in) operating activities in accordance with GAAP. The utility of free cash flow as a measure of our liquidity is limited as it does not represent the total increase or decrease in our cash balance for any given period and does not reflect our future contractual commitments. In addition, other companies, including companies in our industry, may calculate free cash flow differently or not at all, which reduces the usefulness of free cash flow as a tool for comparison.
The following table summarizes our cash flows and provides a reconciliation of net cash provided by (used in) operating activities, the most directly comparable GAAP measure, to free cash flow, a non-GAAP financial measure, for each of the periods presented:
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Year Ended January 31,
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Three Months Ended April 30,
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2020
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2021
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2020
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2021
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(in thousands)
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Net cash used in operating activities
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$
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(44,424)
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$
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(66,570)
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$
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(11,795)
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$
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(30,798)
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Less: Purchases of property and equipment
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(953)
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(3,283)
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(278)
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(780)
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Less: Capitalized internal-use software
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(1,700)
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(2,758)
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(647)
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(1,013)
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Free cash flow
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$
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(47,077)
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|
|
$
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(72,611)
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|
|
$
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(12,720)
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$
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(32,591)
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Net cash used in investing activities
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$
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(3,187)
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|
|
$
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(6,265)
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$
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(925)
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|
|
$
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(5,242)
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Net cash provided by financing activities
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$
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52,770
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|
|
$
|
423,978
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|
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$
|
153,179
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|
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$
|
1,917
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Impact of COVID-19
Since January 2020, the COVID-19 pandemic has caused general business disruption worldwide. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, operating results, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. We have experienced, and may continue to experience, a modest adverse impact on certain parts of our business following the implementation of shelter-in-place orders to mitigate the outbreak of the COVID-19 pandemic, including a lengthening of the sales cycle for some prospective customers and delays in the delivery of professional services and trainings to our customers.
We have also experienced, and may continue to experience, a positive impact as a result of the COVID-19 pandemic. For example, in connection with the travel restrictions and shelter-in-place policies resulting from the COVID-19 pandemic, we have seen an increase in usage and subscriptions from smaller customers, many of whom are small or medium sized businesses. We have also seen slower growth in certain operating expenses due to reduced business travel, deferred hiring for some positions, and the virtualization or cancellation of customer and employee events. While a reduction in operating expenses may have an immediate positive impact on our operating results, we do not yet have visibility into the full impact this will have on our business. Moreover, as a vaccine becomes widely available and people begin to return to offices and other workplaces, any positive impacts of the COVID-19 pandemic on our business may slow or decline once the impact of the pandemic tapers.
We cannot predict how long we will continue to experience these impacts as shelter-in-place orders, vaccine availability, and other related measures are expected to change over time. Our operating results, cash flows, and financial condition have not been adversely impacted to date. However, as certain of our customers or partners experience downturns or uncertainty in their own business operations or revenue resulting from the spread of
COVID-19 our operating results, cash flows, and financial condition could be adversely impacted. In addition, in response to the spread of COVID-19, we have required substantially all of our employees to work remotely to minimize the risk of the virus to our employees and the communities in which we operate, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners.
The global impact of the COVID-19 pandemic continues to rapidly evolve, and we will continue to monitor the situation and the effects on our business and operations closely. We do not yet know the full extent of potential impacts on our business or operations or on the global economy as a whole, particularly if the COVID-19 pandemic continues and persists for an extended period of time. Given the uncertainty, we cannot reasonably estimate the impact on our future operating results, cash flows, or financial condition. For additional information, see the section titled “Risk Factors.”
Components of Our Results of Operations
Revenue
We generate substantially all of our revenue from subscriptions to our Singularity Platform. Customers can extend the functionality of their subscription to our platform by subscribing to additional Singularity Modules. Subscriptions provide access to hosted software. The nature of our promise to the customer under the subscription is to stand ready to provide protection for the duration of the contractual term. As a result, we recognize revenue for these performance obligations ratably over the contractual term. Premium support and maintenance and other Singularity Modules are distinct from subscriptions and are recognized ratably over the term as the performance obligations are satisfied.
We invoice our customers upfront upon signing for the entire term of the contract, periodically, or in arrears. Most of our subscription contracts have a term of one to three years.
Cost of Revenue
Cost of revenue consists primarily of third-party cloud infrastructure expenses incurred in connection with the hosting and maintenance of our platform. Cost of revenue also consists of personnel-related costs associated with our customer support and services organization, including salaries, benefits, bonuses, and stock-based compensation, amortization of acquired intangible assets, amortization of capitalized internal-use software, software and subscription services used by our customer support and services team, and allocated overhead costs.
Our third-party cloud infrastructure costs are driven primarily by the number of customers, the number of endpoints per customer, the number of modules, and the incremental costs for storing additional data collected for such cloud modules. We plan to continue to invest in our platform infrastructure and additional resources in our customer support and services organization as we grow our business. The level and timing of investment in these areas could affect our cost of revenue from period to period.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel related expenses are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include allocated facilities and IT overhead costs.
Research and Development
Research and development expenses consist primarily of employee salaries, benefits, bonuses, and stock-based compensation. Research and development expenses also include consulting fees, software and subscription services, and third-party cloud infrastructure expenses incurred in developing our platform and modules.
We expect research and development expenses to increase in absolute dollars as we continue to increase investments in our existing products and services. However, we anticipate research and development expenses to
decrease as a percentage of our total revenue over time, although our research and development expenses may fluctuate as a percentage of our total revenue from period to period depending on the timing of these expenses. In addition, research and development expenses that qualify as internal-use software are capitalized, the amount of which may fluctuate significantly from period to period.
Sales and Marketing
Sales and marketing expenses consist primarily of employee salaries, commissions, benefits, bonuses, stock-based compensation, travel and entertainment related expenses, advertising, branding and marketing events, promotions, and software and subscription services. Sales and marketing expenses also include sales commissions paid to our sales force and referral fees paid to independent third parties that are incremental to obtain a subscription contract. Such costs are capitalized and amortized over an estimated period of benefit of four years, and any such expenses paid for the renewal of a subscription are capitalized and amortized over the contractual term of the renewal.
We expect sales and marketing expenses to increase in absolute dollars as we continue to make significant investments in our sales and marketing organization to drive additional revenue, further penetrate the market, and expand our global customer base, but to decrease as a percentage of our revenue over time.
General and Administrative
General and administrative expenses consist primarily of salaries, benefits, bonuses, stock-based compensation, and other expenses for our executive, finance, legal, human resources, and facilities organizations. General and administrative expenses also include external legal, accounting, other consulting, and professional services fees, software and subscription services, and other corporate expenses.
Following the closing of this offering, we expect to incur additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services. We expect that our general and administrative expenses will increase in absolute dollars as our business grows but will decrease as a percentage of our revenue over time.
Interest Income, Interest Expense, and Other Income (Expense), Net
Interest income consists primarily of interest earned on our cash equivalents and short-term investments.
Interest expense consists primarily of interest on borrowings associated with our loan and security agreement.
Other income (expense), net consists primarily of foreign currency transaction gains and losses.
Provision for (Benefit from) Income Taxes
Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance against our deferred tax assets because we have concluded that it is more likely than not that the deferred tax assets will not be realized. Based upon a change in operations of our Israel subsidiary, there is a reasonable possibility that within the next several quarters, sufficient positive evidence becomes available to reach a conclusion that all or a significant portion of the valuation allowances against our Israel net deferred tax assets would no longer be required. This could result in a material income tax benefit in our consolidated statement of operations and a corresponding increase in deferred tax assets on our consolidated balance sheet in the period in which such valuation allowance is released.
Results of Operations
The following table sets forth our results of operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
(in thousands)
|
|
Revenue
|
$
|
46,474
|
|
|
$
|
93,056
|
|
|
$
|
17,957
|
|
|
$
|
37,395
|
|
|
Cost of revenue(1)
|
18,331
|
|
|
39,332
|
|
|
7,613
|
|
|
18,283
|
|
|
Gross profit
|
28,143
|
|
|
53,724
|
|
|
10,344
|
|
|
19,112
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development(1)
|
36,683
|
|
|
62,444
|
|
|
13,865
|
|
|
27,820
|
|
|
Sales and marketing(1)
|
51,322
|
|
|
77,740
|
|
|
17,751
|
|
|
36,180
|
|
|
General and administrative(1)
|
15,122
|
|
|
29,059
|
|
|
4,957
|
|
|
16,724
|
|
|
Total operating expenses
|
103,127
|
|
|
169,243
|
|
|
36,573
|
|
|
80,724
|
|
|
Loss from operations
|
(74,984)
|
|
|
(115,519)
|
|
|
(26,229)
|
|
|
(61,612)
|
|
|
Interest income
|
886
|
|
|
231
|
|
|
150
|
|
|
23
|
|
|
Interest expense
|
(2,015)
|
|
|
(1,401)
|
|
|
(300)
|
|
|
(303)
|
|
|
Other income (expense), net
|
(217)
|
|
|
(424)
|
|
|
(193)
|
|
|
(593)
|
|
|
Loss before provision for income taxes
|
(76,330)
|
|
|
(117,113)
|
|
|
(26,572)
|
|
|
(62,485)
|
|
|
Provision for income taxes
|
237
|
|
|
460
|
|
|
66
|
|
|
149
|
|
|
Net loss
|
$
|
(76,567)
|
|
|
$
|
(117,573)
|
|
|
$
|
(26,638)
|
|
|
$
|
(62,634)
|
|
__________________
(1)Includes stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
(in thousands)
|
|
Cost of revenue
|
$
|
138
|
|
|
$
|
308
|
|
|
$
|
70
|
|
|
$
|
383
|
|
|
Research and development
|
1,686
|
|
|
6,590
|
|
|
2,763
|
|
|
7,139
|
|
|
Sales and marketing
|
1,034
|
|
|
3,835
|
|
|
461
|
|
|
2,047
|
|
|
General and administrative
|
1,488
|
|
|
5,179
|
|
|
357
|
|
|
3,868
|
|
|
Total stock-based compensation expense
|
$
|
4,346
|
|
|
$
|
15,912
|
|
|
$
|
3,651
|
|
|
$
|
13,437
|
|
The following table sets forth the components of our consolidated statements of operations as a percentage of revenue for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
(as a percentage of total revenue)
|
|
Revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Cost of revenue
|
39
|
|
42
|
|
42
|
|
49
|
|
Gross profit
|
61
|
|
58
|
|
58
|
|
51
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
79
|
|
67
|
|
77
|
|
74
|
|
Sales and marketing
|
110
|
|
84
|
|
99
|
|
97
|
|
General and administrative
|
33
|
|
31
|
|
28
|
|
45
|
|
Total operating expenses
|
222
|
|
182
|
|
204
|
|
216
|
|
Loss from operations
|
(161)
|
|
(124)
|
|
(146)
|
|
(165)
|
|
Interest income
|
2
|
|
—
|
|
1
|
|
—
|
|
Interest expense
|
(5)
|
|
(2)
|
|
(2)
|
|
(1)
|
|
Other income (expense), net
|
—
|
|
—
|
|
(1)
|
|
(2)
|
|
Loss before provision for income taxes
|
(164)
|
|
(126)
|
|
(148)
|
|
(167)
|
|
Provision for income taxes
|
1
|
|
—
|
|
—
|
|
—
|
|
Net loss
|
(165)
|
%
|
|
(126)
|
%
|
|
(148)
|
%
|
|
(167)
|
%
|
Note: Certain figures may not sum due to rounding.
Comparison of the Three Months Ended April 30, 2020 and 2021
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Revenue
|
$
|
17,957
|
|
|
$
|
37,395
|
|
|
$
|
19,438
|
|
|
108
|
%
|
Revenue increased by $19.4 million, or 108%, from $18.0 million for the three months ended April 30, 2020 to $37.4 million for the three months ended April 30, 2021, primarily due to the ongoing demand for our platform. The increase was due to new customers, which accounted for 54% of the increase, to existing customers, which accounted for 32% of the increase, and to MSP, MSSP, and OEM channel partners, which accounted for 14% of the increase.
Cost of Revenue, Gross Profit, and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Cost of revenue
|
$
|
7,613
|
|
|
$
|
18,283
|
|
|
$
|
10,670
|
|
|
140
|
%
|
|
Gross profit
|
$
|
10,344
|
|
|
$
|
19,112
|
|
|
$
|
8,768
|
|
|
85
|
%
|
|
Gross margin
|
58
|
%
|
|
51
|
%
|
|
|
|
|
Cost of revenue increased by $10.7 million, from $7.6 million for the three months ended April 30, 2020 to $18.3 million for the three months ended April 30, 2021, primarily due to higher third-party cloud infrastructure expenses of $6.8 million from increased data usage and an increase of $3.0 million in allocated overhead costs.
Gross margin decreased by 7% to 51% primarily due to the expansion of our cloud infrastructure related to the growing adoption of our platform.
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Research and development expenses
|
$
|
13,865
|
|
|
$
|
27,820
|
|
|
$
|
13,955
|
|
|
101
|
%
|
Research and development expenses increased from $13.9 million for the three months ended April 30, 2020 to $27.8 million for the three months ended April 30, 2021, primarily due to an increase in personnel-related expenses of $10.3 million, including an increase of $4.4 million related to stock-based compensation expense as a result of increased headcount, and an increase of $1.6 million in third-party cloud infrastructure expenses incurred in developing our platform and modules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Sales and marketing expenses
|
$
|
17,751
|
|
|
$
|
36,180
|
|
|
$
|
18,429
|
|
|
104
|
%
|
Sales and marketing expenses increased from $17.8 million for the three months ended April 30, 2020 to $36.2 million for the three months ended April 30, 2021 primarily due to an increase in personnel-related expenses of $12.3 million, including an increase of $1.6 million in stock-based compensation expense as a result of increased headcount. In addition, there was an increase of $4.9 million in marketing related expenses, including an increase of $1.7 million in corporate branding costs.
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
General and administrative expenses
|
$
|
4,957
|
|
|
$
|
16,724
|
|
|
$
|
11,767
|
|
|
237
|
%
|
General and administrative expenses increased from $5.0 million for the three months ended April 30, 2020 to $16.7 million for the three months ended April 30, 2021, primarily due to an increase in personnel-related expenses of $7.9 million, including an increase of $3.5 million in stock-based compensation expense as a result of increased headcount. In addition, there was an increase of $2.1 million in legal and accounting services to support our growth, an increase of $1.0 million in acquisition-related expenses, and a $0.7 million increase in software and subscription services.
Interest Income, Interest Expense, and Other Income (Expense), Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Interest income
|
$
|
150
|
|
|
$
|
23
|
|
|
$
|
(127)
|
|
|
(85)
|
%
|
|
Interest expense
|
$
|
(300)
|
|
|
$
|
(303)
|
|
|
$
|
(3)
|
|
|
1
|
%
|
|
Other income (expense), net
|
$
|
(193)
|
|
|
$
|
(593)
|
|
|
$
|
(400)
|
|
|
207
|
%
|
Interest income decreased primarily due to the decrease in the overall market interest rate. Interest expense did not significantly fluctuate during the three months ended April 30, 2021 compared to the three months ended April 30, 2020. The increase in other income (expense), net is primarily due to net foreign currency exchange losses.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Provision for income taxes
|
$
|
66
|
|
|
$
|
149
|
|
|
$
|
83
|
|
|
126
|
%
|
The provision for income taxes increased primarily as a result of the increase in foreign taxes related to operations in international subsidiaries.
Comparison of the Years Ended January 31, 2020 and 2021
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Revenue
|
$
|
46,474
|
|
|
$
|
93,056
|
|
|
$
|
46,582
|
|
|
100
|
%
|
Revenue increased by $46.6 million, or 100%, from $46.5 million for fiscal 2020 to $93.1 million for fiscal 2021, primarily due to the ongoing demand for our platform. The increase was due to new customers, which accounted for 38% of the increase, to existing customers, which accounted for 38% of the increase, and to MSP, MSSP, and OEM channel partners, which accounted for 24% of the increase.
Cost of Revenue, Gross Profit, and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Cost of revenue
|
$
|
18,331
|
|
|
$
|
39,332
|
|
|
$
|
21,001
|
|
|
115
|
%
|
|
Gross profit
|
$
|
28,143
|
|
|
$
|
53,724
|
|
|
$
|
25,581
|
|
|
91
|
%
|
|
Gross margin
|
61
|
%
|
|
58
|
%
|
|
|
|
|
Cost of revenue increased by $21.0 million from $18.3 million for fiscal 2020 to $39.3 million for fiscal 2021, primarily due to higher third-party cloud infrastructure expenses from increased data usage of $14.6 million, an increase of $5.3 million in allocated overhead costs, and an increase in amortization of capitalized internal-use software of $0.6 million. Gross margin decreased by 3% to 58% primarily due to the expansion of our cloud infrastructure related to growing adoption of our platform.
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Research and development expenses
|
$
|
36,683
|
|
|
$
|
62,444
|
|
|
$
|
25,761
|
|
|
70
|
%
|
Research and development expenses increased from $36.7 million for fiscal 2020 to $62.4 million for fiscal 2021, primarily due to an increase in personnel-related expenses of $20.0 million, including an increase of $4.9 million related to stock-based compensation expense as a result of increased headcount, and an increase of $3.0 million in third-party cloud infrastructure expenses incurred in developing our platform and modules. In addition, there was an increase of $1.5 million in consulting services and an increase of $0.5 million in software and subscription services.
Sales and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Sales and marketing expenses
|
$
|
51,322
|
|
|
$
|
77,740
|
|
|
$
|
26,418
|
|
|
51
|
%
|
Sales and marketing expenses increased from $51.3 million for fiscal 2020 to $77.7 million for fiscal 2021 primarily due to an increase in personnel-related expenses of $23.4 million, including an increase of $2.8 million in stock-based compensation expense as a result of increased headcount. In addition, there was an increase of $2.2 million in corporate branding costs and an increase of $1.0 million in software and subscription services, partially offset by a decrease of $2.4 million in travel and entertainment costs due to travel restrictions imposed by the COVID-19 pandemic.
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
General and administrative expenses
|
$
|
15,122
|
|
|
$
|
29,059
|
|
|
$
|
13,937
|
|
|
92
|
%
|
General and administrative expenses increased from $15.1 million for fiscal 2020 to $29.1 million for fiscal 2021 primarily due to an increase in personnel-related expenses of $9.7 million, including an increase of $3.7 million in stock-based compensation expense as a result of increased headcount. In addition, there was an increase of $2.6 million in legal and accounting services to support our growth and a $0.7 million increase in software and subscription services, partially offset by a decrease of $0.5 million in travel costs due to travel restrictions imposed by the COVID-19 pandemic.
Interest Income, Interest Expense, and Other Income (Expense), Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Interest income
|
$
|
886
|
|
|
$
|
231
|
|
|
$
|
(655)
|
|
|
(74)
|
%
|
|
Interest expense
|
$
|
(2,015)
|
|
|
$
|
(1,401)
|
|
|
$
|
614
|
|
|
(30)
|
%
|
|
Other income (expense), net
|
$
|
(217)
|
|
|
$
|
(424)
|
|
|
$
|
(207)
|
|
|
95
|
%
|
Interest income decreased primarily due to decrease in the overall market interest rate. Interest expense decreased primarily due to lower interest rates in connection with the refinancing of our term loan in fiscal 2021. The increase in other income (expense), net is primarily due to net foreign currency exchange losses.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Change
|
|
|
2020
|
|
2021
|
|
$
|
|
%
|
|
|
(dollars in thousands)
|
|
Provision for income taxes
|
$
|
237
|
|
|
$
|
460
|
|
|
$
|
223
|
|
|
94
|
%
|
The provision for income taxes increased primarily as a result of the increase in foreign taxes related to operations in international subsidiaries.
Quarterly Results of Operations and Other Data
The following tables set forth our selected unaudited quarterly consolidated statements of operations data, the percentage of revenue that each line item represents for each quarter, and the key business metrics for each of the
eight quarters in the period ended April 30, 2021. The unaudited quarterly consolidated statements of operations data for each of these quarters have been prepared on the same basis as our audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair statement of such data. This data should be read in conjunction with our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and the results for any quarter are not necessarily indicative of results to be expected for a full year or any other period.
Consolidated Statements of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
July 31, 2019
|
|
October 31, 2019
|
|
January 31, 2020
|
|
April 30, 2020
|
|
July 31, 2020
|
|
October 31, 2020
|
|
January 31, 2021
|
|
April 30, 2021
|
|
|
(in thousands)
|
|
Revenue
|
$
|
10,551
|
|
|
$
|
12,123
|
|
|
$
|
15,219
|
|
|
$
|
17,957
|
|
|
$
|
20,674
|
|
|
$
|
24,557
|
|
|
$
|
29,868
|
|
|
$
|
37,395
|
|
|
Cost of revenue(1)
|
3,884
|
|
|
4,688
|
|
|
6,308
|
|
|
7,613
|
|
|
7,543
|
|
|
10,341
|
|
|
13,835
|
|
|
18,283
|
|
|
Gross profit
|
6,667
|
|
|
7,435
|
|
|
8,911
|
|
|
10,344
|
|
|
13,131
|
|
|
14,216
|
|
|
16,033
|
|
|
19,112
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development(1)
|
9,252
|
|
|
9,028
|
|
|
11,284
|
|
|
13,865
|
|
|
13,476
|
|
|
14,925
|
|
|
20,178
|
|
|
27,820
|
|
|
Sales and marketing(1)
|
10,605
|
|
|
14,751
|
|
|
15,133
|
|
|
17,751
|
|
|
16,302
|
|
|
19,974
|
|
|
23,713
|
|
|
36,180
|
|
|
General and administrative(1)
|
4,366
|
|
|
2,864
|
|
|
5,152
|
|
|
4,957
|
|
|
5,914
|
|
|
9,003
|
|
|
9,185
|
|
|
16,724
|
|
|
Total operating expenses
|
24,223
|
|
|
26,643
|
|
|
31,569
|
|
|
36,573
|
|
|
35,692
|
|
|
43,902
|
|
|
53,076
|
|
|
80,724
|
|
|
Loss from operations
|
(17,556)
|
|
|
(19,208)
|
|
|
(22,658)
|
|
|
(26,229)
|
|
|
(22,561)
|
|
|
(29,686)
|
|
|
(37,043)
|
|
|
(61,612)
|
|
|
Interest income
|
292
|
|
|
268
|
|
|
161
|
|
|
150
|
|
|
46
|
|
|
10
|
|
|
25
|
|
|
23
|
|
|
Interest expense
|
(513)
|
|
|
(508)
|
|
|
(471)
|
|
|
(300)
|
|
|
(477)
|
|
|
(312)
|
|
|
(312)
|
|
|
(303)
|
|
|
Other income (expense), net
|
(95)
|
|
|
(101)
|
|
|
(50)
|
|
|
(193)
|
|
|
182
|
|
|
(111)
|
|
|
(302)
|
|
|
(593)
|
|
|
Loss before provision for income taxes
|
(17,872)
|
|
|
(19,549)
|
|
|
(23,018)
|
|
|
(26,572)
|
|
|
(22,810)
|
|
|
(30,099)
|
|
|
(37,632)
|
|
|
(62,485)
|
|
|
Provision for income taxes
|
69
|
|
|
40
|
|
|
118
|
|
|
66
|
|
|
128
|
|
|
57
|
|
|
209
|
|
|
149
|
|
|
Net loss
|
$
|
(17,941)
|
|
|
$
|
(19,589)
|
|
|
$
|
(23,136)
|
|
|
$
|
(26,638)
|
|
|
$
|
(22,938)
|
|
|
$
|
(30,156)
|
|
|
$
|
(37,841)
|
|
|
$
|
(62,634)
|
|
__________________
(1)Includes stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
July 31, 2019
|
|
October 31, 2019
|
|
January 31, 2020
|
|
April 30, 2020
|
|
July 31, 2020
|
|
October 31, 2020
|
|
January 31, 2021
|
|
April 30, 2021
|
|
|
(in thousands)
|
|
Cost of revenue
|
$
|
19
|
|
|
$
|
38
|
|
|
$
|
60
|
|
|
$
|
70
|
|
|
$
|
65
|
|
|
$
|
66
|
|
|
$
|
107
|
|
|
$
|
383
|
|
|
Research and development
|
1,236
|
|
|
169
|
|
|
173
|
|
|
2,763
|
|
|
261
|
|
|
443
|
|
|
3,123
|
|
|
7,139
|
|
|
Sales and marketing
|
358
|
|
|
220
|
|
|
250
|
|
|
461
|
|
|
606
|
|
|
985
|
|
|
1,783
|
|
|
2,047
|
|
|
General and administrative
|
1,229
|
|
|
80
|
|
|
99
|
|
|
357
|
|
|
656
|
|
|
3,101
|
|
|
1,065
|
|
|
3,868
|
|
|
Total
|
$
|
2,842
|
|
|
$
|
507
|
|
|
$
|
582
|
|
|
$
|
3,651
|
|
|
$
|
1,588
|
|
|
$
|
4,595
|
|
|
$
|
6,078
|
|
|
$
|
13,437
|
|
Percentage of Revenue Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
July 31, 2019
|
|
October 31, 2019
|
|
January 31, 2020
|
|
April 30, 2020
|
|
July 31, 2020
|
|
October 31, 2020
|
|
January 31, 2021
|
|
April 30, 2021
|
|
|
(as a percentage of total revenue)
|
|
Revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Cost of revenue
|
37
|
|
|
39
|
|
|
41
|
|
|
42
|
|
|
36
|
|
|
42
|
|
|
46
|
|
|
49
|
|
|
Gross profit
|
63
|
|
|
61
|
|
|
59
|
|
|
58
|
|
|
64
|
|
|
58
|
|
|
54
|
|
|
51
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
88
|
|
|
74
|
|
|
74
|
|
|
77
|
|
|
65
|
|
|
61
|
|
|
68
|
|
|
74
|
|
|
Sales and marketing
|
101
|
|
|
122
|
|
|
99
|
|
|
99
|
|
|
79
|
|
|
81
|
|
|
79
|
|
|
97
|
|
|
General and administrative
|
41
|
|
|
24
|
|
|
34
|
|
|
28
|
|
|
29
|
|
|
37
|
|
|
31
|
|
|
45
|
|
|
Total operating expenses
|
230
|
|
|
220
|
|
|
207
|
|
|
204
|
|
|
173
|
|
|
179
|
|
|
178
|
|
|
216
|
|
|
Loss from operations
|
(166)
|
|
|
(158)
|
|
|
(149)
|
|
|
(146)
|
|
|
(109)
|
|
|
(121)
|
|
|
(124)
|
|
|
(165)
|
|
|
Interest income
|
3
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Interest expense
|
(5)
|
|
|
(4)
|
|
|
(3)
|
|
|
(2)
|
|
|
(2)
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
Other income (expense), net
|
(1)
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
1
|
|
|
—
|
|
|
(1)
|
|
|
(2)
|
|
|
Loss before provision for income taxes
|
(169)
|
|
|
(161)
|
|
|
(151)
|
|
|
(148)
|
|
|
(110)
|
|
|
(123)
|
|
|
(126)
|
|
|
(167)
|
|
|
Provision for income taxes
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
Net loss
|
(170)
|
%
|
|
(162)
|
%
|
|
(152)
|
%
|
|
(148)
|
%
|
|
(111)
|
%
|
|
(123)
|
%
|
|
(127)
|
%
|
|
(167)
|
%
|
Note: Certain figures may not sum due to rounding.
Quarterly Changes in Revenue
Revenue increased sequentially in each of the quarters presented primarily due to increases in the number of new customers purchasing our subscriptions as well as additional sales to existing customers. We experience seasonal fluctuations in our financial results as we typically receive a higher percentage of our annual orders from new customers, as well as renewal orders from existing customers, in our fourth fiscal quarter as compared to other quarters due to the annual budget approval process of many of our customers. As a result, our sequential growth in revenue has historically been highest in the fourth fiscal quarter of each year. The seasonality and duration of customer agreements and customer renewals is reflected to a lesser extent, and sometimes is not immediately apparent, in revenue due to the fact that we recognize subscription revenue ratably over the term of the contract.
Quarterly Changes in Cost of Revenue and Gross Margin
Cost of revenue generally increased sequentially in each of the quarters presented primarily as a result of increased third-party cloud infrastructure expenses as a result of the growing speed of customer adoption of our Singularity platform. We expect our costs and gross margin to scale over time as we achieve higher platform processing efficiencies with the integration of Scalyr.
Quarterly Changes in Operating Expenses
Operating expenses have generally increased sequentially in each of the quarters presented primarily due to increased personnel-related expenses, including increased stock-based compensation expense due to increased headcount and other related costs to support our growth. We intend to continue to make significant investments in research and development as we continue to increase investments in our existing products and services. We also intend to invest in our sales and marketing organization to drive future revenue growth.
Key Business Metrics and Non-GAAP Financial Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or For the Three Months Ended
|
|
|
July 31, 2019
|
|
October 31, 2019
|
|
January 31, 2020
|
|
April 30, 2020
|
|
July 31, 2020
|
|
October 31, 2020
|
|
January 31, 2021
|
|
April 30, 2021
|
|
|
(dollars in thousands)
|
|
Annualized recurring revenue (ARR)
|
$
|
45,360
|
|
|
$
|
54,371
|
|
|
$
|
66,764
|
|
|
$
|
74,845
|
|
|
$
|
87,284
|
|
|
$
|
102,663
|
|
|
$
|
130,825
|
|
|
$
|
161,323
|
|
|
Customers with ARR of $100,000 or more
|
61
|
|
|
77
|
|
|
104
|
|
|
122
|
|
|
145
|
|
|
173
|
|
|
219
|
|
|
277
|
|
|
Dollar-based net retention rate
|
114
|
%
|
|
122
|
%
|
|
119
|
%
|
|
122
|
%
|
|
121
|
%
|
|
115
|
%
|
|
117
|
%
|
|
124
|
%
|
|
Gross profit
|
$
|
6,667
|
|
|
$
|
7,435
|
|
|
$
|
8,911
|
|
|
$
|
10,344
|
|
|
$
|
13,131
|
|
|
$
|
14,216
|
|
|
$
|
16,033
|
|
|
$
|
19,112
|
|
|
Non-GAAP gross profit
|
$
|
6,686
|
|
|
$
|
7,473
|
|
|
$
|
8,971
|
|
|
$
|
10,414
|
|
|
$
|
13,196
|
|
|
$
|
14,282
|
|
|
$
|
16,140
|
|
|
$
|
19,986
|
|
|
Gross margin
|
63
|
%
|
|
61
|
%
|
|
59
|
%
|
|
58
|
%
|
|
64
|
%
|
|
58
|
%
|
|
54
|
%
|
|
51
|
%
|
|
Non-GAAP gross margin
|
63
|
%
|
|
62
|
%
|
|
59
|
%
|
|
58
|
%
|
|
64
|
%
|
|
58
|
%
|
|
54
|
%
|
|
53
|
%
|
|
Loss from operations
|
$
|
(17,556)
|
|
|
$
|
(19,208)
|
|
|
$
|
(22,658)
|
|
|
$
|
(26,229)
|
|
|
$
|
(22,561)
|
|
|
$
|
(29,686)
|
|
|
$
|
(37,043)
|
|
|
$
|
(61,612)
|
|
|
Non-GAAP loss from operations
|
$
|
(14,714)
|
|
|
$
|
(18,701)
|
|
|
$
|
(22,076)
|
|
|
$
|
(22,578)
|
|
|
$
|
(20,973)
|
|
|
$
|
(25,091)
|
|
|
$
|
(30,965)
|
|
|
$
|
(47,501)
|
|
|
Operating margin
|
(166)
|
%
|
|
(158)
|
%
|
|
(149)
|
%
|
|
(146)
|
%
|
|
(109)
|
%
|
|
(121)
|
%
|
|
(124)
|
%
|
|
(165)
|
%
|
|
Non-GAAP operating margin
|
(139)
|
%
|
|
(154)
|
%
|
|
(145)
|
%
|
|
(126)
|
%
|
|
(101)
|
%
|
|
(102)
|
%
|
|
(104)
|
%
|
|
(127)
|
%
|
|
Net cash used in operating activities
|
$
|
(11,886)
|
|
|
$
|
(7,072)
|
|
|
$
|
(15,005)
|
|
|
$
|
(11,795)
|
|
|
$
|
(13,712)
|
|
|
$
|
(17,769)
|
|
|
$
|
(23,294)
|
|
|
$
|
(30,798)
|
|
|
Net cash used in investing activities
|
$
|
(839)
|
|
|
$
|
(1,241)
|
|
|
$
|
(423)
|
|
|
$
|
(925)
|
|
|
$
|
(894)
|
|
|
$
|
(2,127)
|
|
|
$
|
(2,319)
|
|
|
$
|
(5,242)
|
|
|
Net cash provided by financing activities
|
$
|
48,214
|
|
|
$
|
140
|
|
|
$
|
305
|
|
|
$
|
153,179
|
|
|
$
|
118
|
|
|
$
|
268,870
|
|
|
$
|
1,811
|
|
|
$
|
1,917
|
|
|
Free cash flow
|
$
|
(12,638)
|
|
|
$
|
(8,309)
|
|
|
$
|
(15,320)
|
|
|
$
|
(12,720)
|
|
|
$
|
(14,480)
|
|
|
$
|
(19,840)
|
|
|
$
|
(25,571)
|
|
|
$
|
(32,591)
|
|
ARR increased sequentially in each of the quarters presented primarily due to increases in the number of new customers purchasing our subscriptions as well as additional sales to existing customers. We typically receive a higher volume of orders from new and existing customers in the fourth fiscal quarter of each year as a result of customer buying patterns. As a result, our sequential growth in ARR has historically been highest in the fourth fiscal quarter of each year. We expect ARR will change from period to period for several reasons, including the timing and duration of customer contracts, and the timing and duration of customer renewals.
Customers with ARR of $100,000 or more increased sequentially in each of the quarters presented as a result of our ability to scale with customers and the strategic importance of our platform for large enterprises and governments who continue to replace or supplement their legacy security solutions.
Our dollar-based net retention rate has been over 100% in each of the quarters presented primarily attributed to the sale of additional endpoints and modules and renewal of existing customers. Our retention rate may fluctuate as a result of a number of factors, including the increase or reduction in the contract value of subscription contracts from our customers, or large upfront purchases made by customers that do not increase purchases in subsequent periods.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
The following table provides a reconciliation of GAAP gross profit to non-GAAP gross profit and of GAAP gross margin to non-GAAP gross margin, for each of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
July 31, 2019
|
|
October 31, 2019
|
|
January 31, 2020
|
|
April 30, 2020
|
|
July 31, 2020
|
|
October 31, 2020
|
|
January 31, 2021
|
|
April 30, 2021
|
|
|
(dollars in thousands)
|
|
Revenue
|
$
|
10,551
|
|
$
|
12,123
|
|
$
|
15,219
|
|
$
|
17,957
|
|
$
|
20,674
|
|
$
|
24,557
|
|
$
|
29,868
|
|
$
|
37,395
|
|
Gross profit
|
$
|
6,667
|
|
$
|
7,435
|
|
$
|
8,911
|
|
$
|
10,344
|
|
$
|
13,131
|
|
$
|
14,216
|
|
$
|
16,033
|
|
$
|
19,112
|
|
Add: Stock-based compensation expense
|
19
|
|
38
|
|
60
|
|
70
|
|
65
|
|
66
|
|
107
|
|
383
|
|
Add: Amortization of acquired intangible assets
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
491
|
|
Non-GAAP gross profit
|
$
|
6,686
|
|
$
|
7,473
|
|
$
|
8,971
|
|
$
|
10,414
|
|
|
$
|
13,196
|
|
|
$
|
14,282
|
|
|
$
|
16,140
|
|
|
$
|
19,986
|
|
|
Gross margin
|
63
|
%
|
|
61
|
%
|
|
59
|
%
|
|
58
|
%
|
|
64
|
%
|
|
58
|
%
|
|
54
|
%
|
|
51
|
%
|
|
Non-GAAP gross margin
|
63
|
%
|
|
62
|
%
|
|
59
|
%
|
|
58
|
%
|
|
64
|
%
|
|
58
|
%
|
|
54
|
%
|
|
53
|
%
|
Non-GAAP Loss from Operations and Non-GAAP Operating Margin
The following table provides a reconciliation of GAAP loss from operations to non-GAAP loss from operations and of GAAP operating margin to non-GAAP operating margin, for each of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
July 31, 2019
|
|
October 31, 2019
|
|
January 31, 2020
|
|
April 30, 2020
|
|
July 31, 2020
|
|
October 31, 2020
|
|
January 31, 2021
|
|
April 30, 2021
|
|
|
(dollars in thousands)
|
|
Revenue
|
$
|
10,551
|
|
|
$
|
12,123
|
|
|
$
|
15,219
|
|
|
$
|
17,957
|
|
|
$
|
20,674
|
|
|
$
|
24,557
|
|
|
$
|
29,868
|
|
|
$
|
37,395
|
|
|
Loss from operations
|
$
|
(17,556)
|
|
|
$
|
(19,208)
|
|
|
$
|
(22,658)
|
|
|
$
|
(26,229)
|
|
|
$
|
(22,561)
|
|
|
$
|
(29,686)
|
|
|
$
|
(37,043)
|
|
|
$
|
(61,612)
|
|
|
Add: Stock-based compensation expense
|
2,842
|
|
|
507
|
|
|
582
|
|
|
3,651
|
|
|
1,588
|
|
|
4,595
|
|
|
6,078
|
|
|
13,437
|
|
|
Add: Amortization of acquired intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
674
|
|
|
Non-GAAP loss from operations
|
$
|
(14,714)
|
|
|
$
|
(18,701)
|
|
|
$
|
(22,076)
|
|
|
$
|
(22,578)
|
|
|
$
|
(20,973)
|
|
|
$
|
(25,091)
|
|
|
$
|
(30,965)
|
|
|
$
|
(47,501)
|
|
|
Operating margin
|
(166)
|
%
|
|
(158)
|
%
|
|
(149)
|
%
|
|
(146)
|
%
|
|
(109)
|
%
|
|
(121)
|
%
|
|
(124)
|
%
|
|
(165)
|
%
|
|
Non-GAAP operating margin
|
(139)
|
%
|
|
(154)
|
%
|
|
(145)
|
%
|
|
(126)
|
%
|
|
(101)
|
%
|
|
(102)
|
%
|
|
(104)
|
%
|
|
(127)
|
%
|
Free Cash Flow
The following table summarizes our cash flows and provides a reconciliation of net cash used in operating activities, the most directly comparable GAAP measure, to free cash flow, a non-GAAP financial measure, for each of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
July 31, 2019
|
|
October 31, 2019
|
|
January 31, 2020
|
|
April 30, 2020
|
|
July 31, 2020
|
|
October 31, 2020
|
|
January 31, 2021
|
|
April 30, 2021
|
|
|
(in thousands)
|
|
Net cash used in operating activities
|
$
|
(11,886)
|
|
|
$
|
(7,072)
|
|
|
$
|
(15,005)
|
|
|
$
|
(11,795)
|
|
|
$
|
(13,712)
|
|
|
$
|
(17,769)
|
|
|
$
|
(23,294)
|
|
|
$
|
(30,798)
|
|
|
Less: Purchases of property and equipment
|
(267)
|
|
|
(235)
|
|
|
(102)
|
|
|
(278)
|
|
|
(123)
|
|
|
(1,233)
|
|
|
(1,649)
|
|
|
(780)
|
|
|
Less: Capitalized internal-use software
|
(485)
|
|
|
(1,002)
|
|
|
(213)
|
|
|
(647)
|
|
|
(645)
|
|
|
(838)
|
|
|
(628)
|
|
|
(1,013)
|
|
|
Free cash flow
|
$
|
(12,638)
|
|
|
$
|
(8,309)
|
|
|
$
|
(15,320)
|
|
|
$
|
(12,720)
|
|
|
$
|
(14,480)
|
|
|
$
|
(19,840)
|
|
|
$
|
(25,571)
|
|
|
$
|
(32,591)
|
|
|
Net cash used in investing activities
|
$
|
(839)
|
|
|
$
|
(1,241)
|
|
|
$
|
(423)
|
|
|
$
|
(925)
|
|
|
$
|
(894)
|
|
|
$
|
(2,127)
|
|
|
$
|
(2,319)
|
|
|
$
|
(5,242)
|
|
|
Net cash provided by financing activities
|
$
|
48,214
|
|
|
$
|
140
|
|
|
$
|
305
|
|
|
$
|
153,179
|
|
|
$
|
118
|
|
|
$
|
268,870
|
|
|
$
|
1,811
|
|
|
$
|
1,917
|
|
Liquidity and Capital Resources
Since inception, we have financed operations primarily through proceeds received from sales of equity securities, payments received from our customers, and borrowings under our loan and security agreement, and we have generated operating losses, as reflected in our accumulated deficit of $350.6 million and $413.2 million as of January 31, 2021 and April 30, 2021, respectively. As of January 31, 2021 and April 30, 2021, our principal source
of liquidity was cash, cash equivalents, and short-term investments of $395.8 million and $362.6 million, respectively.
We believe that our existing cash, cash equivalents, and short-term investments will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support research and development efforts, the price at which we are able to purchase third-party cloud infrastructure, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of our platform. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operating results, and financial condition.
The following table shows a summary of our cash flows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
(in thousands)
|
|
Net cash used in operating activities
|
$
|
(44,424)
|
|
|
$
|
(66,570)
|
|
|
$
|
(11,795)
|
|
|
$
|
(30,798)
|
|
|
Net cash used in investing activities
|
$
|
(3,187)
|
|
|
$
|
(6,265)
|
|
|
$
|
(925)
|
|
|
$
|
(5,242)
|
|
|
Net cash provided by financing activities
|
$
|
52,770
|
|
|
$
|
423,978
|
|
|
$
|
153,179
|
|
|
$
|
1,917
|
|
Operating Activities
Our largest source of operating cash is payments received from our customers. Our primary uses of cash from operating activities are for personnel-related expenses, sales and marketing expenses, third-party cloud infrastructure expenses, and overhead expenses. We have generated negative cash flows from operating activities and have supplemented working capital through net proceeds from the sale of equity securities.
Cash used in operating activities primarily consists of our net loss adjusted for certain non-cash items, including stock-based compensation expense, depreciation and amortization, amortization of deferred contract acquisition costs, and changes in operating assets and liabilities during each period.
Cash used in operating activities during the three months ended April 30, 2020 was $11.8 million, primarily consisting of our net loss of $26.6 million, adjusted for non-cash items of $7.8 million and net cash inflows of $7.0 million provided by changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a $14.3 million decrease in accounts receivable resulting primarily from timing of collections, and a $0.8 million increase in accounts payable due to timing of payments, partially offset by a $3.2 million decrease in accrued payroll and benefits, a $2.4 million increase in deferred contract acquisition costs, a $1.4 million decrease in deferred revenue, and a $1.0 million decrease in operating lease liabilities.
Cash used in operating activities during the three months ended April 30, 2021 was $30.8 million, primarily consisting of our net loss of $62.6 million, adjusted for non-cash items of $19.5 million and net cash inflows of $12.3 million provided by changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a $9.7 million increase in deferred revenue resulting primarily from increased subscription contracts, a $6.3 million decrease in accounts receivable resulting primarily from timing of collections, a $2.7 million increase in accrued liabilities, and a $1.3 million increase in accrued payroll and benefits, partially offset by an increase in deferred contract acquisition costs of $5.5 million and a decrease in accounts payable of $2.2 million due to timing of payments.
Cash used in operating activities during fiscal 2020 was $44.4 million, primarily consisting of our net loss of $76.6 million, adjusted for non-cash items of $11.9 million and net cash inflows of $20.3 million provided by
changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a $46.3 million increase in deferred revenue resulting primarily from increased subscription contracts, a $5.6 million increase in accrued payroll and benefits due to increased headcount, a $2.9 million increase in accounts payable, and a $0.6 million increase in accrued liabilities due to our growth and timing of payments. These amounts were partially offset by a $19.0 million increase in accounts receivable due to an increase in sales, a $14.6 million increase in deferred contract acquisition costs, and a $1.2 million increase in prepaid expenses and other current assets.
Cash used in operating activities during fiscal 2021 was $66.6 million, primarily consisting of our net loss of $117.6 million, adjusted for non-cash items of $33.3 million and net cash inflows of $17.7 million provided by changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a $49.1 million increase in deferred revenue, resulting primarily from increased subscription contracts, a $7.8 million increase in accrued payroll and benefits due to increased headcount, a $7.4 million increase in accounts payable, and a $1.4 million increase in accrued liabilities due to our growth and timing of payments. These amounts were partially offset by a $26.9 million increase in deferred contract acquisition costs, a $9.4 million increase in prepaid expenses and other current assets, primarily due to an increase in prepaid hosting and sponsorship costs, and an $8.3 million increase in accounts receivable due to an increase in sales.
Investing Activities
Cash used in investing activities during the three months ended April 30, 2020 was $0.9 million, consisting of $0.6 million of capitalized internal-use software costs and $0.3 million of purchases of property and equipment to support additional office facilities.
Cash used in investing activities during the three months ended April 30, 2021 was $5.2 million, consisting of $3.4 million used in the acquisition of Scalyr, $1.0 million of capitalized internal-use software costs, and $0.8 million of purchases of property and equipment to support additional office facilities.
Cash used in investing activities during fiscal 2020 was $3.2 million, consisting of $1.7 million of capitalized internal-use software costs, $1.0 million of purchases of property and equipment to support additional office facilities, $0.3 million of purchases of short-term investments, and $0.2 million of purchases of intangible assets.
Cash used in investing activities during fiscal 2021 was $6.3 million, consisting of $3.3 million of purchases of property and equipment to support additional office facilities, $2.8 million of capitalized internal-use software costs, and $0.2 million of purchases of intangible assets.
Financing Activities
Cash provided by financing activities during the three months ended April 30, 2020 was $153.2 million, primarily consisting of $152.5 million of net proceeds from the issuance of our Series E redeemable convertible preferred stock.
Cash provided by financing activities during the three months ended April 30, 2021 was $1.9 million, consisting of proceeds from the exercise of stock options of $3.7 million, offset by payments of deferred offering costs of $1.8 million.
Cash provided by financing activities during fiscal 2020 was $52.8 million, consisting of $51.9 million of net proceeds from the issuance of our Series D redeemable convertible preferred stock and $0.9 million of proceeds from the exercise of stock options.
Cash provided by financing activities during fiscal 2021 was $424.0 million, consisting of $419.3 million of net proceeds from the issuances of our Series E redeemable convertible preferred stock and Series F redeemable convertible preferred stock, $19.9 million of net proceeds from our revolving line of credit, and $4.8 million of proceeds from the exercise of stock options and warrants, partially offset by a $20.0 million repayment of our term loan.
Debt Obligations
In May 2018, we entered into a loan and security agreement with a certain lender, which was restated in May 2020, or the Amended Loan and Security Agreement. The Amended Loan and Security Agreement provides a revolving line of credit of up to $45.0 million, maturing in May 2023. We drew down $20.0 million on the revolving line of credit in May 2020 and repaid the outstanding amounts borrowed under the loan and security agreement in full. All borrowings under the Amended Loan and Security Agreement are secured by substantially all of our assets, including the assets of our wholly-owned subsidiary Scalyr. In addition, the terms of the Amended Loan and Security Agreement include certain affirmative covenants that, among other things, require us to maintain certain annual revenue targets during a given covenant period and limit our and our subsidiaries’ abilities to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, and make investments, in each case subject to certain exceptions.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of January 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Total
|
|
Less Than 1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More Than 5 Years
|
|
Purchase obligations
|
$
|
16,916
|
|
|
$
|
7,152
|
|
|
$
|
9,764
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Operating lease obligations
|
26,362
|
|
|
3,752
|
|
|
6,984
|
|
|
7,006
|
|
|
8,620
|
|
|
Long-term debt
|
22,485
|
|
|
1,063
|
|
|
21,422
|
|
|
—
|
|
|
—
|
|
|
|
$
|
65,763
|
|
|
$
|
11,967
|
|
|
$
|
38,170
|
|
|
$
|
7,006
|
|
|
$
|
8,620
|
|
The purchase obligation amounts in the table above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included in the table above.
In April 2021, we entered into a non-cancellable purchase commitment with our cloud infrastructure vendor for a total value of $250.0 million over the next three years.
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, such 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.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
Interest Rate Risk
As of January 31, 2021 and April 30, 2021, we had $395.8 million and $362.6 million, respectively, of cash, cash equivalents, and short-term investments, which consist of money market funds and certificates of deposit. We also had $3.6 million and $4.1 million of restricted cash as of January 31, 2021 and April 30, 2021, respectively, primarily due to outstanding letters of credit established in connection with lease agreements for our facilities. Our cash, cash equivalents, and short-term investments are held for working capital purposes. We do not enter into investments for trading or speculative purposes. We do not believe a 10% increase or decrease in interest rates would have resulted in a material impact to our operating results.
Foreign Currency Exchange Risk
To date, all of our sales contracts have been denominated in U.S. dollars, therefore our revenue is not subject to foreign currency risk. Operating expenses within the United States are primarily denominated in U.S. dollars, while operating expenses incurred outside the United States are primarily denominated in each country’s respective local currency.
The functional currency of our foreign subsidiaries is each country’s respective local currency. Assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at the reporting date, and income and expenses are translated at average exchange rates during the period, with the resulting translation adjustments directly recorded as a component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations. As the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant. We do not believe a 10% increase or decrease in foreign exchange rates would have resulted in a material impact to our operating results.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, and we evaluate our estimates and assumptions on an ongoing basis. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, operating results, and cash flows will be affected.
The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers.
We consider the terms and conditions of contracts with customers and our customary business practices in identifying contracts. We determine we have a contract with a customer when the contract is approved, the payment terms for the services can be identified, each party’s rights regarding the services to be transferred can be identified, the contract has commercial substance, and we have determined that the customer has the ability and intent to pay. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to such customer.
Our contracts with customers may contain multiple performance obligations, which are accounted for separately if they are capable of being distinct and are distinct in the context of the contract. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on relative standalone selling price, or SSP. We apply judgment in determining SSP for our performance obligations. To determine SSP, we maximize the use of observable standalone sales and observable data, where available. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include but is not limited to product groupings, or applying the expected cost-plus margin approach to estimate the price we would charge if the service was sold separately. Certain sales arrangements may include variable consideration, which is recorded as part of the transaction price if, in our judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur.
Stock-Based Compensation
Stock-based compensation expense related to equity awards is recognized based on the fair value of the awards on the date of the grant. The fair value of stock option awards granted is generally estimated using the Black-Scholes option pricing model. For awards with market-based vesting conditions, a Monte Carlo simulation model is used. Stock-based compensation expense for awards with only service-based vesting conditions is recognized on a straight-line basis over the requisite service period of the awards. We account for forfeitures related to these awards as they occur.
The use of the Black-Scholes option pricing model requires the input of highly subjective assumptions. These assumptions involve inherent uncertainties and the application of management’s judgment. These assumptions are estimated as follows:
•Fair value of common stock. Because our common stock is not yet publicly traded, we must estimate the fair value of our common stock, as discussed below in the section titled “—Common Stock Valuations."
•Expected term. We determine the expected term based on the average period the options are expected to remain outstanding using the simplified method, calculated as the midpoint of the options’ vesting term and contractual expiration period, until sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior becomes available.
•Expected volatility. Since we do not have a trading history of our common stock, we estimate the expected volatility based on the historical volatilities of a group of comparable publicly traded companies.
•Risk-free interest rate. We use the U.S. Treasury yield for our risk-free interest rate for a period that corresponds with the expected term of the award.
•Dividend yield. We utilize a dividend yield of zero, as we do not currently issue dividends and do not expect to issue dividends on our common stock in the foreseeable future.
The following table summarizes the assumptions used in the Black-Scholes option pricing model to determine the fair value of our stock options:
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Year Ended January 31,
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Three Months Ended April 30,
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2020
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2021
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2020
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2021
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Expected term (years)
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6.0
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6.0
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6.0
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6.0
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Expected volatility
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29.9%–30.7%
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47.3%–48.7%
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48.5
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%
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63.2%–66.0%
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Risk-free interest rate
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1.4%–2.5%
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0.4%–0.6%
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0.5
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0.8%–1.1%
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Dividend yield
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—
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%
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—
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—
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—
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Common Stock Valuations
The fair value of the common stock underlying our equity awards has been determined by our board of directors, with input from management and contemporaneous third-party valuations. Given the absence of a public trading market for our common stock and in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock at each grant date. These factors include:
•contemporaneous third-party valuations of our common stock;
•the prices, rights, preferences, and privileges of our redeemable convertible preferred stock relative to those of our common stock;
•the prices paid for common or redeemable convertible preferred stock sold to third-party investors by us and prices paid in secondary transactions for shares purchased by third-party investors in arms-length transactions;
•the lack of marketability inherent in our common stock;
•our actual operating and financial performance;
•our current business conditions and projections;
•the hiring of key personnel and the experience of our management;
•the likelihood of achieving a liquidity event, such as an initial public offering, a merger, or acquisition of SentinelOne given prevailing market conditions;
•the operational and financial performance of comparable publicly traded companies; and
•the U.S. and global capital market conditions and overall economic conditions.
In determining the fair value of our common stock, we first estimate the fair value of our business using either the income approach, the market approach, or a combination of the income and market approaches. The income approach estimates value based on expectations of future cash flows that we will generate. Future cash flows are then discounted to their present values using a risk-adjusted discount rate. The market approach estimates value based on a comparison of the company to a group of comparable public companies. From the comparable companies, a representative market value multiple is determined and then applied to our financial results to estimate the fair value of our business.
The resulting estimated fair value of our business is then allocated to each class of stock using the Option Pricing Method, or OPM, or a hybrid of the Probability Weighted Expected Return Method, or PWERM, and OPM. Prior to February 1, 2021, the OPM was selected as the principal equity allocation method. For dates near a recent preferred stock financing, we assessed the value of common stock implied by the price paid for the redeemable convertible preferred stock, primarily using an OPM to backsolve the common stock value. Beginning February 1, 2021, we allocated the fair value of our business based on a hybrid of the OPM and the PWERM. Using the PWERM, a probability-weighted analysis of values for our common stock was estimated assuming possible future events for our company, including a scenario assuming we become a publicly traded company and a scenario assuming we continue as a privately held company. A discount for lack of marketability was applied to the resulting per share value to arrive at the fair value of our common stock on a non-marketable basis.
In addition, we also considered any secondary transactions involving our capital stock. In our evaluation of those transactions, we considered the facts and circumstances of each transaction to determine the extent to which they represented a fair value exchange. Factors considered include transaction volume, the number of participants, timing, whether the transactions occurred between willing and unrelated parties, and whether the transactions involved parties with access to our financial information.
Upon completion of this offering, our Class A common stock will be publicly traded, and our board of directors will use the closing price of our Class A common stock as reported on the date of grant to determine the fair value of our Class A common stock.
Based on the assumed initial public offering price per share of $ , which is the midpoint of the offering price range set forth on the cover page of this prospectus, the aggregate intrinsic value of our outstanding stock options as of April 30, 2021 was $ million, with $ million related to vested stock options.
Business Combinations
We account for our acquisitions using the acquisition method of accounting. We allocate the fair value of purchase consideration to the tangible and intangible assets acquired, and liabilities assumed, based on their estimated fair values. The excess of the fair value of purchase consideration over the values of these identifiable
assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain identifiable assets include, but are not limited to, the selection of valuation methodologies, future expected cash flows, discount rates, and useful lives. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups, “JOBS,” Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period 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.
Recently Issued Accounting Pronouncements
See Note 2 to our consolidated financial statements included elsewhere in this prospectus for more information regarding recently issued accounting pronouncements.
BUSINESS
Overview
Cy·ber·at·tack - Any unauthorized attempt to expose, alter, disable, destroy, steal, or gain data.
Cyberattacks have become the output of military-grade, highly resourced, and automated nation-state and cybercrime operations. We envisioned a revolutionary data and AI paradigm where technology alone could autonomously prevent, detect, and respond to cyberattacks. It is time to fight machine with machine.
We pioneered the world’s first purpose-built AI-powered XDR platform to make cybersecurity defense truly autonomous, from the endpoint and beyond. Our Singularity Platform instantly defends against cyberattacks - performing at a faster speed, greater scale, and higher accuracy than possible from any single human or even a crowd.
Modern society is digital. With digital transformation changing everything, accelerated by the COVID-19 pandemic, organizations have become increasingly susceptible to cyberattacks. Every place where data resides is vulnerable from device to server to the cloud. From healthcare to commerce, education to infrastructure, transportation to manufacturing, financial institutions to government agencies, cyberattacks are one of the biggest threats to global stability and progress. Within milliseconds, services we rely on can cease to operate. Our growing reliance on technology creates an accelerating risk cycle: more devices generate and process more data which result in more opportunities for cybercriminals to attack. Cybersecurity is foundational to preserving our digital way of life.
Cyberattacks are a daily occurrence in every part of the world. Accepted defense mechanisms are failing. Legacy antivirus, powered by human-generated signatures, remains the most widely deployed security technology, despite proving ineffective and reactive. Human-powered EDR emerged as the alternative in which people became the detection and response crew. This approach evangelized the “1-10-60” rule which claimed the best achievable cybersecurity outcome was capped at one minute to detect an attack, ten minutes to investigate, and 60 minutes to respond. Recent ransomware attacks prove it only takes milliseconds to breach an organization, exfiltrate data, and force a complete shutdown. The central problem with legacy antivirus and human-powered EDR is that both rely on linear human effort to defend against the exponential growth of cyber threats. This is akin to bringing a knife to a gunfight.
It is time for a new cybersecurity paradigm.
Our XDR platform ingests, correlates, and queries petabytes of structured and unstructured data from a myriad of ever-expanding disparate external and internal sources in real-time. We build rich context and deliver greater visibility by constructing a dynamic representation of data across an organization. As a result, our AI models are highly accurate, actionable, and autonomous. Our distributed AI models run both locally on every endpoint and every cloud workload, as well as on our cloud platform. Our Static and vector-agnostic Behavioral AI models, which run on the endpoints themselves, provide our customers with protection even when their devices are not connected to the cloud. In the cloud, our Streaming AI detects anomalies that surface when multiple data feeds are correlated. Furthermore, our platform provides visibility across an organization’s digital assets through one console, making it easy and very fast for analysts to search through petabytes of data to investigate incidents and hunt threats. Our Singularity Platform offers multi-tenancy and can be deployed on a diverse range of environments that our customers choose, including public, private, or hybrid clouds.
On each endpoint and cloud workload, we run highly optimized AI models in a single lightweight software agent. Our Static AI model predicts file-based attacks of all types, even previously unknown threats, often referred to as “zero-day attacks,” with extreme precision in milliseconds. Our Behavioral AI model maps, monitors, and links all behaviors on the endpoint to create rich, contextual narratives that we call Storylines. These high-fidelity Storylines are continuously evaluated by our Behavioral AI model. When activity is deemed a threat, our software autonomously takes action to kill the attack. Because Storylines contain a complete record of unauthorized changes made during an attack, we are ready to remediate or roll back these changes. The power to turn back time on a
device is unique in the market. It is the ultimate safety net and exemplifies autonomous cybersecurity. Thus, our software eliminates manual, expensive, and time-consuming incident cleanup.
In the cloud, our platform aggregates Storylines. Our Streaming AI detects anomalies that surface when multiple data feeds are correlated with additional external and internal data. By providing full visibility into the Storyline of every secured device across the organization through one console, our platform makes it very fast for analysts to easily search through petabytes of data to investigate incidents and proactively hunt threats. We have extended our control and visibility planes beyond the traditional endpoint to cloud workloads, unmanaged devices, and IoT devices. This empowers security analysts of all skill levels to hunt, investigate, and remediate even the most sophisticated threats across the network leveraging automated context provided by our Storylines. Our proprietary data stack and cloud architecture enable us to retain this rich, contextual data on behalf of our customers for up to three years in a highly cost-efficient manner. All of this threat intelligence is fed back into our AI model and further strengthens our algorithms, creating a strong flywheel effect and deepening our competitive moat.
Our Singularity Platform can be flexibly deployed on the environments that our customers choose, including public, private, or hybrid clouds. Our feature parity across Windows, macOS, Linux, and Kubernetes offers best-of-breed protection, visibility, and control across today’s heterogeneous IT environments. Together, these capabilities make our platform the logical choice for organizations of all sizes, industry verticals, and compliance requirements. Our platform offers true multi-tenancy, which enables the world’s largest organizations and our managed security providers and incident response partners the best management experience. Our customers realize improved cybersecurity outcomes with fewer people, producing an attractive return on investment.
Cybersecurity has always been a game of cat and mouse. The attacker only needs to be successful once whereas the defender must be correct each and every time. It is asymmetrical and simply impossible for humans alone to win. Our data and AI-powered XDR platform changes this paradigm, shifting the advantage to our customers. The results speak for themselves: in the world’s most recent mass-scale cyberattack, SolarWinds Sunburst, we kept each and every one of our customers safe. This is but one of numerous examples where our technology paradigm was battle tested. And, our customers won.
Our Singularity Platform can be used globally by organizations of all sizes across a broad range of industries. As of April 30, 2021, we had over 4,700 customers, increasing from over 2,700 as of April 30, 2020. Our AI and automation driven approach to cybersecurity has been adopted by some of the world’s largest and most demanding organizations. As a result, we have grown rapidly since our inception. Our revenue for fiscal 2020 and fiscal 2021 was $46.5 million and $93.1 million, respectively, representing year-over-year growth of 100%. Our revenue for the three months ended April 30, 2020 and 2021 was $18.0 million and $37.4 million, respectively, representing year-over-year growth of 108%. During this period we continued to invest in growing our business to capitalize on our market opportunity. As a result, our net loss for fiscal 2020 and fiscal 2021 was $76.6 million and $117.6 million, respectively, and our net loss for the three months ended April 30, 2020 and 2021 was $26.6 million and $62.6 million, respectively.
Industry Background
Cybersecurity is fundamentally a data problem. Advances in AI, specifically machine learning, where algorithms use data to make decisions with minimal human intervention, are already revolutionizing fields such as healthcare, advertising, and securities trading. We believe that AI is ripe for revolutionizing cybersecurity.
To achieve fully autonomous cyber defense, organizations need to leverage the petabytes of data being generated from their rapidly growing devices, applications, and IT infrastructure. IDC projects that there will be more data created in the next three years than was created in the last 30 years combined. First, organizations need to ingest, normalize, and correlate petabytes of structured and unstructured data from a myriad of external and internal data in a cost efficient manner. After that, organizations need to apply powerful AI models on this high-fidelity contextual data to automatically detect known and unknown threats, then autonomously remediate and neutralize the threats. It is critical that we harness the power of data and AI to protect our digital way of life.
Stakes are high for organizations and cybercriminals. The exponential growth of sensitive customer and business data has simultaneously made many organizations the target of highly sophisticated cybercriminals. In
addition to the intangible cost of data breaches, for companies that experienced breaches of 1 million to 10 million records, the average cost of a data breach is $50 million, according to IBM Security’s Cost of a Data Breach 2020 report.
Cybercriminals are looking for opportunities to exfiltrate data to steal intellectual property or facilitate future attacks, destroy it to disrupt operations or for political gain, or encrypt it to demand ransom for financial gain. To gain access to an organization’s data, cybercriminals target endpoints and applications and deploy a variety of sophisticated methods in the form of attack frameworks, machine learning, weaponized exploits, fileless techniques, and social engineering. According to Cybersecurity Ventures, cybercrime is a massive $6 trillion business. Powered by very large networks of individual attackers distributed worldwide, it is practically infinite in scale and transcends geographical boundaries. In the absence of mechanisms to hold cybercriminals accountable for their actions, efforts to identify and shut down all sources of cybercrime have resulted in a never ending game of whack-a-mole.
As a result, solutions that help strengthen and scale their cyber defenses cost effectively is a top-level priority for organizations today.
Tectonic shifts in IT require a “Zero Trust” operating procedure. With millions of remote laptops accessing thousands of applications running in public, private and hybrid clouds, traditional perimeter-based security controls are bypassed and organizations have to operate in a “Zero Trust” IT environment. Organizations are digitizing and bringing their sensitive data assets online and connecting more devices to their network. As a result, the attack surface has expanded considerably, and the notion of a corporate perimeter protected by firewalls is a relic of the past, making the endpoint the epicenter, and endpoint protection software the first, and last, line of defense. The following tectonic shifts in IT have increasingly left companies vulnerable:
•Rapid adoption of cloud computing. Cloud computing has become a strategic imperative for organizations to accelerate their digital transformation. According to IDC, worldwide spending on cloud services is expected to grow at 15.7% annually from 2020 to 2024, to over $1 trillion. While public cloud services continue to be the largest engine of growth, private clouds are indispensable for mid-size to large organizations, in particular government agencies and companies in regulated industries, that seek enhanced control over their business-critical operations and data. As security and compliance is a shared responsibility model between the cloud infrastructure provider and their customer, organizations are looking for technology solutions that protect their growing cloud workloads while enabling flexible deployment options across public, private and hybrid clouds.
•The operating system landscape is more complex than ever before. The diversification of IT and BYOD policies brought Macs and other devices into today’s organizations. IDC’s MarketScape reports that the number of computers that run macOS at U.S.-based companies with 1,000 or more employees increased from 17% in 2019 to 23% in 2021. While Windows remains the dominant operating system for computers, Linux has become widely adopted among organizations to power their business applications and servers. Organizations are looking for cybersecurity solutions that deliver comprehensive defense capabilities and feature parity across a large variety of operating systems, including Windows, macOS, and Linux, without burdening their IT teams.
•Proliferation of connected devices. According to IDC, an estimated 41.4 billion IoT devices will be online in 2025. Many of these devices will have little to no built-in security capabilities. Cybercriminals are increasingly exploiting inherent vulnerabilities in these devices to breach organizations. Unmanaged devices are especially vulnerable. As a result, the attack surface has exploded. Visibility across connected devices and continuous assessment of their risk profile has become a top priority for organizations.
•Remote work is here to stay. The COVID-19 pandemic changed the way most organizations operate, accelerating technology’s role in supporting remote work. The prevalence and speed in which new approaches have been deployed make organizations even more vulnerable. Within days, organizations were forced to enable their employees to work remotely and to dramatically expedite digital transformation plans. The pandemic has accelerated the structural shift towards a more distributed workforce. Gartner found that 82% of company leaders say their organizations plan to let employees continue to work from
home at least some of the time, while 47% plan to allow employees to do so all of the time. The growth of remote work has increased the risk of cyberattacks. According to a survey by Ponemon Institute, 42% of respondents said their organizations have no understanding how to protect against cyberattacks due to remote working. As a result of the accelerated structural shift towards a distributed workforce, organizations are increasingly looking for cybersecurity solutions that safeguard their remote workforces.
Sophisticated cyberattacks circumvent existing security controls. Cyberattacks have evolved from “child’s play” malware into highly sophisticated, organized and large-scale attacks by malicious insiders, criminal syndicates, and nation-states seeking to circumvent existing security controls and undermine critical societal functions through a variety of attacks that are:
•Fast acting. Many attacks, such as Emotet, Maktub and Medusa Locker, take only seconds for adversaries to breach organizations, exfiltrate data, demand ransoms, and disrupt operations. They bypass security controls that are based on the “1-10-60” rule which evangelizes that organizations have one minute to detect, ten minutes to investigate, and 60 minutes to remediate a security breach.
•Stealthy, with long dwell times. Some attacks, such as advanced persistent attacks, or APT, and targeted attacks, are designed to breach the organization and stealthily infiltrate across assets to steal data, facilitate future attacks, or cause other harm over a long period of time, all while operating undetected. The average time to identify and contain a breach is 280 days, according to IBM Security’s Cost of a Data Breach Report 2020, giving threat actors plenty of time to inflict damage. For instance, the recent Sunburst attack that impacted approximately 18,000 organizations across federal, state and local governments and the private sector, used a variety of sophisticated techniques to disguise its operations as it spread laterally within target organizations over many months.
Cybersecurity teams are unable to scale. While the number of connected devices, applications and cyber threats have increased exponentially, organizations are facing an acute shortage of skilled cybersecurity talent. (ISC)2 estimates that approximately three million additional professionals are needed today to adequately defend organizations against cyberattacks worldwide. This is further aggravated by the large number of security solutions that companies have deployed over time, many of which generate large volumes of alerts that security teams have to sift through and make sense of. According to the Enterprise Strategy Group (ESG), around 20% of cybersecurity professionals surveyed identify their top incident response challenge as “keeping up with the volume of alerts.” As a result, despite their often large cybersecurity budgets, organizations continue to become victims of disastrous breaches and cyberattacks. There is no way to resolve this growing resource imbalance without embracing a new, technology-powered, data-driven approach. Out of necessity, organizations are demanding solutions that do not require human intervention to prevent, detect, and remediate cyber threats.
Limitations of Existing Solutions
Organizations must deploy solutions that enable them to stay one step ahead of attackers and address intrusion attempts in real-time. As attackers up the ante, developing new skills and deploying new tactics and techniques, existing tools are often unable to prevent and respond effectively to breaches. The result is a rising number of successful high-profile attacks.
Key limitations of existing tools are that they:
•Cover a limited spectrum of cyber threats. Existing tools, such as signature-based approaches, human-powered monitoring, application whitelisting and sandboxing, are each effective under limited circumstances, but lack the ability to detect the full spectrum of threats organizations are dealing with. Signature-based approaches can detect attacks that have been seen previously, but are incapable of preventing a wide range of attacks, such as unknown malware, ransomware, modified versions of previously known attacks and exploits of zero day vulnerabilities. In addition, they lack the ability to detect and prevent an increasing number of fileless attacks, that deposit no malware, but instead exploit operating system vulnerabilities and use trusted tools within IT environments, such as Office document macros and PowerShell scripts. Application whitelisting relies on manually creating and updating “always allow” or “always block” rules that strain the limited security resources of an organization and are often rendered
obsolete, or are ineffective in detecting attack vectors embedded in legitimate applications. As a result, despite deploying a myriad of point solutions, organizations have continued to suffer huge losses from cyberattacks.
•Utilize AI approaches that rely on humans to power protection mechanisms. First generation AI tools cannot handle the volume, variety, and velocity of data that must be ingested and analyzed, in real-time, to be effective in preventing breaches. These tools often rely on ineffective pattern-matching algorithms in the cloud that generate so much “noise” that human intervention is required to extract useful “signals.” Some of those tools transfer the raw data into the public cloud, hoping to leverage the massive compute power available there, but that has not fixed the problem. It has merely shifted the problem elsewhere because AI algorithms are only as intelligent as the quality of the data that they work with as well as the speed at which they operate. Without curated, contextual data, these tools only generate more alerts that need to be analyzed by humans. They cannot take action at machine speed and are thus unable to detect and prevent or stop many fast-acting attacks. Additionally, due to communication latency with the cloud, these tools cannot generate actionable insights in real-time, which is required to stop many current threats. Sunburst and numerous recent breaches have illustrated that these tools are unable to provide the protection that organizations need. Further, because these tools lack the ability to prevent attacks and often do not meet regulatory requirements such as File Integrity Monitoring by themselves, organizations are forced to leave in their antiquated antivirus software as “crutches” to satisfy auditors.
•Lack long-term data visibility to proactively investigate advanced threats. Existing EDR tools lack the capability to store large sets of historical data cost efficiently, and consequently often only offer limited data retention capabilities. This results in only partial datasets being available for threat hunting and time bound retrospective forensic analysis. Given that the average time to identify and contain a breach is 280 days, limited historical EDR data makes full incident investigation challenging for security personnel, as they are unable to go back in time and see how the attack breached the organization and progressed.
•Struggle to protect complex modern IT environments. Existing tools were not designed to protect today’s multi-cloud, multi-device, multi-OS IT environments. Vendors have extended their existing solutions by bolting on functionalities, which has led to a wide disparity of capabilities across endpoints and operating systems. This has resulted in a patchwork of second class capabilities and a disjointed collection of security tools that significantly increases operational complexity without delivering higher levels of protection. Existing tools further lack the ability to identify unmanaged IoT devices which often have very limited, if any, built-in security capabilities and can be used by attackers to access the networks of target organizations. This lack of unified visibility and control over endpoints, cloud workloads, and IoT devices results in gaps in security coverage for organizations.
•Lack deployment flexibility for organizations. Organizations struggle with the limited deployment methods mandated by existing tools. On-premise tools impose complexity and maintenance burdens on organizations. These tools typically lack the ability to quickly adapt to organizations’ rapidly evolving IT environments, which requires significant upfront investments and configuration and integration efforts. On the other hand, cloud-only cybersecurity vendors are unsuitable for many large and complex enterprises and governments that need private or hybrid cloud solutions to meet their security, regulatory and compliance requirements.
•Inhibit technology workflow automation. Many existing tools lack out-of-the box APIs and rely heavily on professional services, which makes the integration and implementation process long, expensive and often unattainable. The lack of flexible workflow integrations limits organizations’ ability to reduce overhead by automating processes, and to improve their security by ensuring that process steps are done quickly, consistently, and according to their predefined requirements.
A new paradigm for cybersecurity is needed to autonomously protect organizations and their heterogeneous IT footprints from highly sophisticated, machine-based attacks in a holistic, seamless and automated manner.
Our Revolutionary XDR Approach to Cybersecurity
Our AI-powered Singularity Platform defines and delivers XDR. Our platform ingests, correlates, and queries petabytes of structured and unstructured data from a myriad of disparate external and internal sources in real-time. We build rich context by constructing a dynamic representation of data across an organization. As a result, our AI models are highly accurate, actionable, and autonomous. Our distributed AI models run both locally on every endpoint and every cloud workload, as well as on our cloud platform. Our Static and vector-agnostic Behavioral AI models, which run on the endpoints themselves, provide our customers with protection even when their devices are not connected to the cloud. In the cloud, our Streaming AI detects anomalies that surface when multiple data feeds are correlated. Furthermore, our platform provides visibility across an organization’s digital assets through one console, making it easy and very fast for analysts to search through petabytes of data to investigate incidents and hunt threats. Our Singularity Platform offers multi-tenancy and can be deployed on a diverse range of environments that our customers choose, including public, private, or hybrid clouds.
Key Benefits of our Singularity Platform
Key benefits of our platform include:
•Protects against present and future cyber threats. A combination of our powerful Static AI and Behavioral AI on the device with Streaming AI models in the cloud addresses the full spectrum of attacks in an evolving threat landscape, including ransomware, known and unknown malware, trojans, hacking tools, memory exploits, script misuse, bad macros and “living off the land,” or file-less, attacks. As our on-device machine learning models assess how an endpoint behaves, they are completely independent of the attack vector itself or any further updates and configurations. Our protection coverage against all attacks is further supported by our 100% total accuracy rating in the SE Labs Breach Response Test.
•Enables protection and visibility across all digital assets. Our Singularity Platform provides organizations with our full suite of real-time threat prevention, detection and remediation capabilities across all of their endpoints, cloud workloads, servers, and operating systems, including 17 years of Windows releases, three years of Mac releases, and ten major Linux distributions and many more subversions. Our platform further leverages our agents, combined with passive and active network discovery methods, to provide our customers with organization-wide visibility into all of their network assets, managed and unmanaged. This allows customers to identify potentially vulnerable endpoints and either add protection, or isolate them from the network.
•Provides autonomous protection and remediation. Powered by our AI and Storyline technology, our agents defend and heal endpoints autonomously and in real-time by stopping malicious processes, quarantining, remediating, and even rolling back events to surgically keep endpoints clean. Rollbacks are performed autonomously and in real-time, eliminating the need for manual, expensive, and time-consuming incident cleanup.
•Enables facilitated, as well as fully-automated, incident investigation and proactive threat hunting. Our platform gives security teams the ability to search their IT assets for behavioral indicators via a single-click interface. Our deep visibility and contextual data empowers security analysts of all skill levels to run queries at very fast speeds, and quickly understand the root causes behind the most complex threats. Our watchlists further lighten the load on security teams by giving them the ability to schedule customized and fully automated threat hunting searches according to their own criteria.
•Provides full forensic recall for complete remediation. We offer our customers the ability to retain rich, contextual data for up to three years in a highly cost efficient manner. This forensic data helps our customers to investigate breaches that have stealthily infiltrated their organization and operated undetected for many months. It gives them the ability to ensure that any incident has been fully remediated without the need to reimage or replace elements of their IT infrastructure.
•Provides a superior customer experience. We put the user at the center of our product development and engineering processes. The combination of our intuitive and clean user interface, our ability to provide
context with one click, and our high degree of automation empowers our customers to use our platform independent of their expertise level. As a result, our customers report a 97% Customer Satisfaction Score, which represents the percentage of positive customer survey responses relative to the total number of such responses, demonstrating our commitment to customer experience.
•Delivers rapid time to value. By deploying our Singularity Platform, customers can receive an return on investment of 353% over three years, and a payback period of less than three months according to a 2020 Total Economic Impact study that we commissioned and that was conducted by Forrester Consulting. Our Singularity Platform can be quickly and easily deployed on the diverse IT environments of our customers, and without extensive configuration or maintenance.
Competitive Strengths
Our platform has the following key competitive strengths:
•Recognized market leadership. Our platform provides leading threat protection and visibility capabilities. The following industry and customer recognition is a testament to our capabilities:
◦In the MITRE ATT&CK®2020 assessment, we are the only vendor to achieve 100% visibility with zero missed detections across all tested operating systems amongst a study of 29 endpoint vendors evaluated. In the MITRE ATT&CK®2019 assessment, our solution achieved the lowest number of missed detections and the highest number of correlated detections amongst a study of 21 cybersecurity vendors.
◦In the 2020 Gartner Peer Insights ‘Voice of the Customer’: Endpoint Detection and Response Solutions, we had the highest overall rating (4.8/5) and most verified reviews (123).
◦We were named a Leader in the 2021 Gartner Magic Quadrant for Endpoint Protection Platforms report. In addition, we scored highest across all three Use Cases in the related 2021 Gartner Critical Capabilities for Endpoint Protection Platforms report.
•Flexible deployment model. Our Singularity Platform can be deployed on a diverse range of environments that our customers choose, including the public, private or hybrid cloud, making it relevant for organizations of all sizes with varying compliance and regulatory requirements.
•Proprietary data stack. Our modern, innovative, and extensible data stack enables us to ingest, process and analyze massive amounts and a wide variety of data types efficiently. Our independent, component-driven architecture allows us to evolve rapidly leveraging continued innovations of public cloud infrastructure, while controlling every aspect of our innovation roadmap and customer experience. As more data improves our AI algorithms and cross-organizational visibility, our data stack allows us to offer superior threat protection for our customers.
•Deeply embedded within our customers’ IT stacks. Our API-first approach and Singularity Marketplace allow our customers to easily integrate intelligence, analytics, automation, and other third-party business applications with our platform.
•Rich partner ecosystem. We have deep partnerships with many of the leading ISVs, alliance partners whom we engage with on joint technology and/or go-to-market strategies; and channel partners, such as distributors, resellers, MSPs, MSSPs, MDRs, OEMs, and IR firms. Our partner relationships provide us with significantly broader market reach. In particular, we do not currently have a services offering that competes with our IR partners. Therefore, they seek to bring us into remediation situations where their customers often become our customers. As a result, many of our partners act as force multipliers and broaden our market reach.
•Quality and access of cybersecurity and AI talent. Our thought leadership in security and AI, combined with our award winning culture, allows us to attract and retain the best talent at a global scale. It allows us
to develop state-of-the-art solutions, to innovate faster, and to solve many of the industry’s most complex problems.
Our Market Opportunity
According to IDC, the addressable market addressed by our solutions today is expected to reach $40.2 billion in 2024, growing at a compound annual growth rate, or CAGR, of 11.9% between 2021 and 2024. Our addressable market today represents revenue from the following markets:
•Corporate Endpoint Security. A $9.7 billion market in 2021 and growing to $12.0 billion in 2024; comprising Modern Endpoint Security, Server Security (physical servers and cloud workload security), Information Protection and Control, and Endpoint Management.
•Cybersecurity Analytics, Intelligence, Response, and Orchestration. A $13.1 billion market in 2021 and growing to $17.1 billion in 2024; comprising Device Vulnerability Assessment, Forensics and Incident Investigation, Policy and Compliance, Security Device Systems Management, SIEM, and Software Vulnerability Assessment.
•IT Operations Management. A $5.9 billion market in 2021 and growing to $11.1 billion in 2024.
We believe IoT Security represents another incremental market opportunity, which we address through our Ranger modules. By empowering MSPs, MSSPs, MDRs, and IR firms with our technology and through our deep partnerships with them, we benefit from the market penetration of those entities. IDC estimates that the Managed Security Services market alone will grow to $44.0 billion in 2024. In addition to these markets, we believe several adjacent markets, including Threat Intelligence and Data Loss Prevention will be addressable by us in the future as we continue to innovate and build out our capabilities and offerings.
We believe our XDR capabilities position us well to consolidate and unify spend across these categories. Over time, we believe this unification and re-architecture of the prevention, detection and response paradigm will create new opportunities for additional products and features for us.
Growth Strategy
Key elements of our growth strategy include:
•Continue to innovate and enhance our cybersecurity and data platform. We will continue to expand our platform and XDR capabilities and continue to develop new modules to include greater functionality and address additional use cases. As a pioneer in autonomous and AI-based endpoint security, we have established a track record for regularly enhancing our platform with new modules. For example, in 2019, we launched ActiveEDR and Ranger (for IoT) and in February 2020, we launched Singularity Platform to significantly expand our threat coverage. Through our convergence of cybersecurity and data, we intend to bring our customers and prospects a variety of differentiated cybersecurity-first and enhanced data analytics offerings. Having access to some of the world’s top cybersecurity and AI talent through our distributed workforce model and our research and development centers across North America, Israel, Europe, and Asia allows us to continue hiring top technical talent and conduct extensive research and development to maintain our leading position.
•Drive new customer acquisition. As of April 30, 2021, we had over 4,700 customers, from small and medium-sized businesses to Fortune 10 companies. We intend to continue to add new customers through a product-first approach to customer acquisition. This approach enables us to build trusted relationships with a large and rapidly growing group of highly influential managed service and incident response providers, as opposed to creating a dynamic of competition that creates friction between product vendors and service providers. We derive significant customer acquisition benefits from our cloud-delivered platform, which makes it easy to onboard new customers. Through our FedRAMP certification, which we received in 2020, we intend to further grow our footprint within the U.S. federal government. We intend to continue to build
our relationships with our channel partners, including MSPs, MSSPs, MDRs, OEMs, and IR firms, as well as our alliance partners to expand our market reach.
•Increase adoption within our customer base. We have been successful in our ability to grow revenue from our customer base as they deploy additional endpoints and expand the use of our platform. As we enhance our platform functionality and value proposition, we expect many of our customers to adopt additional platform functionalities and Singularity Modules to address all of their cybersecurity use cases through the same platform and agent. We have architected our single agent such that we can immediately activate additional modules for our customers on the already deployed agent, so adding increased functionality is seamless for us and our customers. This gives us the ability to show in-product promotions and trials and to drive the expansion of our Singularity Modules, The power of our land-and-expand strategy is evidenced by our 119% and 117% dollar-based net retention rates as of January 31, 2020 and 2021, respectively. As of April 30, 2020 and 2021, our dollar-based net retention rates were 122% and 124%, respectively.
•Expand our global footprint. Revenue generated outside of the United States was 27% and 30% for fiscal 2020 and fiscal 2021, respectively, and 32% and 30% for the three months ended April 30, 2020 and 2021, respectively. We intend to continue to grow our international customer base by increasing our investments in our international operations. We recently invested and hired for planned expansions in Asia-Pacific and Europe, the Middle East and Africa, and Latin America.
•Expand our total addressable market through acquisitions. Our focus has been on expanding our endpoint protection capabilities from traditional endpoints to incrementally include IoT devices and cloud workloads. We intend to complement our organic investments with acquisitions to successfully execute on our XDR strategy. For example, our recent acquisition of Scalyr has increased our real-time data ingestion and analytics capabilities.
Our Singularity Platform
Our Singularity Platform delivers AI-powered autonomous threat prevention, detection, and response capabilities across an organization’s endpoints, and cloud workloads, enabling seamless and automatic protection against a full spectrum of cyber threats. We built our Singularity Platform to be deployed as a cloud service or in private and hybrid clouds.
Our platform capabilities are connected through three key patented technologies:
•Data Analytics. Our data analytics technology can ingest, correlate, and query petabytes of structured and unstructured data from disparate external and internal sources.
•AI. Our Static, Behavioral, and Streaming AI technologies that run in a distributed manner on our data cloud as well as on every endpoint and every cloud workload we protect.
•Storyline. Our Storyline technology builds a model of real-time running processes and their behaviors, to create rich, contextual data narratives which become the input to our Behavioral AI model. Storyline powers our unified EPP, EDR, XDR, and platform functionalities. It is the foundation of our EPP while providing unprecedented levels of visibility with contextual information for benign and malicious processes. We extend our fundamental protection, visibility and response capabilities well beyond the endpoint to cloud, and third-party solutions in our Singularity Platform. We designed our platform based on our “design to delight” principle and developed a powerful yet simple and intuitive user experience.
Endpoint Protection
Our next-generation antivirus technology provides autonomous real-time protection across all operating systems, including Windows, Linux, macOS, and cloud-native and containerized workloads. Our endpoint protection is powered by distributed AI which resides both on devices as well as in the cloud for always-on, machine-speed protection. It is capable of autonomous decision making on the device and stopping threats in milliseconds rather than minutes, hours or even days. We are able to provide superior performance compared to traditional signature-based antivirus tools and earlier next-gen antivirus products with the following three key capabilities:
•Static AI. Our on-device AI model can detect file-based attacks predictively, even those that are previously unknown zero day exploits, with extreme precision in milliseconds. Our Static AI model is the output of a supervised machine learning cycle that is trained on a continuously evolving data set from billions of files coupled with the data from multiple threat intelligence sources, including our proprietary Embedded Threat Intelligence. We achieve industry-leading detection rates by carefully developing and curating training data sets at scale.
•Behavioral AI. Our on-device AI model continuously scores Storylines from the device to precisely classify individual or group behaviors as benign or malicious. The accuracy of our Behavioral AI is powered by the rich contextual information that is encoded in each Storyline that is being scored. As a result, it is attack vector agnostic because it is not limited to any particular pathway used by attackers to penetrate a system, such as zero day vulnerability exploits and living off the land attacks.
•Embedded Threat Intelligence. Our cloud threat intelligence system combines threat information from our data analytics and research teams, Vigilance MDR and IR services, and other commercial and proprietary threat feeds.
Endpoint Detection and Response
Unlike first-generation EDR products that are reactive and mainly focused on collecting data, our ActiveEDR solutions leverage Storylines to reduce analysis time and to automate response actions by:
•Significantly minimizing the time between detection and response through technology automation;
•Enabling on-device behavioral analysis, auto-remediation, and response in a fully autonomous fashion; and
•Reducing analysis time and requirements for specialized skills by providing technology-generated context which would otherwise need to be produced by highly skilled people manually in a time-intensive and error prone fashion.
Our approach “democratizes EDR,” bringing what was once only usable by seasoned analysts to IT professionals of all levels of expertise. We do this without compromising on any EDR functionality sought by power users and advanced security operation centers, or SOCs. From retrospective hunts to remote shells, ActiveEDR excels at visualizing context, pinpointing anomalies, and providing a variety of granular responses.
The main capabilities of ActiveEDR are:
•Deep Visibility Threat Hunting. Deep Visibility Threat Hunting provides an easy-to-use search interface on top of our Deep Visibility dataset. This helps security analysts as they hunt for Indicators of Compromise, or IoCs. The search interface is powered by our S1QL language, a user-friendly and intuitive search language streamlined for threat hunting use cases. Features like query auto-completion, drilldowns that facilitate filtering and sorting, and interactive annotated process tree visualization make it easy for entry level analysts as well as highly skilled analysts to be more proficient with S1QL. As a result, analysts can analyze results faster, review more alerts, and be more productive with the power of technology. The Storylines shown within Deep Visibility hunts enable one-click responses, which are far easier and faster to execute than manually scripting responses.
•Response Capabilities. Our Singularity Platform offers one of the broadest sets of response actions in the EDR market today. Leveraging Storylines, we automate responses or make them optionally initiated by operators. Our response capabilities include:
◦Kill. Surgically stops the execution of a single process or a whole process group, instantly.
◦Quarantine. Moves and encrypts threat artifacts from the location in which it was found into a special quarantine directory.
◦Remediation. Deletes all files and system changes created by the threat.
◦Remote Shell. Provides full shell capabilities, PowerShell on Windows and Bash on macOS and Linux, directly and securely from the Singularity XDR console. Remote Shell represents a powerful method of responding remotely to events and obtaining additional forensic information.
◦Rollback. Uses Storylines as a manifest to restore files and system changes impacted by a threat from secured VSS snapshots. Rollback undoes changes with a single-button click or automatically, precisely and deterministically reversing threats and restoring devices to a healthy and secure state.
•Storyline Active Response. Our Storyline Active Response, or STAR, gives users the capability to set custom IOC-based rules for real-time analysis, alerting, and automatic response workflows. Our STAR module is also capable of ingesting threat intelligence feeds to enhance and correlate analyses. The STAR module uses Streaming AI technology to match billions of events to tens of millions of IOCs at the time of ingestion. STAR is a threat hunting and workflow orchestration force multiplier. Without STAR, it is difficult for security analysts to keep pace with the number and complexity of emerging threats from an EDR perspective.
◦Data Retention. Modern attacks can take days and weeks to initiate after infiltration. Therefore, it is critical for an EDR solution to provide visibility for extended periods of time. This enhances both retrospective analysis and proactive hunting measures. Our platform has been designed and built to support extended data retention to time periods that far exceed what others are able to offer, and we do so on a cost-efficient basis due to our data retention architecture. We offer data retention for up to three years to provide maximum value from our Deep Visibility Threat Hunting module.
Leveraging our data retention capabilities, we constructed Binary Vault to store a copy of every known binary, both benign and malicious, that executes across an enterprise. This enables an optional capability for advanced security analysts to download a copy of any file that has been executed in their environment for forensic review and reverse engineering, and provides them with access to a broader
dataset and more complete lookback capabilities than any of our competitors. In addition, this large repository of benign and malicious binaries enables us to continuously improve our AI models.
◦Remote Script Orchestration. In incident response situations, rapid artifact extraction and endpoint state querying across the entire enterprise is critical. Our remote script orchestration module allows concurrent execution of custom and preset scripts across an enterprise, instead of having to triage with a device by device approach. By converging our protection, detection, and response capabilities with remote script orchestration, our platform is the only solution that is needed to respond to a breach.
Cloud Workload Security
As more organizations migrate their workloads to the cloud and re-platform on cloud services, adversaries follow the data. Because these workloads are hosted on public cloud infrastructure, they are even more vulnerable. When organizations move to public cloud infrastructure, a typical assumption is that the cloud service provider takes care of all configuration and security. This is not the case and a lot of responsibility is carried by the organization to secure OS, middleware, runtime, data and applications. Coupled with standardization of public cloud services with highly accessible APIs and open documentation, this shift leaves a well-marked open door for nefarious actors. Our cloud security offerings have been purpose-built for these novel attack surfaces. We offer our AI-powered Cloud Workload Protection, or CWPP, and Cloud Security Posture Management, or CSPM, to address these threats in the public cloud.
•Cloud Workload Protection Platform
◦EPP and EDR. We offer full-fledged EPP and EDR for servers, virtual machines, and containerized workloads. Our runtime protection delivers prevention, detection, response and hunting functionalities purpose-built for these environments. These capabilities are offered within our single console, streamlining management and meeting anti-malware, regulatory, and compliance needs for server and cloud computing. Our efficient one agent per node architecture supports self-managed Kubernetes and managed Kubernetes services, including AWS EKS, Azure AKS, and Google Cloud GKE.
◦Cloud Application Control. Our Cloud Application Control locks down the running image of servers and containers to prevent configuration drift and protect against unauthorized changes, in line with best practices for cloud workload security. We are one of the few vendors to offer cloud application control. This capability enables cybersecurity and IT teams to continuously regulate changes within their cloud environment, increasing the overall reliability and security of their services.
•Cloud Security Posture Management
◦Cloud Configuration Management Database. For servers running in the cloud, our CWPP Cloud Workload Security module syncs cloud asset information with our Singularity Platform. This cloud asset information captures meta-data of the cloud providers like host, network, application information and tags, which can be used to dynamically group the servers, apply policies, and is used in our reporting module for operational and configuration insights. As cloud environments rapidly expand and contract in terms of server and compute resources, our CCMDB enables proactive management and provides an accurate and real-time operational picture without having to reconcile data from multiple sources.
◦Configuration Audit and Risk Scoring. Organizations migrating to public cloud infrastructure need to secure their workloads by enforcing hardening guidelines for cloud native services. AWS, Azure and Google Cloud provide hundreds of services, many of which come with their own unique security models. There is far more complexity in public cloud security management than organizations had to contend with in their own private data centers. Our planned Configuration Audit Risk Scoring, or CARS, module helps organizations secure their cloud services by automating the controls necessary to secure their cloud footprint. We plan to introduce our CARS module in the second half of 2021.
IoT Security
Our IoT Security modules, which we market and sell under the Ranger brand, leverage the presence of our software in an organization’s network to track assets, create an Enterprise Asset Map, perform network segmentation, deploy our agents to unprotected devices, and provide risk scores. Ranger transforms our agents into an AI powered intelligent scanning mesh. Using passive and active techniques, Ranger discovers connected devices, including virtual machines, containers, and IoT devices such as printers, smart TVs, and thermostats. Our approach delivers network inventory and risk mapping with no additional software or hardware deployment. Ranger has four key component features:
•Rogue Discovery. Enables administrators to identify unprotected or “rogue assets” and verifies our agent is installed on all corporate assets. From a compliance perspective, this feature is useful in ensuring security coverage across large and distributed organizations as well as when integrating newly acquired companies or business units.
•Ranger Insight. Provides in-depth information about each discovered device, including open ports, header and application versions, and vulnerability information. Insight augments traditional vulnerability management programs by providing a clear picture of the inventory and risk in the IoT environment.
•Rogue Control. Creates network segments to restrict access to a corporate network. Much like the features of a network access control, or NAC, solution, Rogue Control prevents unsanctioned devices, such as guest machines, from connecting to authorized networks. Organizations benefit by eliminating the risk of attackers gaining access to and moving laterally within the network.
•Ranger Auto-Deploy. Rapidly deploys our agents using service credentials to unprotected endpoints with no additional IT infrastructure or software. Auto-Deploy provides security teams with complete, instant asset coverage without having to rely on their IT teams’ schedules and priorities to deploy security software.
IT and Security Operations
Our Singularity Platform enables security and IT teams to identify vulnerabilities, fix insecure configurations, and manage endpoints. Vulnerable and mis-configured applications make it easier for attackers to gain entry and evade detection. Addressing these vulnerabilities and mis-configured settings strengthens the security risk profile of our customers. Our platform has the following capabilities:
•Application Inventory. Maintains a software application inventory across an entire organization, by capturing the list of installed applications and their attributes such as their version numbers, install date, and publisher. Our software collects this information in real-time, enabling our customers to easily search and sort through these attributes in a global application inventory view within the console. Customers can quickly perform software frequency analysis and compliance checks.
•Scanless Vulnerability Assessment. Using our real-time organization-wide Application Inventory database, our solution is able to provide highly accurate and dynamic Vulnerability Management information without the need to deploy another solution. We do so by matching version information from our Application Inventory database to the known vulnerabilities published as Common Vulnerability Enumeration, CVE, records.
Most vulnerability scanners rely on three legacy approaches to identify vulnerable applications within their environment. These approaches include uncredentialed scans, credentialed scans, and agent-based scanning methods. Each is flawed for three primary reasons: (i) scans are point-in-time snapshots, not up to date, and lack data completeness, (ii) the operational overhead required to scan, install new software, and rotate passwords is unnecessarily complex and time intensive, and (iii) scans and re-scans can only be conducted periodically as they significantly tax the network and might result in computer crashes if the operating system views the scan as invasive. Our approach is highly accurate, constantly updated, and doesn’t require any new software to be installed
or passwords to be managed. This enables our customers to consolidate agents and replace them with a seamless solution to Vulnerability Management.
•Device Control. Allows maximum granularity and flexibility when defining Device Control policies to prevent data exfiltration and malware entry. Our Device Control module supports two main media types: USB and Bluetooth devices. Our Bluetooth Device Control capability augments our IoT capability, limiting pairing with unsanctioned hardware and other wearable devices. We believe the ability to provide granular control for Bluetooth devices in conjunction with other forms of USB media is a competitive differentiator.
•Native OS Host Firewall Control. Leverages native operating system infrastructure to provide an application-aware and location-aware endpoint firewall orchestrator for remote devices. Firewall control provides visibility, malware prevention, and network segmentation by utilizing the native firewall capabilities on Windows, macOS, and Linux devices. With the global workforce working from home and “anywhere” into the foreseeable future, traditional network firewalls have become less effective. Network firewalls are unable to protect users from attacks when they are not on the VPN or within office facilities. With our Singularity Platform, we enable our users to keep their workforce protected, segment their networks, and block traffic from malicious IPs/C2 servers using the same console that they use to monitor threats.
•File Integrity Monitoring. File Integrity Monitoring, or FIM, gained popularity in the early 2000s as the PCI DSS required the implementation of FIM products to track unauthorized changes to critical system files. The data collected by our Deep Visibility EDR can be used to replace traditional file integrity monitoring solutions. Coupled with STAR, our FIM module is able to automatically alert or remediate unauthorized changes to these files. Organizations use this module to be compliant with PCI DSS and other regulatory requirements while eliminating other agents, products, and spend.
WatchTower
WatchTower is a subscription software offering that provides intelligence-driven, cross-platform threat hunting to help customers adapt to the modern threat landscape through visibility and actionability to novel attacker techniques, global APT, campaigns, and emerging cybercrimes. As we track threat actors globally, WatchTower parses, consolidates, and contextualizes threat intelligence sources and hunts for threats in our customers’ environments. WatchTower distills intelligence down to its most valuable insights, such as a summary bulletin of the threat, its impact on our customers’ organizations, and how the threat can be addressed.
Vigilance MDR
Vigilance MDR leverages the expertise of our in-house security analysts to review, act upon, and document every threat that our Singularity Platform autonomously identifies. It adds a human lens to cybersecurity understanding and augments our customers’ in-house security teams. Due to the autonomous nature of our Singularity Platform, Vigilance MDR provides rapid response times to threats. Our optional, technology-powered digital forensics analysis and incident response, offering takes Vigilance MDR two steps further and provides customers with a full-service solution.
Foundational Technologies Underlying Our Singularity Platform
•Singularity Data Platform. Our proprietary XDR data lake that seamlessly fuses together the data, access, control, and integration planes of EPP, EDR, CWPP, and IoT security into a centralized platform. With Singularity, organizations gain access to back-end data across the organization through a single solution. It was designed with the goal of optimizing scale, cost and performance - what we call the Golden Ratio of Big Data. This is achieved by the use of innovative data structures, storage systems, and algorithms:
◦Ingest. Our platform is able to ingest structured and unstructured data from any source, with little to no manual configuration and unprecedented speed and scale.
◦Normalize. Aligns every data point to extract the shared elements regardless of origin and to produce true insights.
◦Correlate. We correlate events from multiple sources into Storylines which contains event data, both benign and malicious, in a context-rich format for easy understanding.
◦Analyze. Our Singularity Platform enriches and visualizes every Storyline with information from Threat Intelligence sources, both homegrown and through integrations with third-party intelligence information services.
•Singularity XDR Integrations. Enables customers to seamlessly extend the power of the Singularity Platform across the entire IT stack—regardless of vendor—to automate response actions. Our integrations give customers the flexibility to operate our platform as a platform-as-a-service in their own customized graphical user interface and workflows simply by leveraging over 300 of our robust, well-documented and easy-to-use APIs. We further provide substantial integrations in the following areas which enables customers to:
◦Threat Intelligence Apps. Ingest third-party and custom threat intelligence feeds and artifacts to enrich forensic detail and create EDR enhancements within our Singularity Platform.
◦SIEM Apps. Ingest our alerts, device details, audit trail logs into the industry’s leading Security Information and Event Management providers such as Splunk, QRadar, and others. This allows customers to take actions on our Singularity Platform from their SIEM interface.
◦Sandboxing Apps. Ingest and detonate samples in third-party sandboxes like Joe Sandbox, VMRay, Hatching, Reversing Labs, and others, and annotate Singularity forensics details with sandbox results.
◦Analytics Apps. Ingest, visualize, and correlate data from leading big data platforms such as PowerBI and Tableau, as well as various structured and unstructured data sources to enhance data understanding within the Singularity Platform.
◦Workflow Automation Apps. Integrate with workflow enhancement solutions from security orchestration, automation and response and IT service management providers such as Palo Alto Networks, Splunk, and ServiceNow, with further customization capabilities for bespoke use cases.
•Multi-tenancy Architecture. Having superior management capabilities in complex environments always was a trade-off of remaining with a legacy vendor rather than adopting a modern technology. Unlike other next-gen providers, our Singularity Platform offers a superior level of management capability and flexibility with tiering, policy inheritance, and customizable Role Based Access Control, or RBAC, from the same console. We offer complete multi-tenancy with four tiers - Global, Account, Site, and Group. Policies set at the higher tier of the hierarchy are automatically inherited by the lower levels, but administrators may override them to create local policies at any tier. We also support fully customizable RBAC that allows organizations to create specific rules controlling console permissions at a granular level. This enables large, distributed teams to work independently while at the same time providing a global view for the CISO and other stakeholders. It further enables our platform adoption by the world’s largest organizations, MSPs, MSSPs, MDRs, OEMs, and IR firms.
Our Singularity Platform Tiers and Modules
We offer our Singularity Platform with a highly flexible deployment model. Our Singularity Platform is primarily hosted in AWS in multiple regions - North America, European Union, Asia Pacific, and AWS GovCloud. We also support deploying our platform in the Google Cloud Platform as well as customers’ on-premise data centers, private, and hybrid cloud environments for organizations with specialized hosting and data sovereignty needs.
Our platform provides feature parity across Windows, macOS, and Linux. It provides customers with full flexibility through a multi-tier offering priced on a per agent basis, which generally corresponds with an endpoint, server, virtual machine, or host. The tiers of our Singularity Platform include:
•Singularity Core. Our entry level security solution for organizations that want to replace antivirus tools with our EPP which we believe is more effective and easier to manage than legacy antivirus and next-gen antivirus products. Singularity Core includes our Static and Behavioral AI models and autonomous threat response and rollback features.
•Singularity Control. Made for organizations seeking best-of-breed security with the addition of our “security suite” features for endpoint management. It provides additional features for control network connectivity, USB and Bluetooth peripherals, and to uncover rogue devices.
•Singularity Complete. Our flagship offering that includes our full suite of product capabilities.
We further offer customers additional functionality through our Singularity Modules. We price our modules as a subscription on a per agent basis:
•Binary Vault. Enables customers to store and download copies of any file that has been executed in their environment for forensic review and reverse engineering.
•Data Retention. Offers data retention upgrades from one month to three years and beyond.
•Cloud Funnel. Allows organizations to export their XDR data in real-time to their private data lakes, whether locally-hosted or in the cloud.
•STAR Premium. Enables custom behavioral and IOC-based rules for real-time analysis, alerting, and automatic response workflows. This module is priced based on the number of STAR rules.
•Ranger (for IoT). Provides organization-wide inventory and control of IoT devices.
•Cloud Workload Security. Extends our EPP, EDR, and XDR features to offer runtime protection for servers and containerized workloads.
•WatchTower. Delivers threat hunting and insights to help customers understand the nature of threats, targeted attacks, threat actors, and risk reduction.
•Vigilance MDR. Enables customers to benefit from world-class SOC operations with customized threat annotation and response. Vigilance MDR helps customers of all sizes augment their cybersecurity staff with a 24/7/365 globally-distributed operation which operates under the industry’s only publicly available SLAs.
Our Customers
As of April 30, 2021, we had over 4,700 customers using our Singularity Platform in more than 80 countries. We have key reference customers in many industry verticals that we believe validate our solutions in the market, and our customers range from small and medium-sized organizations to Fortune 10 companies. No single end customer accounted for more than 3% of our revenue in fiscal 2021 or the three months ended April 30, 2021. For a definition of customer, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—Customers with ARR of $100,000 or More.”
Representative Customers
The following is a representative list of our customers as of April 30, 2021.
Consumer & Retail
•Estee Lauder
•Groupe Casino
•Kenneth Cole
•Monoprix
•O’Neill
Energy & Diversified Industries
•Aston Martin
•Jardines
•JetBlue
•National Oilwell Varco
•Norwegian Airlines
Hospitality
•Red Robin
•Shangri-La
•TGI Fridays
•Wynn
Media
•Blizzard
•Cengage
•Electronic Arts
•Pandora
•Shutterfly
Technology
•Autodesk
•Fiverr
•Flex
•Nutanix
•NVidia
Other
•CIMB Bank
•Havas
•Manpower Group
•Wells Fargo
Customer Case Studies
The customer examples below illustrate how customers from different industries benefit from our Singularity Platform.
Aston Martin Lagonda
Situation: Aston Martin Lagonda is the world’s only independent luxury car group with more than 100 years of design and automotive excellence. The group strives to be the most agile and efficient company in the luxury segment. Facing an evolving threat landscape, Aston Martin began its search in 2018 for a cloud-native endpoint security platform that would better secure against modern malware and ransomware attacks than its incumbent legacy anti-virus tool. Aston Martin’s complex IT environment required the new solution to deliver world-class protection at scale without any disruptions.
Solution: After Aston Martin shortlisted three major EPP & EDR platforms, it was clear to the team that SentinelOne offered automation, artificial intelligence, and machine learning capabilities that no other vendor in the endpoint security market could match. In a proof-of-concept, SentinelOne outperformed the rest of the pack, maximizing protection while minimizing operational overhead. The team also recognized the peace of mind they could gain by enlisting SentinelOne’s Vigilance MDR analysts for 24/7/365 scalability and protection. What followed was the rapid deployment of Singularity Complete and Vigilance. In 2019, SentinelOne was designated as Aston Martin Lagonda’s Official Cybersecurity Partner—a partnership that continues today as SentinelOne delivers state-of-the-art technology for Aston Martin’s constantly-innovating team as well as the Aston Martin Cognizant Formula One team.
“In selecting our Official Cybersecurity Partner, SentinelOne was playing against some very well-established players in the field—and it was a lot more compelling than what the rest were bringing to the table. Our partnership
today is stronger than ever, and we can innovate and grow with confidence knowing we’re backed by world-class, future-proof technology.”
— Information Technology Director, Aston Martin Lagonda
Havas Group
Situation: Havas Group is one of the world’s largest global communications groups, employing more than 19,000 people in over 100 countries with the mission to make a meaningful difference to brands, businesses, and people. Havas started a search for a replacement for its traditional endpoint protection tool in 2019, seeking a modern endpoint security platform that would automate many resource-intensive processes for its lean IT and security team and offer comprehensive cross-platform protection. With the end of its legacy contract on the horizon, Havas required a fast and efficient rollout of the new solution on a global scale.
Solution: Havas narrowed a field of 29 endpoint security vendors down to a shortlist that included SentinelOne and three other established EDR players. SentinelOne prevailed in a technical comparison, delivering best-in-class protection and feature parity across Windows and macOS systems from one intuitive platform. Havas’ staff also noted the Singularity platform’s ease of use and robust AI-powered automation—two critical factors for the resource-limited team. In lieu of building a full SOC in-house, Havas entrusted the SentinelOne Vigilance MDR team to be the eyes and ears for its enterprise. Singularity Complete and Vigilance were subsequently rolled out enterprise-wide at Havas.
“Securing a global enterprise can be a daunting task, especially with limited resources and staff. SentinelOne makes this possible for our team by automating many of the manual processes required with other endpoint tools, and providing us with an extra set of trusted eyes and ears through the Vigilance MDR service. With SentinelOne, we have become more proactive and productive than we were with our previous endpoint protection platform.”
— Global Deputy CIO & NA CIO, Havas Group
NOV Inc.
Situation: NOV Inc. (formerly National Oilwell Varco) is a Fortune 500 leading worldwide provider of equipment and components used in oil and gas drilling and production operations, oilfield services, and supply chain integration services to the upstream oil and gas industry. Faced with a historic industry downturn, NOV was forced to rationalize technology investments. This became an opportunity to modernize cybersecurity, which started a zero-trust journey. NOV adopted a “cloud smart” strategy which began with re-evaluating the incumbent “next-gen” endpoint detection and response tool.
Solution: After stacking up the major endpoint and cloud protection, detection, and response vendors—including its incumbent solution—NOV selected the SentinelOne Singularity platform in early 2021. Despite a longstanding approach of leveraging EDR and application whitelisting together, NOV was able to consolidate due to the high level of detection efficacy and autonomous remediation capabilities of SentinelOne. NOV quickly learned that SentinelOne’s intuitive design makes it easy to get started and become an expert user. In one situation, a small business NOV acquired but never integrated into their network fell victim to ransomware attack. With zero SentinelOne training, the incident response team deployed, contained, and remediated the ransomware before it moved laterally. SentinelOne is now deployed globally to 24,000 endpoints across the organization, not only making machine-speed detection, contextualization, and remediation possible for NOV’s lean security team, but also adding invaluable SOC efficiency and expertise with SentinelOne’s Vigilance MDR service.
“SentinelOne makes it possible for us to scale effective, machine-speed endpoint and cloud protection to our global operations without the massive time and resource investment needed with other EPP + EDR + Application Whitelisting tools. Automating key processes—such as attack reconstruction and remediation—has allowed us to consolidate and free up our team to work on more strategic security initiatives.”
—Chief Information Security Officer, NOV, Inc.
Xylem Inc.
Situation: Xylem is a leading water technology company committed to “solving water” by creating innovative and smart technology solutions to meet the world’s water, wastewater, and energy needs. Xylem delivers innovative water technology solutions throughout the cycle of water. For this reason, Xylem’s team searched for a dependable, scalable, and cutting-edge endpoint security solution in 2019 to keep its systems up and running with confidence. Given the unique attack surface Xylem’s IT and Security teams are tasked with protecting, they needed a partner who could comprehensively secure all major operating systems and support the full range of devices comprising Xylem’s digital environment.
Solution: Following a thorough evaluation of next-gen EDR solutions available, we emerged as the clear choice for Xylem because of our robust feature set, ease of implementation and use, and support for all major operating systems. In addition to Singularity Complete for EPP and EDR, Xylem also desired a solution which would enhance visibility and provide control of internet-enabled devices on the network, and saw significant value in our Singularity Platform’s Ranger offering. We continue to deliver business value for Xylem, as protection against known and unknown attacks without human interaction and efficient, effective investigative, and forensic capabilities for Xylem’s analysts has significantly reduced the effort and time needed to fully address threats. Two years later, Xylem continues to trust us as its endpoint security partner not only for protection against today’s evolving threats, but also for expertise and guidance through our Technical Account Management and Vigilance MDR services.
“Quite simply, SentinelOne provides us greater confidence. Since development, we’ve experienced a significant decrease in the need to reactively respond to threats which might impede and impact our business, enabling Xylem to focus on serving our customers and communities around the world.”
—Chief Information Security Officer, Xylem Inc.
ManpowerGroup Inc.
Situation: ManpowerGroup Inc. is a world leader in innovative workforce solutions. Every day, ManpowerGroup connects more than 600,000 people to meaningful work across a wide range of skills and industries, helping to power the success of clients around the world. In 2019, ManpowerGroup recognized that its existing legacy antivirus tool would not be a sustainable cybersecurity solution as the company continued to scale and face ever-evolving threats. The team needed a modern EPP & EDR platform that could be rolled out quickly and deliver enterprise-grade visibility.
Solution: SentinelOne was selected by ManpowerGroup for its easy-to-deploy, easy-to-use platform that offered a more seamless analyst experience compared to two other established EDR solutions. Singularity Complete delivered the visibility Manpower was lacking with other vendors, and provided the team with full confidence that it could be rolled out before terms ended with their legacy tool. Today, Singularity Complete continues to provide comprehensive prevention, detection, and response to 45,000 of ManpowerGroup’s endpoints around the globe.
“SentinelOne was a fantastic partner for us as we evolved from legacy antivirus to modern EDR. The platform makes it easy to deploy and get started, and gives us the level of visibility and confidence we weren’t seeing with other vendors.”
— Global Director of Information Security Architecture and Engineering, ManpowerGroup Inc.
Our Team and Core Values
Our Team
As of April 30, 2021, we had over 850 employees worldwide, including over 450 employees in the United States.
Our U.S.-based employees includes team members in all key functions, including go-to-market, customer success, technology, product, and support. Each of our U.S. offices has a different functional focus but shares a
driven, customer-centric culture. Our headquarters in Mountain View, California is where the majority of our executive team, marketing, finance, legal, people and talent, and sales operations is collocated, which supports cross functional collaboration. Our office in Eugene, Oregon hosts our North American customer success and support team, as well as our sales development and inside sales teams. Having these teams together supports a highly collaborative and customer-focused site.
Our office in Tel Aviv, Israel benefits from Israel’s concentration of cybersecurity experts. Our employees in Israel draw from Israel’s deep pool of Israeli military cybersecurity and intelligence experts, product mavens and general technical talent.
Our EMEA and APAC teams cover these regions. Our European head office is in Amsterdam, Netherlands, which we chose for its talent pool, language versatility, diversity, labor and tax laws, and central location in relation to our offices in the United States and Israel.
During the COVID-19 pandemic, we have worked to globally realign our benefits to focus on business continuity and employee well-being. We have built a company that we believe can thrive whether our employees are in offices or remote. We have been very intentional with our efforts to support employees while working from home, and around the various burdens it has placed on our employees’ health and well-being.
None of our employees are represented by a labor union or are a party to a collective bargaining arrangement. We have not experienced any work stoppages and we believe that our employee relations are strong.
Our Culture
Our core values capture our company’s culture and guide our approach on how we build and grow our business with all stakeholders:
•Trust. Be dependable. Conduct yourself with the highest integrity at all times.
•Accountability. Be reliable in all your actions and words. Put customers first. Be the owner.
•OneSentinel. Be passionate about driving team success and collaboration across our company.
•Relentlessness. Act with unwavering purpose and determination in everything you do.
•Ingenuity. Encourage innovative approaches to problem-solving and market leadership. Embrace diverse perspectives. Hustle.
•Community. Be kind to one another. Think about how your actions will affect others. Together.
We value transparent and respectful communication as key components of our continuous feedback culture, something that we view as a key driver of our business success. We believe that our resilience and resourcefulness are essential for our continued growth. We are not afraid of challenges or hard work, and we are committed to succeeding in our shared goals by leading with respect and positivity. We benefit from the varied perspectives that come from our global workforce. We believe in the strengths of diversity and are committed to building out a diverse talent base. We plan to continue investing in hiring employees both in and outside of the United States. We were recently awarded a Top Workplaces 2020 honor by Bay Area News Group and several Best Places to Work 2021 awards by Built In. As of February 26, 2021, we had a 4.9/5.0 rating on Glassdoor, a workplace review website, 99% of respondents would recommend SentinelOne to a friend, and our CEO had a 99% approval rating. Our presence and engagement across all social media platforms continues to grow rapidly, a reflection of the market’s perception of us and our leadership as innovators in the cybersecurity space.
Research and Development
Our research and development organization is responsible for the design, development, testing and delivery of new technologies, features and integrations of our platform, as well as the continued improvement and iteration of our existing products. It is also responsible for operating and scaling our platform including its underlying
infrastructure. Our most significant investments are in research and development to drive core technology innovation and bring new products to market. Research and development employees are located primarily in our Israel offices and located remotely.
We have a proven team that constantly works to expand our market, customer and user reach and impact with new, innovative products. As of April 30, 2021, we had approximately 300 employees in our research and development organization. We intend to continue to invest in our research and development capabilities to extend our platform and products.
Our Go-To-Market Strategy
Our sales and marketing organizations partner to create brand awareness, drive demand, and develop customer relationships to deliver strong sales pipeline coverage and revenue growth.
Sales
We sell subscriptions to our Singularity Platform through our direct sales team, which is composed of field sales and inside sales professionals. Our sales team leverages our global network of channel and alliance partners for prospect access and fulfillment. For specific market segments, our channel partners independently manage the complete sales cycle resulting in a highly scaled and leveraged sales experience. Our sales team also identifies existing customers who may be interested in free trials of additional platform modules, which serves as a powerful driver of our “land and expand” growth model. Through segmenting our sales teams by customer size, we can deploy an efficient and scalable sales model which enables rapid prospect engagement, thorough technology evaluations, and yields lasting customer relationships.
Marketing
Our marketing organization is focused on building our brand reputation, increasing the awareness of our platform, and driving prospect and customer demand. To support these efforts, we deliver broad based brand campaigns to build awareness of our solutions and our company. We also deliver targeted and situational content to demonstrate thought leadership in the security industry, including speaking engagements with the security industry's foremost organizations to provide expert advice, educating the public about the cyber threats, and identifying threat research discoveries that illustrate the business outcomes and differentiation of our solution. We engage in paid media, web marketing, out of home media advertising, industry and trade conferences, analyst engagements, producing whitepapers, demand generation via digital and web, telemarketing, and targeted displacement campaigns. We employ a wide range of digital programs, including search engine marketing, online and social media initiatives, and content syndication to increase traffic to our website and encourage new customers to free trials of our Singularity Platform. Additionally, we engage in joint marketing activities with our channel and alliance partners. Over the past several years, we have experienced significant increases in our brand relevance as demonstrated by coverage in leading global press, analyst publications, website traffic, web demo requests, and channel partner engagement.
Partnership Ecosystem
We work with a number of partners to create “better together” technology solutions for mutual customers, many of which we then leverage in joint go-to-market strategies. These partnerships include many of the leading ISVs, alliance partners, MSPs, MSSPs, MDRs, OEMs, and IR firms. We provide our partners with our differentiated technology and platform to enable them to provide the best security service to their own customers.
Our Singularity Platform offers our partners complete multi-tenancy and a superior level of management capability and flexibility with tiering, policy inheritance, and customizable role-based access control from the same console. Our data model and open architecture enable our partners to rapidly build and innovate across a wide range of use cases and deliver their products on top of our technology. As such, our partners are not our competitors but instead, act as force multipliers for our go-to-market investments.
Our partner integrations deliver more secure solutions and an improved end user experience to their customers. Our ISV and alliance partnerships focus on security analytics, network and infrastructure security, threat platforms and orchestration, automation, and other mainstream technology integrations. In addition, in 2020, we announced a strategic technology and go-to-market partnership with Lenovo that enables Lenovo’s business customers to seamlessly add our Singularity Platform to their purchase of Lenovo hardware. Lenovo and its partner network have also market and sell our Singularity Platform as their only endpoint security offering through their global sales organization.
Singularity Marketplace
Singularity Marketplace is an open application ecosystem that enables customers to seamlessly integrate dozens of applications across five categories — Threat Intelligence, SIEM, Sandboxing, Analytics, and Workflow Automation — into our Singularity Platform. It allows organizations to gain visibility over data across historically disparate security solutions without the need for custom business logic, coding or complex configuration. Singularity XDR Marketplace also allows security teams to drive a unified, orchestrated response among security tools in different domains. As such, it helps organizations adopt a proactive and dynamic security posture by automating response workflows.
Competition
The market for our solutions is competitive and characterized by an evolving IT environment, customer requirements, industry standards and by frequent new product and service offerings and improvements. We compete with an array of established and emerging security solution vendors.
Our competitors include the following:
•endpoint security providers, such as CrowdStrike Holdings, Inc. and VMware, Inc.;
•legacy antivirus providers such as McAfee Corp., Symantec (a subsidiary of Broadcom, Inc.), and Microsoft Corporation; and
•providers of general network security products and services who offer a broad portfolio of solutions, such as Palo Alto Networks, Inc.
We compete on the basis of a number of factors, including but not limited to our:
•ability of our technology to detect, prevent, and block threats;
•breadth of our functionality;
•ability to automate threat prevention and remediation with limited human intervention;
•performance of our platform;
•speed of our threat hunting capabilities;
•support for cloud, hybrid, and on-premise deployments;
•support for various operating systems;
•platform data retention capabilities;
•ability to integrate with other participants in the security ecosystem;
•ease of use to deploy, manage, and maintain our platform;
•quality of our MDR service;
•strength of sales, marketing, and channel partner relationships; and
•customer support.
Although certain of our competitors enjoy greater brand awareness and recognition, deep customer relationships, and larger existing customer bases, we believe that we compete favorably with respect to our autonomous and AI-powered threat prevention, detection, response, and hunting capabilities.
Our Facilities
We are headquartered in Mountain View, California, where we occupy over 10,000 square feet of office space pursuant to a lease that expires in February 2028 subject to the terms thereof. Our headquarters was built to reflect our corporate culture, operational needs, and dedication to employee happiness. We lease additional offices in the United States. and around the world, including in Israel, Japan, United Arab Emirates, and the Netherlands. We believe that our current facilities are adequate to meet our current needs.
Intellectual Property
The protection of our technology and intellectual property is an important aspect of our business. We rely upon a combination of trademarks, trade secrets, know-how, copyrights, patents, confidentiality procedures, contractual commitments, domain names, and other legal rights to establish and protect our intellectual property. We generally enter into confidentiality agreements and invention or work product assignment agreements with our officers, employees, agents, contractors, and business partners to control access to, and clarify ownership of, our proprietary information.
As of April 30, 2021, we had 20 issued patents and 12 pending patent applications in the United States and abroad. These patents and patent applications seek to protect our proprietary inventions relevant to our business. These issued patents are scheduled to expire on or around the years between 2037 and 2040 and cover various aspects of our platform and technology.
As of April 30, 2021, we had five trademark registrations in the United States, including registrations for “SentinelOne” and our logo. We also had 29 trademark registrations and applications in certain foreign jurisdictions. Additionally, we are the registered holder of a number of domain names, including sentinelone.com.
Legal Proceedings
BlackBerry Litigation
Starting in October 2019, BlackBerry Corp. and its subsidiary Cylance, Inc., or BlackBerry, filed a total of nine proceedings (seven lawsuits and two arbitrations) against us and certain former BlackBerry employees who joined our company. In these proceedings, BlackBerry alleges that it has viable legal claims as a result of its former employees joining us. Many of these proceedings have now been dismissed. The status of each of the currently pending proceedings is discussed below. We believe that BlackBerry’s claims against us in each of these proceedings are without merit and we have vigorously defended against these claims and expect to continue to vigorously defend against these claims. Litigation, however, is inherently uncertain, and any judgment or injunctive relief entered against us or settlement could materially and adversely impact our business, financial condition, operating results, and prospects. In addition, litigation can involve significant management time and attention, and the cost of litigation can be expensive, regardless of outcome.
BlackBerry Corp., et al. v. Coulter, et al. On October 17, 2019, BlackBerry commenced an action captioned BlackBerry Corp., et al. v. Coulter, et al., No. 953-10-19 (Vt. Super. Ct.), or the Vermont Action, against Chris Coulter, an employee on our Vigilance services team. On October 23, 2019, BlackBerry filed an amended complaint that added us as a defendant. The amended complaint asserts claims against us for conspiracy, tortious interference with contract, aiding and abetting breach of fiduciary duties, and misappropriation of trade secrets. The court entered a preliminary injunction order enjoining Mr. Coulter from working for us through February 2021. As a result of the court’s order, Mr. Coulter chose to seek other employment and is no longer employed by us. On January 15, 2021, the court entered an order narrowing the scope of the case and limiting the claims against us in order to avoid conflict with a similar action that was previously filed in California and was dismissed. The Vermont Action is
currently pending. On October 25, 2019, BlackBerry commenced an action captioned BlackBerry Corp., et al v. Coulter, et al., No. 2019-0854-JTL (Del. Ch.) against Mr. Coulter and us in Delaware Chancery Court. The court stayed this case pending resolution of the Vermont Action, and on February 7, 2020, BlackBerry voluntarily dismissed without prejudice all claims against Mr. Coulter and us. On December 3, 2019, BlackBerry initiated a largely duplicative action in arbitration solely against Mr. Coulter administered by JAMS, an alternative dispute resolution provider. That arbitration action, however, was dismissed on or about March 30, 2021, with JAMS informing us that they had closed their files on this matter on April 30, 2021.
BlackBerry Corp., et al. v. Page, et al. On November 18, 2019, BlackBerry commenced an action captioned BlackBerry Corp., et al. v. Page, et al., No. 2019-CP-07-2552 (S.C. Cir. Ct.) against Barnaby Page, a go-to-market employee, and us, in a South Carolina state court. The complaint asserts claims against us for aiding and abetting breach of fiduciary duties, tortious interference with contract, and misappropriation of trade secrets. Following initial discovery, on August 27, 2020, we and Mr. Page filed a joint motion for judgment on the pleadings. That motion is currently pending and discovery is ongoing.
Blackberry Corp. et al. v. Sentinel Labs, Inc., et al. On January 16, 2020, BlackBerry commenced the action captioned, BlackBerry Corp., et al. v. Sentinel Labs, Inc., et al., No. 20CV361950 (Cal. Super. Ct. Santa Clara Cnty.), or the Current California Action, against us and unnamed “Doe” defendants, asserting claims against us for trade secret misappropriation and unfair business practices. We filed counterclaims that, in part, seek to invalidate any agreements allegedly supporting BlackBerry’s claims against its former employees. On December 14, 2020, we filed a motion requesting that BlackBerry sufficiently identify any trade secrets it alleges we misappropriated in accordance with California law. On February 12, 2021, the court granted that motion in part, including striking BlackBerry’s expert testimony and limiting the scope of discovery to customer lists and sales-related information. On March 15, 2021, BlackBerry re-filed a statement identifying its trade secrets to pursue broader claims and discovery. In response, on April 6, 2021, we again filed a motion requesting that BlackBerry sufficiently identify any trade secrets under California law. On May 24, 2021, the court granted the motion in our favor, absent a few discrete areas permitted by the court, which order will be entered following any redactions requested by Blackberry. We continue to litigate this action and pursue counterclaims, and limited discovery regarding the trade secret claims from Blackberry that survived our motions and their non-trade secret claims, as well as discovery regarding our counterclaims, is ongoing.
BlackBerry Corp., et al. v. Quinn, et al. On February 17, 2020, BlackBerry commenced the action captioned BlackBerry Corp., et al. v. Quinn, et al., No. D-1-GN-20-00096 (Tex. Civ. Ct. – Travis Cnty.) against Sean Quinn, a go-to-market employee, and us, in Texas state court. On August 8, 2020, we and Mr. Quinn moved to stay or dismiss the case in light of the overlapping issues between this case and the Current California Action. On September 21, 2020, the court stayed this case pending resolution of the Current California Action. This lawsuit remains stayed and is pending in abeyance before the Texas court.
Other
We are, and 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 other legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, financial condition or operating results.
Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
MANAGEMENT
Executive Officers, Key Employees, and Non-Employee Directors
The following table provides information regarding our executive officers, key employees, and non-employee directors as of May 31, 2021:
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Name
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Age
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Position(s)
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Executive Officers:
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Tomer Weingarten
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38
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Chairman of the Board of Directors, President, Chief Executive Officer, and Director
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David Bernhardt
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46
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Chief Financial Officer
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Nicholas Warner
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49
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Chief Operating Officer
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Efraim Harari
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53
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Chief Legal and Trust Officer
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Richard Smith, Jr.
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41
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Chief Technology Officer
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Key Employees:
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Eran Ashkenazi
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43
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Senior Vice President, Global Support and Services
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Daniel Bernard
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31
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Chief Marketing Officer
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Divya Ghatak
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50
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Chief People Officer
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Mark Parrinello
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54
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Senior Vice President, Global Sales
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Raj Rajamani
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43
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Chief Product Officer
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Non-Employee Directors:
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Charlene T. Begley(1)
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54
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Director
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Aaron Hughes(1)
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45
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Director
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Mark S. Peek(1)(2)
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63
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Director
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Daniel Scheinman(2)(3)(4)
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58
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Director
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Robert Schwartz(3)
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59
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Director
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Teddie Wardi(2)
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36
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Director
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Jeffery W. Yabuki(3)
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61
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Director
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(1)Member of the audit committee.
(2)Member of the compensation committee.
(3)Member of the nominating and corporate governance committee.
(4)Lead independent director.
Executive Officers
Tomer Weingarten is our co-founder and has served as our Chief Executive Officer and a member of our board of directors since our inception in January 2013, as our President since November 2018, and as our Chairman of the Board of Directors since March 2021. Before our founding, Mr. Weingarten held various positions, including Vice President of Products, at Toluna Holdings Limited, a technology company that delivers real-time consumer insights, from May 2007 to December 2012, which he joined following the acquisition of Dpolls, a startup he had previously co-founded. Prior to that, Mr. Weingarten co-founded Carambola Media Ltd., a publisher focused platform that creates new ad revenue streams through engaging content formats, where he served as Chief Technology Officer from May 2011 to May 2012. Mr. Weingarten also previously served in various roles at Mckit Systems Ltd., a provider of information and knowledge management systems in Israel, from March 2005 to April 2007. We believe Mr. Weingarten is qualified to serve as a member of our board of directors because of the historical knowledge, operational expertise, leadership, and continuity that he brings to our board of directors as our co-founder and Chief Executive Officer.
David Bernhardt has served as our Chief Financial Officer since September 2020. Prior to joining us, Mr. Bernhardt served in various leadership positions at Chegg, Inc., an educational technology company, including as Vice President of Finance and Principal Accounting Officer, from July 2011 to September 2020. Prior to Chegg, Mr.
Bernhardt served in various positions at Palantir Technologies Inc., a data analytics software company, including most recently as its Vice President of Finance and an advisor, from May 2009 to August 2013. Mr. Bernhardt holds a B.S.c. in Finance from Santa Clara University.
Nicholas Warner has served as our Chief Operating Officer since January 2019. Mr. Warner previously served as our Chief Revenue Officer from June 2017 to January 2019. From April 2014 to June 2017, Mr. Warner served in various executive roles at Cylance, Inc., including as Senior Vice President of Worldwide Sales. Mr. Warner served as Worldwide Director of Advanced Technologies, at McAfee Corp., from September 2012 to April 2014. From January 2002 to September 2012, Mr. Warner served in various positions at Websense Inc., a cybersecurity software company now known as Forcepoint LLC, including as Senior Director of Sales, Eastern Region.
Efraim Harari has served as our Chief Legal and Trust Officer since June 2017. Prior to joining us, Mr. Harari served as Vice President of Legal and Business Affairs at Samepage Labs Inc., a collaboration software company acquired by Paylocity Holding Corp. in November 2020, from August 2014 to June 2017. From August 2014 to February 2017, Mr. Harari served as General Counsel of Kerio Technologies, Inc., a communications and security solutions company acquired by GFI Software in January 2017. Prior to Kerio Technologies, Mr. Harari served as Director, Senior Corporate Counsel at Zendesk, Inc., a customer service software company, from August 2011 to August 2014. Mr. Harari holds an LL.B in Law from Bar Ilan University, an L.L.M. in Law from Benjamin N. Cardozo School of Law, and an L.L.M. in Law, Science & Technology from Stanford University Law School.
Richard Smith, Jr. has served as our Chief Technology Officer since March 2021. Prior to joining us, Mr. Smith served in various leadership positions at Medallia, Inc., a customer experience platform company, including as Senior Vice President of Engineering, from January 2016 to March 2021. Prior to Medallia, Mr. Smith served in various positions at Oracle Corporation, a products and services cloud technology company, including most recently as Senior Director of Engineering, from October 2009 to January 2016. Mr. Smith holds a B.S. in Computer Science from the University of Arizona and an M.B.A. from the Wharton School of the University of Pennsylvania.
Key Employees
Eran Ashkenazi has served as our Senior Vice President of Global Support and Services since March 2019. Mr. Ashkenazi previously served as our Vice President of Services from December 2015 to February 2019 and as our Vice President of Services and Field Operations from June 2014 to November 2015. Prior to joining us, Mr. Ashkenazi served in various leadership positions at Check Point Software Technologies, Ltd., a cybersecurity company, including as Head of Global Professional Services, from January 2004 to May 2014. Mr. Ashkenazi holds a B.S.C.S. in Computer Science from Tourou International University.
Daniel Bernard has served as our Chief Marketing Officer since January 2019. Mr. Bernard previously served as our Vice President, Business and Corporate Development from July 2017 to January 2019. Mr. Bernard served as Director of Global Business Development at Cylance Inc. from May 2016 to July 2017. Prior to Cylance, Mr. Bernard served as Channel Partnerships Lead at Dropbox, Inc., a file hosting service company, from April 2014 to May 2016. Mr. Bernard holds a B.S.B.A. in Marketing, International Business and Chinese from Washington University in St. Louis.
Divya Ghatak has served as our Chief People Officer since August 2019. Prior to joining us, Ms. Ghatak led HR globally as Vice President, People at Nevro Corp., a global medical technology company, from April 2017 to April 2020. Prior to Nevro Corp., Ms. Ghatak served as Chief People Officer at GoodData Corporation, a Data Analytics software company, from December 2013 to October 2017. Previously, Ms. Ghatak led talent and implementation of people strategy at several global business units at Cisco Systems, from June 2007 to October 2013. Since July 2016, Ms. Ghatak serves on the board of directors for Watermark, a non-profit dedicated to increasing the number of women in leadership and an active sponsor of WiCys (Women in Cybersecurity). Ms. Ghatak also represents SentinelOne as an active sponsor of WiCys. Ms. Ghatak is a member of the board of advisors of Findem, Inc., a company that uses an artificial intelligence platform to assist companies in their employee hiring, since February 2021. Ms. Ghatak holds a B.A. in Economics from Delhi University in India and an M.A. in Personnel Management and Industrial Relations, from the Tata Institute of Social Sciences in India.
Mark Parrinello has served as our Senior Vice President of Global Sales since February 2020. Prior to joining us, Mr. Parrinello served as Senior Vice President of Worldwide Sales at Cohesity Inc. from February 2017 to November 2019. From June 2014 to February 2017, Mr. Parrinello served as Vice President of American Sales at Nimble Storage, Inc., a data storage solutions company that was acquired by Hewlett Packard Enterprise Company in April 2017. Mr. Parrinello holds a B.A. in Broadcast Journalism from Arizona State University.
Raj Rajamani has served as our Chief Product Officer since August 2019. Mr. Rajamani previously served as our Vice President of Product Management from March 2017 to July 2018. From August 2018 to July 2019, Mr. Rajamani served as the Vice President of Products at Cohesity, Inc., a data management software company. From May 2014 to February 2017, Mr. Rajamani served as Vice President of Product Management at Cylance. Prior to Cylance, Mr. Rajamani served as Director of Product Management at Marketo, Inc., a cloud-based marketing software company, from September 2012 to April 2014. Earlier in his career, Mr. Rajamani served as Senior Product Manager at McAfee Corp. and in various product management roles at Solidcore, Inc., a software security company that was acquired by McAfee. Mr. Rajamani holds a B.E. (Hons.) in Computer Science and an M.Sc. (Hons.) in Physics from the Birla Institute of Technology and Science, Pilani, an M.S. in Computer Science from the University of Wisconsin-Madison and an M.B.A from the University of California-Berkeley, Haas School of Business.
Non-Employee Directors
Charlene T. Begley has served as a member of our board of directors since January 2021. Ms. Begley has served as an independent director and member of the audit committee and management compensation committee of Nasdaq, Inc., a global technology and financial services company, since April 2014. Since April 2017, she has served as an independent director, chairperson of the audit committee, and member of the nomination and Environmental, Social and Governance committee at Hilton Worldwide Holdings Inc., a multinational hospitality company. Earlier in her career, Ms. Begley served in various roles at the General Electric Company, or GE, a diversified infrastructure and financial services company, from June 1988 to December 2013. Ms. Begley served in a dual role as Senior Vice President and Chief Information Officer, as well as President and Chief Executive Officer of GE’s Home and Business Solutions Office, from January 2010 to December 2012. Previously, Ms. Begley served as President and Chief Executive Officer of GE’s Enterprise Solutions group from 2007 to 2009. In addition, Ms. Begley served as President and Chief Executive Officer of GE Plastics and GE Transportation and prior to that led GE’s Corporate Audit staff and served as Chief Financial Officer for GE Transportation and GE Plastics Europe and India. Ms. Begley served as a director at Red Hat, Inc., a software development company, from November 2014 to June 2019 and at WPP plc, a multinational communications, commerce and technology company, from December 2013 to June 2017. Ms. Begley holds a B.S. in Finance from the University of Vermont. We believe Ms. Begley is qualified to serve as a member of our board of directors because of her knowledge of technology and information security companies, and her expertise and experience both in operational management roles and board leadership positions at large, public organizations.
Aaron Hughes has served as a member of our board of directors since May 2021. Since November 2020, Mr. Hughes has served as Group Vice President and Chief Information Security Officer at Albertsons Companies, Inc., a grocery and drugstore company. From June 2017 to November 2020, Mr. Hughes served as Vice President for Information Security and Deputy Chief Information Security Officer at Capital One Financial Corporation, a financial services company. Prior to Capital One, Mr. Hughes served as Deputy Assistant Secretary of Defense for Cyber Policy at the United States Department of Defense from May 2015 to January 2017. From July 2008 to May 2015, Mr. Hughes served as Vice President at In-Q-Tel, Inc., a venture capital firm. Mr. Hughes holds a B.S. in Mechanical Engineering from the University of Virginia, a M.S. in Telecommunication and Computers from George Washington University, and an M.B.A. from the Stanford Graduate School of Business. We believe that Mr. Hughes is qualified to serve as a member of our board of directors because of his extensive leadership, business and policy experience in the technology and cybersecurity industries.
Mark S. Peek has served as a member of our board of directors since May 2021. Since February 2018, Mr. Peek has served as Executive Vice President, Managing Director and head of Workday Ventures, the strategic investment arm of Workday, Inc., or Workday. a leading provider of enterprise cloud applications for finance and human resources. From June 2015 to February 2018, Mr. Peek served as Co-President of Workday, and from June 2012 to
April 2016, as Workday’s Chief Financial Officer. Prior to joining Workday, Mr. Peek served as President, Business Operations and Chief Financial Officer of VMware, Inc., a provider of business infrastructure virtualization solutions from April 2007 to January 2011. From March 2000 to April 2007, Mr. Peek served as Senior Vice President and Chief Accounting Officer at Amazon.com, Inc. a technology company. Prior to joining Amazon, Mr. Peek spent 19 years at Deloitte, and as a partner for the last ten of those years. Mr. Peek serves on the Advisory Board of the Foster School of Business at the University of Washington. From December 2011 to June 2012, Mr. Peek served on the board of directors of Workday. Mr. Peek has served as a member of the board of directors of Trimble Inc. since May 2010. Mr. Peek received a B.S. in accounting and international finance from Minnesota State University. We believe that Mr. Peek is qualified to serve as a member of our board of directors because of his extensive leadership and business experience with technology companies.
Daniel Scheinman has served as a member of our board of directors since September 2015. Since April 2011, Mr. Scheinman has been an angel investor. From January 1997 to April 2011, Mr. Scheinman served in various roles at Cisco Systems, Inc., a technology and networking company, most recently as Senior Vice President, Cisco Media Solutions Group. He has served as a member of the boards of directors of Arista Networks, Inc., a cloud networking company, since October 2011, and of Zoom Video Communications Inc., a cloud-based video communication company, since January 2013, and currently serves on the boards of directors of several private companies. Mr. Scheinman holds a B.A. in Politics from Brandeis University and a J.D. from the Duke University School of Law. We believe that Mr. Scheinman is qualified to serve as a member of our board of directors because of his extensive leadership and business experience with technology companies, as well as his service on the boards of directors of other privately and publicly -held companies.
Robert Schwartz has served as a member of our board of directors since September 2015. Since June 2000, Mr. Schwartz has served as Managing Partner at Third Point Ventures, a private investment firm. Mr. Schwartz has served as a member of the board of directors of Upstart Holdings Inc., an online lending platform, since 2015, and currently serves on the board of directors of several privately-held companies. Mr. Schwartz also served as a member of the board of directors from 2008 to 2016 of Apigee Corp., an API management and predictive analytics software provider that was acquired by Alphabet Inc. in September 2016, and Enphase Energy, Inc., a publicly traded energy technology company, from 2006 to 2016. Mr. Schwartz holds a B.S. in multi-discipline engineering from the University of California, Berkeley. We believe Mr. Schwartz is qualified to serve as a member of our board of directors because of his extensive experience in the venture capital industry, his knowledge of technology companies, and his deep understanding of our business and operations as one of our early investors.
Teddie Wardi has served as a member of our board of directors since May 2019. Since October 2017, Mr. Wardi has served as a Managing Director at Insight Venture Management, L.L.C., a private investment firm. Prior to joining Insight, Mr. Wardi served as a Partner at Atomico (UK) Partners LLP, an international investment firm, from March 2016 to October 2017. Previously, Mr. Wardi served as Vice President at Dawn Capital LLP, a private investment firm, from March 2014 to March 2016. Mr. Wardi co-founded Nervogrid Oy, a software provider acquired by ALSO Holding Ag, and served as Chief Technology Officer from March 2006 to August 2012. Mr. Wardi holds a B.S.c. Business Technology and Finance from Aalto University in Finland and an M.B.A. from Harvard Business School. We believe that Mr. Wardi is qualified to serve as a member of our board of directors because of his extensive leadership and business experience with the venture capital and technology industries.
Jeffery W. Yabuki has served as a member of our board of directors since May 2021. Since January 2021, Mr. Yabuki has served as the Chairman of the board of directors of Sportradar Holding AG, a leading global provider of sports betting and sports entertainment products and services. From December 2005 to December 2020, Mr. Yabuki served as the Chief Executive Officer of Fiserv, Inc., a global leader in financial services and payments technology. From 2005 to June 2020, Mr. Yabuki served as a member of board of directors of Fiserv and from July 2019 to December 2020 as the Chairman of the board of directors. Before joining Fiserv, Mr. Yabuki served as Executive Vice President and Chief Operating Officer for H&R Block, Inc., a financial services firm, from 2002 to 2005. From 2001 to 2002, he served as Executive Vice President of H&R Block and from 1999 to 2001, he served as the President of H&R Block International. From 1987 to 1999, Mr. Yabuki held various executive positions with American Express Company, a financial services firm, including President and Chief Executive Officer of American Express Tax and Business Services, Inc. Mr. Yabuki currently serves as a director at Royal Bank of Canada, a publicly traded financial institution and as a director at Ixonia Bancshares, Inc., a privately held bank holding
company. Mr. Yabuki received a B.S. in accounting from California State University, Los Angeles. We believe that Mr. Yabuki is qualified to serve as a member our board of directors because of his leadership experience as a chief executive officer and board member.
Family Relationships
There are no family relationships among any of our executive officers or directors.
Code of Business Conduct and Ethics
Our board of directors will adopt, effective prior to the completion of this offering, a code of business conduct and ethics that applies to all of our employees, officers, and directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. The full text of our code of business conduct and ethics will be posted on the investor relations page on our website. We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website or in filings under the Exchange Act.
Board of Directors
Our business and affairs are managed under the direction of our board of directors. Our board of directors currently consists of eight directors. Pursuant to our amended and restated certificate of incorporation, as currently in effect, and the Seventh Amended and Restated Voting Agreement by and among us and other parties, dated October 28, 2020, as amended, or our Voting Agreement, our current directors were elected as follows:
•Messrs. Weingarten and Scheinman were elected as the designees nominated by holders of our Class B common stock;
•Ms. Begley and Messrs. Hughes, Peek and Yabuki were elected as the designees nominated by holders of our Class B common stock and redeemable convertible preferred stock, voting together, as a single class;
•Mr. Schwartz was elected as the designee nominated by holders of our Series B redeemable convertible preferred stock; and
•Mr. Wardi was elected as the designee nominated by holders of our Series D redeemable convertible preferred stock.
Our Voting Agreement will terminate and the provisions of our current amended and restated certificate of incorporation by which our directors were elected will be amended and restated in connection with this offering and, following this offering, there will be no contractual obligations regarding the election of our directors. After this offering, the number of directors will be fixed by our board of directors, subject to the terms of our restated certificate of incorporation and restated bylaws that will become effective immediately prior to the completion of this offering. Each of our current directors will continue to serve as a director until the election and qualification of their successor, or until their earlier death, resignation, or removal.
Classified Board of Directors
Upon the completion of this offering, our board of directors will consist of eight members and be divided into three classes of directors that will serve staggered three-year terms. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring. As a result, 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. Our directors will be divided among the three classes as follows:
•the Class I directors will be Daniel Scheinman, Teddie Wardi and Tomer Weingarten, and their terms will expire at the first annual meeting of stockholders to be held after the completion of this offering;
•the Class II directors will be Jeffery W. Yabuki and Robert Schwartz, and their terms will expire at the second annual meeting of stockholders to be held after the completion of this offering; and
•the Class III directors will be Aaron Hughes, Charlene T. Begley and Mark S. Peek, and their terms will expire at the third annual meeting of stockholders to be held after the completion of this offering.
Each director’s term continues until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal. Our restated certificate of incorporation and restated bylaws to be in effect upon the completion of this offering will authorize only our board of directors to fill vacancies on our board of directors. Any increase or decrease 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 directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our company. See the section titled “Description of Capital Stock—Anti-Takeover Provisions.”
Director Independence
In connection with this offering, we intend to list our Class A common stock on the NYSE. Under the rules of the NYSE, independent directors must comprise a majority of a listed company’s board of directors within a specified period after the completion of this offering. In addition, the rules of the NYSE require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Under the rules of the NYSE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Additionally, compensation committee members must not have a relationship with us that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or be an affiliated person of the listed company or any of its subsidiaries. We intend to satisfy the audit committee independence requirements of Rule 10A-3 as of the completion of this offering.
Our board of directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors determined that Charlene T. Begley, Aaron Hughes, Mark S. Peek, Dan Scheinman, Robert Schwartz, Teddie Wardi, and Jeffery W. Yabuki are “independent directors” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the NYSE. In making these determinations, our board of directors reviewed and discussed information provided by the directors and by us with regard to each director’s business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of our common stock by each non-employee director and the transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.”
In evaluating the independence of Mr. Peek, our board of directors considered that Mr. Peek serves as Executive Vice President, Managing Director, and head of Workday Ventures, the strategic investment arm of Workday, which is both a customer and a vendor of our company. Sales to and purchases from Workday were significantly less than 2% of the recipient company’s gross revenue during its most recent fiscal year.
Lead Independent Director
Our board of directors will adopt, effective prior to the completion of this offering, corporate governance guidelines that provide that one of our independent directors will serve as our lead independent director. Our board
of directors has appointed Daniel Scheinman to serve as our lead independent director. As lead independent director, Mr. Scheinman will provide leadership to our board of directors if circumstances arise in which the role of Chief Executive Officer and chairperson of our board of directors may be, or may be perceived to be, in conflict, and perform such additional duties as our board of directors may otherwise determine and delegate.
Committees of the Board of Directors
Our board of directors has an audit committee, a compensation committee and a nominating and governance committee, each of which, pursuant to its respective charter, will have the composition and responsibilities described below upon the completion of this offering. Following the completion of this offering, copies of the charters for each committee will be available on the investor relations portion of our website. Members serve on these committees until their resignation or until otherwise determined by our board of directors.
Audit Committee
Our audit committee is composed of Charlene T. Begley, Aaron Hughes and Mark S. Peek. Ms. Begley is the chair of our audit committee. The members of our audit committee meet the independence requirements under NYSE and SEC rules. Each member of our audit committee is financially literate. In addition, our board of directors has determined that each of Ms. Begley and Mr. Peek is an “audit committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not, however, impose on him or her any supplemental duties, obligations or liabilities beyond those that are generally applicable to the other members of our audit committee and board of directors. Our audit committee’s principal functions are to assist our board of directors in its oversight of:
•selecting a firm to serve as our independent registered public accounting firm to audit our financial statements;
•ensuring the independence of the independent registered public accounting firm, reviewing the qualifications and performance of the independent registered public accounting firm, and overseeing the rotation of the independent registered public accounting firm’s audit partners;
•discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and that firm, our interim and year-end operating results;
•establishing procedures for employees to anonymously submit concerns about questionable accounting or audit matters;
•considering the adequacy of our internal controls and the design, implementation, and performance of our internal audit function;
•risk assessment and management;
•our compliance with legal and regulatory requirements;
•reviewing related party transactions that are material or otherwise implicate disclosure requirements; and
•approving, or as permitted, pre-approving all audit and non-audit services to be performed by the independent registered public accounting firm.
Compensation Committee
Our compensation committee is composed of Mark S. Peek, Daniel Scheinman, and Teddie Wardi. Mr. Peek is the chair of our compensation committee. The members of our compensation committee meet the independence requirements under NYSE and SEC rules. The majority of the members of this committee are also “non-employee
directors” within the meaning of Rule 16b-3 under the Exchange Act. Our compensation committee is responsible for, among other things:
•evaluating, recommending to our board of directors, approving and reviewing our executive officer and director compensation arrangements, plans, policies, and programs;
•reviewing and recommending to our board of directors the form and amount of our compensation of our non-employee directors;
•reviewing, at least annually, the goals and objectives to be considered in determining the compensation of our chief executive officer and other executive officers;
•reviewing with our management our organization and people activities;
•administering and interpreting our cash and equity incentive compensation plans;
•reviewing and approving, or making recommendations to our board of directors with respect to, our cash and equity incentive compensation plans; and
•establishing our overall compensation philosophy.
Nominating and Governance Committee
Our nominating and governance committee is composed of Daniel Scheinman, Robert Schwartz, and Jeffrey W. Yabuki. Mr. Scheinman is the chair of our nominating and governance committee. The members of our nominating and governance committee meet the independence requirements under NYSE and SEC rules. Our nominating and governance committee’s principal functions include:
•identifying, considering, and recommending candidates for membership on our board of directors, and recommending to our board of directors the desired qualifications, expertise, and characteristics of members of our board of directors;
•developing and recommending our corporate governance guidelines and policies;
•periodically consider and make recommendations to our board of directors regarding the size, structure and composition of our board of directors and its committees
•reviewing and recommending to our board of directors any changes to our corporate governance guidelines;
•reviewing any corporate governance related matters required by the federal securities laws;
•reviewing proposed waivers of the code of conduct for directors and executive officers;
•assisting our board of directors in overseeing our programs related to corporate responsibility and sustainability;
•overseeing the process of evaluating the performance of our board of directors and its committees; and
•advising our board of directors on corporate governance matters.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee is currently, or has been at any time, one of our officers or employees. None of our executive officers has served as a member of our board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board of directors or compensation committee during fiscal 2021.
Non-Employee Director Compensation
Our employee director, Tomer Weingarten, did not receive any compensation for his service as a director for fiscal 2021. All compensation paid to Mr. Weingarten, our only employee director, is set forth below in the section titled “Executive Compensation—Fiscal 2021 Summary Compensation Table.” We did not pay any fees to, make any equity awards or non-equity awards to, or pay any other compensation to the non-employee members of our board of directors in fiscal 2021.
In February 2021, we granted Ms. Begley, who was appointed to our board of directors in January 2021, an option to purchase 33,000 shares of Class B common stock as compensation for Ms. Begley’s service as a member of our board of directors. This stock option is subject to the terms of our 2013 Plan and vests in equal monthly installments over four years beginning on January 1, 2021. In the event of a change of control (as this term is defined in the applicable stock option agreement), all of the unvested shares subject to this option will become immediately vested and exercisable as of the date immediately prior to the change of control.
In May 2021, we granted each of Messrs. Hughes, Peek, and Yabuki, who were appointed to our board of directors in May 2021, options to purchase 40,000 shares of our Class B common stock as compensation for their respective service as a member of our board of directors. Each stock option is subject to the terms of our 2013 Plan and vests in equal monthly installment over three years beginning on the grant date. In the event of a change of control (as this term is defined in the applicable stock option agreement), all of the unvested shares subject to this option will become immediately vested and exercisable as of the date immediately prior to the change of control.
Outside Director Compensation Policy
Before this offering, we did not have a formal policy to provide any cash or equity compensation to our non-employee directors for their service on our board of directors or committees of our board of directors. In connection with this offering, our board of directors approved a non-employee director compensation policy, pursuant to which our non-employee directors will be eligible to receive certain fees and equity awards, as described below.
Employee directors will receive no additional compensation for their service as a director.
Following the completion of this offering, each non-employee director will be entitled to receive (i) an annual cash retainer of $50,000 for service on the board of directors and (ii) additional annual cash compensation for committee membership set forth below, in each case payable quarterly in arrears, prorated based on full calendar months served, and subject to such non-employee director’s continued service.
Lead Independent Director Fee: $20,000
Committee Chair Service Fee (in lieu of Non-Chair Committee Member Service Fee):
•Audit committee chair: $20,000
•Compensation committee chair: $12,000
•Nominating and governance committee chair: $12,000
Non-Chair Committee Member Service Fee (in lieu of Committee Chair Service Fee):
•Audit committee member: $10,000
•Compensation committee member: $6,000
•Nominating and governance committee member: $6,000
Each of our non-employee directors may elect to receive his or her cash fees in the form of deferred share units, or DSUs, pursuant to a prior written election. DSUs will vest in equal quarterly installments so long as the non-employee director provides continuous service to the company through each vesting date, with the final installment vesting on the earliest of (i) the date of the next annual meeting of our stockholders, (ii) the date immediately prior
to the next annual meeting of our stockholders if the non-employee director’s service as a director ends at such meeting due to his or her failure to be re-elected or his or her not standing for re-election, and (iii) the originally scheduled vesting date of such installment.
The DSUs will settle on the earliest to occur of (i) the 5th anniversary of the grant date, (ii) the non-employee director’s separation from service from the company, (iii) the non-employee director’s disability, (iv) the non-employee director’s death, and (v) a corporate transaction.
The annual fees, regardless of the form of payment, will become payable in full immediately prior to a corporate transaction.
Additionally, each non-employee director who did not receive a stock option award in respect of his or her appointment to our board of directors between April 1, 2021, and the date of this offering will be eligible to receive an initial equity award in the form of stock options or RSUs, as determined by our board of directors, with an aggregate value of $300,000. The initial award will vest quarterly with respect to 1/12 of the total number of RSUs or stock options, as applicable, subject to the award, so long as the non-employee director provides continuous service to the Company through each vesting date. The initial award is subject to full vesting acceleration immediately prior to a corporate transaction.
Thereafter, on the date of each annual meeting of our stockholders, each non-employee director will be eligible to receive an equity award in the form of stock options or RSUs, as determined by our board of directors, with an aggregate value of $225,000 (prorated based on months of service). The annual award will fully vest on the earliest to occur of (i) the date of the next annual meeting of our stockholders (or the day immediately prior if the non-employee director’s service as a director ends at such meeting due to his or her failure to be re-elected or his or her not standing for re-election), (ii) the first anniversary of the grant date, (iii) the non-employee director’s death, (iv) the non-employee director’s disability, or (v) a corporate transaction, in each case subject to the non-employee director’s continuous service through such date.
EXECUTIVE COMPENSATION
Our named executive officers, consisting of our principal executive officer and the next two most highly compensated executive officers, as of January 31, 2021, were:
•Tomer Weingarten, our Chairman of the Board of Directors, President, Chief Executive Officer, and Director;
•David Bernhardt, our Chief Financial Officer; and
•Nicholas Warner, our Chief Operating Officer.
Summary Compensation Table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to, earned by or paid to our named executive officers for fiscal 2021.
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Name and Principal Position
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Salary ($)
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Option
Awards ($)(1)
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Bonus ($)(2)
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Total
($)
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Tomer Weingarten, Chairman of the Board of Directors, President, and Chief Executive Officer
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316,667
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3,117,263
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200,000
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3,633,930
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David Bernhardt, Chief Financial Officer
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115,952(3)
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4,527,338
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61,817
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4,705,107
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Nicholas Warner, Chief Operating Officer
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350,000
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1,934,185
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385,000
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2,669,185
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(1)The amounts presented represent the aggregate grant-date fair value of the options to purchase shares of Class B common stock awarded to the named executive officer during fiscal 2021 in accordance with FASB Accounting Standards Codification Topic 718. The assumptions used in calculating the grant-date fair value of the stock options reported in the “Option Awards” column are set forth in Note 11 to our consolidated financial statements included in this prospectus. Such grant-date fair value does not take into account any estimated forfeitures related to service-based vesting conditions. The amount in this column does not include (i) options to purchase 6,521,791 shares of our Class B common stock awarded to Mr. Weingarten, (ii) options to purchase 250,000 shares of our Class B common stock awarded to Mr. Warner, and (iii) options to purchase 100,000 shares of our Class B common stock awarded to Mr. Bernhardt, in each case, awarded in March 2021.
(2)The amounts presented represent discretionary bonuses paid for contributions to our performance.
(3)Represents a partial year as Mr. Bernhardt joined us in September 2020.
2021 Awards
In March 2021, our board of directors, with participation by every independent member of the board, granted performance stock option awards to Messrs. Weingarten and Bernhardt, or the Performance Awards. The Performance Awards are each comprised of a 10-year term option to purchase 1,304,605 shares of our Class B common stock for Mr. Weingarten, and 100,000 shares of our Class B common stock for Mr. Bernhardt. The Performance Awards have an exercise price of $9.74 per share, which our board of directors determined was equal to the fair market value of our common stock on the date of grant.
Mr. Weingarten’s Performance Award vests 100% upon the earlier of (a) our achieving a market capitalization (as reported in the Wall Street Journal) of not less than $20 billion over not less than 90 consecutive trading days, or (b) a “change of control” as defined in the 2013 Plan, in which our equity holders receive proceeds of no less than $20 billion at closing, collectively, the Milestone Events, in each case, subject to Mr. Weingarten remaining continuously employed as our Chief Executive Officer at all times from the date of grant through the applicable Milestone Event.
Mr. Bernhardt’s Performance Awards vests 100% upon a Milestone Event, subject to Mr. Bernhardt remaining continuously employed as our Chief Financial Officer at all times from the date of grant through the applicable Milestone Event.
For the avoidance of doubt, in the event of a “change of control” in which equity holders receive proceeds of less than $20 billion at closing or if we achieve a market capitalization of less than $20 billion, the Performance Awards shall remain outstanding and eligible to vest.
Additionally, in March 2021, our board of directors, with participation by every independent member of the board, also granted: (i) a stock option award to Mr. Weingarten comprised of a 10-year term option to purchase 5,217,186 shares of our Class B common stock, with an exercise price of $9.74 per share and (ii) a stock option award to Mr. Warner comprised of a 10-year term option to purchase 250,000 shares of our Class B common stock, with an exercise price of $9.74 per share. Such awards vest over five years, with 1/60th of the shares subject to the award vesting on the one-month anniversary of the grant date and an additional 1/60th vesting on each monthly anniversary thereafter, subject to such officer’s continued service with us on each applicable vesting date. This award will be subject to accelerated vesting pursuant to the terms of our change of control and severance agreement, effective with each such officer, each of which will be effective upon the effectiveness of this offering.
Outstanding Equity Awards at Fiscal 2021 Year-End
The following table presents, for each of our named executive officers, information regarding outstanding stock options to purchase shares of Class B common stock held as of January 31, 2021.
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Option Awards
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Name
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Grant Date(1)
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Number of Securities Underlying Unexercised Options (#) Exercisable
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Number of Securities Underlying Unexercised Options (#) Unexercisable
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Option Exercise Price ($)(2)
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Option Expiration Date
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Tomer Weingarten
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3/8/2019
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395,312
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429,688(3)
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1.20
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3/7/2029
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3/27/2020
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750,000
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2,250,000(4)
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2.27
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3/27/2030
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David Bernhardt
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10/1/2020
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—
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2,051,996(5)
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3.02
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10/1/2030
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Nicholas Warner
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8/1/2017
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1,022,203
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180,830(6)
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0.65
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7/31/2027
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5/31/2018
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416,025
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48,375(7)
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0.65
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5/30/2028
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3/8/2019
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179,687
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195,313(8)
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1.20
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3/7/2029
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7/22/2020
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125,000
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875,000(9)
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2.27
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7/22/2030
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(1)All of the outstanding equity awards were granted under our 2013 Plan, unless otherwise indicated.
(2)This column represents the fair value of a share of our Class B common stock on the grant date, as determined by our board of directors.
(3)This stock option vests monthly over 48 months in equal installments starting on February 1, 2019, subject to continued service through the applicable vesting date.
(4)This stock option vests monthly over 48 months in equal installments starting on January 22, 2020, subject to continued service through the applicable vesting date. In the event of a change of control, or if Mr. Weingarten’s service is terminated by us or a successor company without cause or by Mr. Weingarten for good reason (each as defined in the 2013 Plan), 50% of the total shares subject to the option shall vest and become exercisable immediately. Upon a termination without cause or a resignation for good reason following a change of control, all remaining unvested shares subject to the option shall immediately vest and become exercisable.
(5)25% of the shares subject to this stock option will vest on September 8, 2021, subject to continued service through the applicable vesting date. The remainder of the shares will vest in equal monthly installments over 36 months thereafter. In the event of a change of control, 50% of the total shares subject to the option shall vest and become exercisable immediately. Additionally, if Mr. Bernhardt’s service is terminated by us or a successor company without cause or by Mr. Bernhardt for good reason, each as defined in the 2013 Plan, within one year following a change of control, 100% of the then-unvested shares of subject to the stock option shall immediately vest.
(6)25% of the shares subject to this stock option vested on May 12, 2018, subject to continued service through the applicable vesting date. The remainder of the shares vest in equal monthly installments over 36 months thereafter. In the event of a change of control, 75% of the total shares subject to the option shall vest and become exercisable immediately prior to the closing of such change of control. Additionally, if Mr. Warner’s service is terminated by us or a successor company without cause or by Mr. Warner for good reason, each as defined in the 2013 Plan, within one year following a change of control, 100% of the then-unvested shares of subject to the stock option shall immediately vest.
(7)25% of the shares of subject to this stock option vested on June 12, 2018, subject to continued service through the applicable vesting date. The remainder of the shares vest in equal monthly installments over 36 months thereafter. In the event of a change of control, 75% of the total shares subject to the option shall vest and become exercisable immediately prior to the closing of such change of control. Additionally, if Mr. Warner’s service is terminated by us or a successor company without cause or by Mr. Warner for good reason, within one year following a change of control, 100% of the then-unvested shares subject to the stock option shall immediately vest.
(8)This stock option vests monthly over 48 months in equal installments starting on February 1, 2019, subject to continued service through the applicable vesting date. In the event of a change of control, 75% of the total shares subject to the option shall vest and become exercisable immediately prior to the closing of such change of control. Additionally, if Mr. Warner’s service is terminated by us or a successor company without cause or by Mr. Warner for good reason, within one year following a change of control, 100% of the then-unvested shares of the option shall immediately vest.
(9)This stock option vests monthly over 48 months in equal installments starting on July 1, 2020, subject to continued service through the applicable vesting date. In the event of a change of control or Mr. Warner’s termination without cause by us or by Mr. Warner for good reason, 50% of the total shares subject to the option shall vest and become exercisable. Additionally, if Mr. Warner’s service is terminated by us or a successor company without cause or by Mr. Warner for good reason following a change of control, 100% of the then-unvested shares subject to the stock option shall immediately vest.
Executive Offer Letters
Prior to the completion of this offering, we intend to enter into a confirmatory offer letter with each of our named executive officers setting forth the terms and conditions of employment for each of our named executive officers as described below.
Tomer Weingarten
Prior to the completion of this offering, we intend to enter into a confirmatory offer letter with Mr. Weingarten. The letter agreement will not have a specific term and will provide that Mr. Weingarten is an at-will employee. Mr. Weingarten is eligible to receive variable bonus compensation in accordance with our bonus policies and at the sole discretion of our board of directors. Effective as of May 2021, Mr. Weingarten’s annual base salary is $496,000 and his target annual bonus is $496,000.
David Bernhardt
Prior to the completion of this offering, we intend to enter into a confirmatory offer letter with Mr. Bernhardt. The letter agreement will not have a specific term and will provide that Mr. Bernhardt is an at-will employee. Mr. Bernhardt will be eligible to receive variable bonus compensation in accordance with our bonus policies and at the sole discretion of our board of directors. Effective as of May 2021, Mr. Bernhardt’s annual base salary is $389,700 and his target annual bonus is $194,850.
Nicholas Warner
Prior to the completion of this offering, we intend to enter into a confirmatory offer letter with Mr. Warner. The letter agreement will not have a specific term and will provide that Mr. Warner is an at-will employee. Mr. Warner will be eligible to receive variable bonus compensation in accordance with our bonus policies and at the sole discretion of our board of directors. Effective as of May 2021, Mr. Warner’s annual base salary is $400,000 and his target annual bonus is $400,000.
Potential Payments upon Termination or Change of Control
Prior to the completion of this offering, we adopted arrangements for our executive officers, including our named executive officers, that provide for payments and benefits on termination of employment or upon a termination in connection with a change of control.
Under those proposed arrangements, in the event that our executive officers, including our named executive officers, are terminated without “cause” or resigns for “good reason” within three months before or twelve months following a “change of control” of the company, he or she will be entitled to: (i) an amount equal to twelve months (eighteen months for Mr. Weingarten) of his or her base salary at the rate in effect immediately prior to such termination plus his or her then-current annual target bonus opportunity, payable in a cash lump-sum and (ii) to the
extent this named executive officer timely elects to receive continued coverage under our group-healthcare plans, we will continue to pay the employer portion of the participant’s premium payments for such continued coverage for a period ending on the earlier of (x) twelve months following the termination date (eighteen months for Mr. Weingarten) and (y) the date that the named executive officer becomes eligible for coverage under another employer’s plans. In addition, each of our named executive officer’s outstanding equity awards, excluding awards that would otherwise vest contingent upon remaining-unsatisfied performance criteria, will become vested and exercisable, as applicable, with respect to 100% of the underlying shares. All such severance payments and benefits will be subject to each named executive officer’s execution of a general release of claims against us.
Additionally, in the event that our executive officers, including our named executive officers, are terminated without “cause” or resign for “good reason” outside of the period of three months before or twelve months after a “change of control,” he or she will be entitled to (i) an amount equal to six months (twelve months for Mr. Weingarten) of his or her base salary at the rate in effect immediately prior to such termination, payable in a cash lump-sum and (ii) to the extent the named executive officer timely elects to receive continued coverage under our group-healthcare plans, we will continue to pay the employer portion of the participant’s premium payments for such continued coverage for a period ending on the earlier of (x) six months following the termination date (twelve months for Mr. Weingarten) and (y) the date that the named executive officer becomes eligible for coverage under another employer’s plans. Finally, in the event that Mr. Weingarten is terminated without “cause”, the vesting of each of his outstanding equity awards, excluding awards that would otherwise vest contingent upon remaining-unsatisfied performance criteria, shall accelerate as if he had completed an additional six months of continuous service. All such severance payments and benefits will be subject to each named executive officer’s execution of a general release of claims against us.
Outstanding equity awards granted to our named executive officers on or after March 24, 2021 are and will be governed by the rules described above, whereas outstanding equity awards granted to our named executive officers prior to March 24, 2021, as set forth in the Outstanding Equity Awards at Fiscal 2021 Year-End table above, will remain subject to their specific acceleration terms.
Outstanding equity awards granted in 2020 to our named executive officers will therefore become vested and exercisable, as applicable, with respect to 50% of the underlying shares in the event that (i) they are terminated without “cause” or resign for “good reason” or (ii) in the event of a “change of control” of the Company, and with respect to 100% of the underlying shares in the event that they are terminated without “cause” or resigns for “good reason” within three months before or twelve months following a “change of control” of the Company.
In addition, outstanding equity awards granted to Mr. Warner in 2017, 2018 and 2019, as set forth in the Outstanding Equity Awards at Fiscal 2021 Year-End table above, will become vested and exercisable, as applicable, (i) with respect to 75% of the underlying shares in the event that he is terminated without “cause” or resigns for “good reason” or in the event of a “change of control,” and (ii) with respect to 100% of the underlying shares in the event that he is terminated without “cause” or resigns for “good reason” within three months before or twelve months following a “change of control.”
The stock option awards granted to each of Messrs. Weingarten and Warner on March 24, 2021, described in the section titled “Executive Compensation—2021 Awards,” will be governed by the rules described above.
Employee Benefit and Stock Plans
2011 Stock Incentive Plan
We assumed the 2011 Plan in February 2021 in connection with our acquisition of Scalyr pursuant to that certain Agreement and Plan of Merger and Reorganization by and among us, Scalyr and certain other parties, dated February 6, 2021, or the Merger Agreement.
Assumption of outstanding awards. Pursuant to the Merger Agreement, we assumed all options to purchase shares outstanding under the 2011 Plan that were unexpired and unexercised as of the closing of the transactions contemplated by the Merger Agreement, or 2,138,347 options as of February 9, 2021. Each such assumed option may be exercised solely for a number of shares of our Class B common stock equal to the number of shares of
Scalyr subject to the option immediately prior to the closing, multiplied by the exchange ratio set forth in the Merger Agreement. The exercise price per share under each such assumed option was adjusted by dividing the per share exercise price under such option by the exchange ratio set forth in the Merger Agreement. All outstanding rights to repurchase restricted shares or similar rights in favor of Scalyr prior to the closing of the transactions contemplated by the Merger Agreement are assigned to and exercisable by us on the same conditions as in effect immediately prior to the closing. No additional grants will be made under the 2011 Plan, but the assumed options will continue to be subject to its terms.
Administration. Our board of directors administers the 2011 Plan and the awards granted thereunder. Subject to the terms of the 2011 Plan, our board of directors has the authority to interpret the 2011 Plan and to take all actions necessary or advisable for the administration of the 2011 Plan.
Eligibility. The 2011 Plan provided for the grant of both incentive stock options, or ISOs, which qualify for favorable tax treatment to their recipients under Section 422 of the Internal Revenue Code, and nonqualified stock options, or NQSOs, as well as for the issuance of restricted share awards. Only employees were eligible to receive ISOs. Employees, consultants, and outside directors were eligible to receive NQSOs and restricted share awards. We refer to employees, consultants, and outside directors who received awards under our 2011 Plan as participants. As of February 9, 2021, no additional grants will be made under our 2011 Plan.
Options. The 2011 Plan provides that the exercise price of each stock option must be at least equal to the fair market value of our Class B common stock on the date of grant. However, the exercise price of any ISO granted to a participant who owns more than ten percent of the total combined voting power of all classes of our capital stock, directly or by attribution, must be at least equal to 110% of the fair market value of our Class B common stock on the date of grant. The maximum permitted term of options granted under the 2011 Plan is ten years from the date of grant, except that the maximum permitted term of ISOs granted to a participant who owns more than ten percent of the total combined voting power of all classes of our capital stock, directly or by attribution, is five years from the date of grant. In the event of a participant’s termination of service other than due to “cause,” “death,” and “disability” (as defined in the 2011 Plan), any portion of a participant’s option that is vested and exercisable will generally expire on the date that is thirty days after such termination. In the event of a participant’s termination of service due to disability, or death, any portion of a participant’s option that is vested and exercisable will generally expire on the date that is six months after such termination. Stock options generally terminate upon a participant’s termination of employment for cause.
Limited transferability. Unless otherwise determined by our board of directors, option awards granted under the 2011 Plan generally may not be transferred or assigned in any manner other than by beneficiary designation, will, or the laws of descent and distribution. Restricted share awards granted under the 2011 Plan are generally subject to transfer restrictions and repurchase provisions as determined by our board of directors.
Change in control. In the event of a “change in control” (as defined in our 2011 Plan), our board of directors may, in its sole discretion, provide for accelerated vesting or exercisability of outstanding awards, subject to the following restrictions: (i) the exercisability of options granted to participants for service as outside directors will be accelerated in full upon a change in control, and (ii) our right of repurchase with respect to restricted share awards granted to participants for service as outside directors will lapse upon a change in control.
In the event of a merger, consolidation, or sale of all or substantially all of our stock or assets, each outstanding option will be treated as set forth in the definitive transaction agreement without the participant’s consent, which transaction agreement may provide for (i) the continuation of the outstanding options by us, if we are a surviving corporation, (ii) the assumption of the 2011 Plan and outstanding options by the surviving corporation or its parent, (iii) the substitution by the surviving corporation or its parent of options with substantially the same terms for such outstanding options, (iv) immediate exercisability of such outstanding options followed by the cancellation of such options, and/or (v) settlement of the intrinsic value of the outstanding options (whether or not then exercisable) in cash or cash equivalents or equity (including cash or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such options or the underlying shares) followed by the cancellation of such options.
Adjustments. In the event of a subdivision of our outstanding stock, a declaration of a dividend payable in shares, a declaration of an extraordinary dividend payable in a form other than shares in an amount that has a material effect on the fair market value of our stock, a combination or consolidation of the outstanding stock into a lesser number of shares, a recapitalization, a spin-off, a reclassification, or a similar occurrence, our board of directors will make appropriate adjustments to the following: (i) the number of shares available for future awards, (ii) the number of shares covered by each outstanding option, (iii) the exercise price of each outstanding option, and (iv) the price of shares subject to our right of repurchase. The determination by our board of directors as to the terms of any of the foregoing adjustments will be conclusive and binding.
Amendment; termination. Our board of directors may amend, suspend, or terminate the 2011 Plan at any time, provided that certain amendments or terminations will require stockholder approval or participant consent. To the extent not previously exercised or settled, outstanding options will terminate immediately prior to a dissolution or liquidation of us. No additional grants will be made under the 2011 Plan, but the assumed options will continue to be subject to its terms.
2013 Equity Incentive Plan
Our 2013 Plan was initially adopted by our board of directors in June 2013 and approved by our stockholders in July 2013.
Share reserve. As of April 30, 2021, we had 66,145,509 shares of our Class B common stock reserved for issuance pursuant to grants under our 2013 Plan, of which 4,275,089 remained available for grant. As of April 30, 2021, options to purchase 13,215,184 shares had been exercised and options to purchase 48,644,223 shares remained outstanding, with a weighted-average exercise price of $3.77 per share. We have also granted 11,013 shares of Class B common stock pursuant to restricted stock agreements under our 2013 Plan. No other types of awards have been granted under our 2013 Plan. Our 2013 Plan will terminate on the date that the 2021 Plan becomes effective (as described below) and no additional grants will be made pursuant to our 2013 Plan following its termination. However, any outstanding options or shares of restricted stock will remain outstanding until they are exercised or are terminated in accordance with the terms of our 2013 Plan and the applicable award agreements evidencing such awards.
Administration. Our board of directors administers our 2013 Plan and the awards granted thereunder. Subject to the terms of our 2013 Plan, our board of directors has the authority to, among other things, select the persons to whom awards will be granted, interpret our 2013 Plan as well as to establish rules and regulations relating to our 2013 Plan.
Eligibility. Our 2013 Plan provides for the grant of both ISOs, which qualify for favorable tax treatment to their recipients under Section 422 of the Internal Revenue Code, and NQSOs, as well as for the issuance of restricted stock units, or RSUs, restricted stock agreements, or RSAs, or stock appreciation rights, or SARs, and cash-based awards or other incentives payable in cash or in shares as the board may designate from time to time. We may grant ISOs only to our employees. We may grant NQSOs, RSUs, RSA’s, and SARs and other cash-based awards or incentives payable in cash or shares to our employees, directors, and consultants. We refer to employees, directors or consultants who receive an award under our 2013 Plan as participants.
Options. Our 2013 Plan provides that the exercise price of each stock option must be at least equal to the fair market value of our Class B common stock on the date of grant. However, the exercise price of any ISO granted to a participant who owns more than ten percent of the total combined voting power of all classes of our capital stock, directly or by attribution, must be at least equal to 110% of the fair market value of our Class B common stock on the date of grant. The maximum permitted term of options granted under our 2013 Plan is ten years from the date of grant, except that the maximum permitted term of ISOs granted to a participant who owns more than ten percent of the total combined voting power of all classes of our capital stock, directly or by attribution, is five years from the date of grant. In the event of a participant’s termination of service other than due to “cause,” “retirement,” “disability,” or “death” (as such terms are defined in our 2013 Plan), any portion of a participant’s option that is vested and exercisable will generally expire on the date that is three months after such termination. In the event of a participant’s termination of service due to retirement, disability, or death, any portion of a participant’s option that is
vested and exercisable will generally expire on the date that is one year after such termination. Stock options generally terminate upon a participant’s termination of employment for cause.
RSAs and RSUs. Our 2013 Plan provides for the grant of RSAs and RSUs, with terms as generally determined by our board of directors and to be set forth in an award agreement. Among other terms and conditions, we may retain an option to repurchase the unvested restricted stock at any time following the holder’s termination of service.
Stock appreciation rights. Our 2013 Plan provides for the grant of SARs at a stated exercise price. The exercise value of a SAR is based upon the difference between the fair market value of our Class B common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares with respect to which the SAR is being exercised. Our board of directors will determine the vesting schedule applicable to each SAR. The maximum permitted term of SARs granted under our 2013 Plan is ten years from the date of grant.
Limited transferability. Unless otherwise determined by our board of directors, awards granted under our 2013 Plan generally may not be transferred or assigned in any manner other than by will or the laws of descent and distribution, except to the extent participants designate one or more beneficiaries on our approved form who may exercise or receive payment under an award after the participant’s death.
Change of control. In the event of a “change of control” (as defined in our 2013 Plan), each outstanding award will be treated as determined by our board of directors without a participant’s consent, including, without limitation, that (i) awards shall be converted, assumed, substituted for or replaced by the “successor company” (as defined in our 2013 Plan), (ii) awards will terminate upon or immediately prior to the change of control, (iii) awards will become vested and exercisable or payable, and all applicable restrictions or forfeiture provisions shall lapse, in whole or in part, as determined by our board of directors, upon or immediately prior the change of control, and, to the extent our board of directors determines, such awards will terminate upon or immediately prior to such change of control, (iv) awards will terminate upon or immediately prior to the change of control in exchange for a cash payment equal to the amount (if any) by which (x) the “acquisition price” (as defined in our 2013 Plan) multiplied by the number of shares of our Class B common stock subject to such outstanding awards (either to the extent then vested and exercisable, or subject to restrictions and/or forfeiture provisions, or whether or not then vested and exercisable, or subject to restrictions and/or forfeiture provisions, as determined by our board of directors in its sole discretion) exceeds (y) if applicable, the respective aggregate exercise, grant, or purchase price payable with respect to shares of our Class B common stock subject to such awards, or (v) any combination of the foregoing.
Awards will be considered converted, assumed, substituted for, or replaced by the successor company if following the change of control the award confers the right to purchase or receive, for each share of our Class B common stock subject to the award immediately prior to the change of control, the consideration (whether stock, cash, or other securities or property) received in the change of control by holders of our Class B common stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the change of control is not solely common stock of the successor company, our board of directors may, with the consent of the successor company, provide for the consideration to be received pursuant to the award, for each share of our Class B common stock subject thereto, to be solely common stock of the successor company substantially equal in fair market value to the per share consideration received by holders of Class B common stock in the change of control. The determination of such substantial equality of value of consideration shall be made by our board of directors, and its determination shall be conclusive and binding.
Adjustments. In the event, at any time or from time to time, of a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in our corporate or capital structure, proportional adjustments will be made to (i) the maximum number and kind of securities available for issuance under our 2013 Plan, (ii) the maximum number and kind of securities issuable as ISOs, and (iii) the number and kind of securities that are subject to any outstanding award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by our board of directors as to the terms of any of the foregoing adjustments will be conclusive and binding.
Amendment; termination. Our board of directors may amend or terminate our 2013 Plan at any time and may terminate any and all outstanding awards upon a dissolution or liquidation of us, provided that certain amendments will require stockholder approval or participant consent.
Sub-plans. In accordance with the terms of our 2013 Plan, the plan administrator established a sub-plan under our 2013 Plan for participants in France and Israel.
2021 Equity Incentive Plan
In May 2021, our board of directors and in , 2021, our stockholders approved our 2021 Plan as a successor to our 2013 Plan that will become effective on the date immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. The 2021 Plan authorizes the award of both ISOs, which are intended to qualify for tax treatment under Section 422 of the Internal Revenue Code, and NQSOs, as well for the award of RSAs, SARs, RSUs, and performance and stock bonus awards. Pursuant to the 2021 Plan, ISOs may be granted only to our employees. We may grant all other types of awards to our employees, directors, and consultants.
Shares reserved. We have initially reserved 35,281,596 shares of our Class A common stock, plus any reserved shares not issued or subject to outstanding grants under our 2011 Plan or the 2013 Plan on the effective date of the 2021 Plan, for issuance pursuant to awards granted under our 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase automatically on February 1 of each of 2022 through 2031 by the number of shares equal to five percent (5%) of the aggregate number of outstanding shares of all classes of our common stock (on an as-converted basis) as of the immediately preceding January 31, or a lesser number as may be determined by our compensation committee, or by our board of directors acting in place of our compensation committee.
In addition, the shares set forth below will again be available for issuance pursuant to awards granted under our 2021 Plan:
•shares subject to options or SARs granted under our 2021 Plan that cease to be subject to the option or SAR for any reason other than exercise of the option or SAR;
•shares subject to awards granted under our 2021 Plan that are subsequently forfeited or repurchased by us at the original issue price;
•shares subject to awards granted under our 2021 Plan that otherwise terminate without such shares being issued;
•shares subject to awards granted under our 2021 Plan that are surrendered pursuant to an “exchange program” (as defined in our 2021 Plan);
•shares subject to outstanding awards granted under our 2011 Plan or 2013 Plan that cease to be subject to such awards, by forfeiture or otherwise, after the effective date of the 2021 Plan;
•shares issued under our 2011 Plan or 2013 Plan before or after the effective date of our 2021 Plan pursuant to the exercise of stock options that are, after the effective date of our 2021 Plan, forfeited;
•shares issued under our 2011 Plan or 2013 Plan that are repurchased by us at the original purchase price or are otherwise forfeited; and
•shares that are subject to stock options or other awards under our 2011 Plan or 2013 Plan that are used to pay the exercise price of a stock option or withheld to satisfy the tax withholding obligations related to any award.
The shares of common stock underlying awards granted under our 2011 Plan or 2013 Plan that are forfeited, canceled, or otherwise returned to the 2021 Plan pursuant to the foregoing will become available for grant and issuance as Class A common stock under our 2021 Plan, regardless of their series or class under our 2011 Plan or 2013 Plan.
Administration. Our 2021 Plan will be administered by our compensation committee, or by our board of directors acting in place of our compensation committee. Subject to the terms and conditions of the 2021 Plan, the administrator will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our 2021 Plan as well as to determine the terms of such awards and prescribe, amend, and rescind the rules and regulations relating to the plan or any award granted thereunder. The 2021 Plan provides that the administrator may delegate its authority, including the authority to grant awards, to one or more executive officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our board of directors.
Options. The 2021 Plan provides for the grant of both ISOs intended to qualify under Section 422 of the Internal Revenue Code, and NQSOs to purchase shares of our Class A common stock at a stated exercise price. ISOs may only be granted to employees, including officers and directors who are also employees. The exercise price of stock options granted under the 2021 Plan must be at least equal to the fair market value of our Class A common stock on the date of grant. ISOs granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% the fair market value of our Class A common stock on the date of grant.
Options may vest based on service or achievement of performance conditions, as determined by the administrator. The administrator may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. In the event of a participant’s termination of service, an option is generally exercisable, to the extent vested, for a period of three months in the case of termination other than due to “cause” or the participant’s death or “disability” (as such terms are defined in our 2021 Plan), or 12 months in the case of termination due to the participant’s death or disability, or such longer or shorter period as the administrator may provide, but in any event no later than the expiration date of the stock option. Stock options generally terminate upon a participant’s termination of employment for cause. The maximum term of options granted under our 2021 Plan is ten years from the date of grant, except that the maximum permitted term of ISOs granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted stock awards. An RSA is an offer by us to grant or sell shares of our Class A common stock subject to restrictions, which may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by the administrator. Holders of RSAs, unlike holders of options, will have the right to vote and any dividends or distributions paid with respect to such shares be subject to the same vesting terms and other restrictions as the RSA and will be accrued and paid when the vesting terms on such shares lapse. Unless otherwise determined by the administrator, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us.
Stock appreciation rights. A SAR provides for a payment, in cash or shares of our Class A common stock (up to a specified maximum of shares, if determined by the administrator), to the participant based upon the difference between the fair market value of our Class A common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The exercise price of a SAR must be at least the fair market value of a share of our Class A common stock on the date of grant. SARs may vest based on service or achievement of performance conditions. No SAR may have a term that is longer than ten years from the date of grant.
Restricted stock units. RSUs represent the right to receive the value of shares of our Class A common stock at a specified date in the future and may be subject to vesting based on service or achievement of performance conditions. RSUs may be settled in cash, shares of our Class A common stock or a combination of both as soon as practicable following vesting or on a later date subject to the terms of the 2021 Plan. No RSU may have a term that is longer than ten years from the date of grant.
Performance awards. Performance awards granted pursuant to the 2021 Plan may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our Class A common stock that may be settled in cash, property or by issuance of those shares, subject to the satisfaction or achievement of specified performance conditions.
Stock bonus awards. A stock bonus award provides for payment in the form of cash, shares of our Class A common stock or a combination thereof, based on the fair market value of shares subject to such award as determined by the administrator. The awards may be granted as consideration for services already rendered, or at the discretion of the administrator, may be subject to vesting restrictions based on continued service or performance conditions.
Dividend equivalents rights. Dividend equivalent rights may be granted at the discretion of the administrator and represent the right to receive the value of dividends, if any, paid by us in respect of the number of shares of our Class A common stock underlying an award. Dividend equivalent rights will be subject to the same vesting or performance conditions as the underlying award and will be paid only when the underlying award becomes vested or may be deemed to have been reinvested by us. Dividend equivalent rights, if any, will be credited to participants in the form of additional whole shares.
Change of control. Our 2021 Plan provides that, in the event of a “corporate transaction” (as defined in our 2021 Plan), outstanding awards will be subject to the agreement evidencing the change of control, which need not treat all outstanding awards in an identical manner, and may include one or more of the following: (i) the continuation of the outstanding awards, (ii) the assumption of the outstanding awards by the surviving corporation or its parent, (iii) the substitution by the surviving corporation or its parent of new options or equity awards for the outstanding awards, (iv) the full or partial acceleration of exercisability or vesting or lapse of our right to repurchase or other terms of forfeiture and accelerated expiration of the award, (v) the settlement of the full value of the outstanding awards (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity with a fair market value equal to the required amount, as determined in accordance with the 2021 Plan, which payments may be deferred until the date or dates the award would have become exercisable or vested, or (vi) the cancellation of outstanding awards for no consideration. Notwithstanding the foregoing, upon a corporate transaction, the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable, to the extent applicable, and vested in full immediately prior to the consummation of the corporate transaction.
Adjustment. In the event of a change in the number of outstanding shares of our Class A common stock without consideration by reason of a stock dividend, extraordinary dividend or distribution, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off, or similar change in our capital structure, proportional adjustments will be made to (i) the number and class of shares reserved for issuance under our 2021 Plan, (ii) the exercise prices, number and class of shares subject to outstanding options or SARs, and (iii) the number and class of shares subject to other outstanding awards, subject to any required action by the board or our stockholders and compliance with applicable laws.
Exchange, repricing and buyout of awards. The administrator may, without prior stockholder approval, (i) reduce the exercise price of outstanding options or SARs without the consent of any participant and (ii) pay cash or issue new awards in exchange for the surrender and cancellation of any, or all, outstanding awards, subject to the consent of any affected participant to the extent required by the terms of the 2021 Plan.
Director compensation limits. No non-employee director may receive awards under our 2021 Plan with a grant date value that when combined with cash compensation received for his or her service as a director, exceed $750,000 in a calendar year or $1,000,000 in the calendar year of his or her initial services as a non-employee director on our board of directors.
Clawback; transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our board of directors or required by law during the term of service of the participant, to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under our 2021 Plan may generally not be transferred in any manner other than by will or by the laws of descent and distribution.
Sub-plans. Subject to the terms of the 2021 Plan, the plan administrator may establish a sub-plan under the 2021 Plan and/or modify the terms of awards granted to participants outside of the United States to comply with any laws or regulations applicable to any such jurisdiction.
Amendment; termination. Our board of directors or compensation committee may amend our 2021 Plan at any time, subject to stockholder approval as may be required. Our 2021 Plan will terminate ten years from the date our board of directors adopts the plan, unless it is terminated earlier by our board of directors. No termination or amendment of the 2021 Plan may adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws or as otherwise provided by the terms of the 2021 Plan.
2021 Employee Stock Purchase Plan
In May 2021, our board of directors and in 2021, our stockholders approved our 2021 ESPP that will become effective upon the date the registration statement of which this prospectus forms a part becomes effective to enable eligible employees to purchase shares of our Class A common stock with accumulated payroll deductions. Our 2021 ESPP is intended to qualify under Section 423 of the Internal Revenue Code, provided that the administrator may adopt sub-plans under our 2021 ESPP designed to be outside of the scope of Section 423 for participants who are non-U.S. residents.
We have initially reserved 7,056,319 shares of our Class A common stock for issuance and sale under our 2021 ESPP. The number of shares reserved for issuance and sale under our 2021 ESPP will increase automatically on February 1 for the first ten calendar years after the first “offering date” (as defined in our 2021 ESPP) by the number of shares equal to one percent (1%) of the aggregate number of outstanding shares of all classes of our common stock (on an as-converted basis) as of the immediately preceding January 31, or a lesser number as may be determined by our compensation committee, or by our board of directors acting in place of our compensation committee. Subject to stock splits, recapitalizations, or similar events, no more than 141,126,380 shares of our Class A common stock may be issued over the term of our 2021 ESPP.
Administration. Our 2021 ESPP will be administered by our compensation committee, or by our board of directors acting in place of our compensation committee, subject to the terms and conditions of our 2021 ESPP. Among other things, the administrator will have the authority to determine eligibility for participation in our 2021 ESPP, designate separate offerings under the plan, and construe, interpret, and apply the terms of the plan.
Eligibility. Employees eligible to participate in any offering pursuant to our 2021 ESPP generally include any employee that is employed by us or certain of our designated subsidiaries at the beginning of the offering period. However, the administrator may exclude employees who have been employed for less than such time period as specified by the administrator, are customarily employed for 20 hours or less per week, are customarily employed for five months or less in a calendar year or certain highly-compensated employees as determined in accordance with applicable tax laws. In addition, any employee who owns (or is deemed to own because of attribution rules) 5% or more of the total combined voting power or value of all classes of our capital stock, or the capital stock of one of our qualifying subsidiaries, or who will own such amount because of participation in our 2021 ESPP, will not be eligible to participate in our 2021 ESPP. The administrator may impose additional restrictions on eligibility from time to time.
Offerings. Under our 2021 ESPP, eligible employees will be offered the option to purchase shares of our Class A common stock at a discount over a series of offering periods, which may be consecutive or overlapping, through accumulated payroll deductions over the period. Each offering period may itself consist of one or more purchase periods. No offering period may be longer than 27 months. The purchase price for shares purchased under our 2021 ESPP during any given purchase period will be 85% of the lesser of the fair market value of our Class A common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of the purchase period.
No participant may purchase more than 3,500 shares of our Class A common stock during any one purchase period, and may not subscribe for more than $25,000 in fair market value of shares of our Class A common stock (determined as of the date the offering period commences) in any calendar year in which the offering is in effect. The administrator in its discretion, may set a lower maximum number of shares which may be purchased.
Adjustments upon recapitalization. If the number of outstanding shares of our Class A common stock is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in our capital structure without consideration, then the administrator will proportionately adjust the
number of shares and class of our common stock that are available under our 2021 ESPP, the purchase price and number of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Change of control. If we experience a “corporate transaction” (as defined in our 2021 ESPP), any offering period then in effect will be shortened and terminated on a final purchase date established by the administrator. The final purchase date will occur on or prior to the effective date of the corporate transaction, and our 2021 ESPP will terminate on the closing of the corporate transaction.
Transferability. Participants may generally not assign, transfer, pledge, or otherwise dispose of payroll deductions credited to his or her account, or any rights with regard to an election to purchase shares pursuant to our 2021 ESPP other than by will or the laws of descent or distribution.
Amendment; termination. Our board of directors or compensation committee may amend, suspend or terminate our 2021 ESPP at any time without stockholder consent, except as to the extent such amendment would increase the number of shares available for issuance under our 2021 ESPP, change the class or designation of employees eligible for participation in the plan or otherwise as required by law. If our 2021 ESPP is terminated, the administrator may elect to terminate all outstanding offering periods immediately, upon next purchase date (which may be sooner than originally scheduled) or upon the last day of such offering period. If any offering period is terminated prior to its scheduled completion, all amounts credited to participants which have not been used to purchase shares will be returned to participants as soon as administratively practicable. Unless earlier terminated, our 2021 ESPP will terminate upon the earlier to occur of the issuance of all shares of Class A common stock reserved for issuance under our 2021 ESPP, or the tenth anniversary of the effective date.
Welfare and Other Benefits
We provide health, dental, vision, life, and disability insurance benefits to our named executive officers, on the same terms and conditions as provided to all other eligible U.S. employees.
We also sponsor a broad-based 401(k) plan intended to provide eligible U.S. employees with an opportunity to defer eligible compensation up to certain annual limits. As a tax-qualified retirement plan, contributions (if any) made by us are deductible by us when made, and contributions and earnings on those amounts are generally not taxable to the employees until withdrawn or distributed from the 401(k) plan. Our named executive officers are eligible to participate in our employee benefit plans, including our 401(k) plan, on the same basis as our other employees.
Limitations on Liability and Indemnification Matters
Our restated certificate of incorporation that will become effective in connection with this offering contains provisions that will limit the liability of our directors for monetary damages to the fullest extent permitted by the DGCL. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
•any breach of the director’s duty of loyalty to us or our stockholders;
•any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
•unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
•any transaction from which the director derived an improper personal benefit.
Our restated certificate of incorporation and our restated bylaws that will become effective in connection with this offering will require us to indemnify our directors and officers to the maximum extent not prohibited by the DGCL and allow us to indemnify other employees and agents as set forth in the DGCL. Subject to certain limitations, our restated bylaws will also require us to advance expenses incurred by our directors and officers for the defense of any action for which indemnification is required or permitted, subject to very limited exceptions.
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors, officers, and certain of our other employees. These agreements, among other things, require us to indemnify our directors, officers and key employees for certain expenses, including attorneys’ fees, judgments, fines, and settlement amounts actually and reasonably incurred by such director, officer or key employee in any action or proceeding arising out of their service to us or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. Subject to certain limitations, our indemnification agreements also require us to advance expenses incurred by our directors, officers, and key employees for the defense of any action for which indemnification is required or permitted.
We believe that these provisions in our restated certificate of incorporation and indemnification agreements are necessary to attract and retain qualified persons such as directors, officers, and key employees. We also maintain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in our restated certificate of incorporation and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling us, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements discussed in the sections titled “Management” and “Executive Compensation,” the following is a description of each transaction since February 1, 2018 and each currently proposed transaction in which:
•we have been or are to be a participant;
•the amount involved exceeded or will exceed $120,000; and
•any of our directors, executive officers, or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.
Series F Redeemable Convertible Preferred Stock Financing
In October 2020, we sold an aggregate of 22,128,982 shares of our Series F redeemable convertible preferred stock at a purchase price of $12.0614 per share for an aggregate purchase price of $266,906,504. Each share of our Series F redeemable convertible preferred stock will convert automatically into one share of our Class B common stock upon the completion of this offering.
The purchasers of our Series F redeemable convertible preferred stock are entitled to specified registration rights. For additional information, see the section titled “Description of Capital Stock—Registration Rights.” The terms of these purchases were the same for all purchasers of our Series F redeemable convertible preferred stock. See the section titled “Principal Stockholders” for more details regarding the shares held by certain of these entities.
The following table summarizes the Series F redeemable convertible preferred stock purchased by an affiliate of a member of our board of directors and holder of more than 5% of our outstanding capital stock:
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Stockholder
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Shares of
Series F Redeemable Convertible Preferred Stock
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Total
Purchase
Price
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Entities affiliated with Tiger Global(1)
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12,434,708
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$
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149,979,987
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Entities affiliated with Third Point Ventures(2)
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2,199,199
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$
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26,525,419
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Entities affiliated with Insight Venture Partners(3)
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1,444,286
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$
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17,420,111
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Entities affiliated with Anchorage Capital(4)
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580,363
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$
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6,999,990
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__________________
(1)Consists of 12,434,708 shares purchased by Tiger Global Private Investment Partners XII, L.P., which together with its affiliates, collectively holds more than 5% of our outstanding capital stock.
(2)Third Point Ventures LLC holds more than 5% of our outstanding capital stock. Robert Schwartz, a member of our board of directors, is a Managing Partner of Third Point Ventures.
(3)Consists of (i) 591,448 shares purchased by Insight Venture Partners (Cayman) X, L.P., (ii) 114,410 shares purchased by Insight Venture Partners (Delaware) X, L.P., (iii) 17,161 shares purchased by Insight Venture Partners X (Co-Investors), L.P., and (iv) 721,267 shares purchased by Insight Venture Partners X, L.P., which together with their affiliates, collectively hold more than 5% of our outstanding capital stock. Teddie Wardi, a member of our board of directors, is a Managing Director of Insight Venture Partners.
(4)Anchorage Illiquid Opportunities Offshore Master V, L.P. holds more than 5% of our outstanding capital stock.
Series E Redeemable Convertible Preferred Stock Financing
In February 2020, we sold an aggregate of 31,405,183 shares of our Series E redeemable convertible preferred stock at a purchase price of $4.8617 per share for an aggregate purchase price of $152,682,578. Each share of our Series E redeemable convertible preferred stock will convert automatically into shares of our Class B common stock upon the completion of this offering based on a conversion rate set forth in our currently in effect amended and
restated certificate of incorporation, and discussed in greater detail in the section titled “Description of Capital Stock—Series E Redeemable Convertible Preferred Stock Conversion Price.”
The purchasers of our Series E redeemable convertible preferred stock are entitled to specified registration rights. For additional information, see the section titled “Description of Capital Stock—Registration Rights.” The terms of these purchases were the same for all purchasers of our Series E redeemable convertible preferred stock. See the section titled “Principal Stockholders” for more details regarding the shares held by certain of these entities.
The following table summarizes the Series E redeemable convertible preferred stock purchased by an affiliate of a member of our board of directors and holder of more than 5% of our outstanding capital stock:
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Stockholder
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Shares of
Series E Redeemable Convertible Preferred Stock
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Total
Purchase
Price
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Entities affiliated with Insight Venture Partners(1)
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12,341,362
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$
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60,000,000
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Entities affiliated with Third Point Ventures(2)
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3,188,100
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$
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15,499,586
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Entities affiliated with Tiger Global(3)
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1,977,543
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$
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9,614,221
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Entities affiliated with Anchorage Capital(4)
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1,503,766
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$
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7,310,859
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Entities affiliated with Redpoint Ventures(5)
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822,757
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$
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3,999,998
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Entities affiliated with Data Collective(6)
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51,422
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$
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249,998
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________________
(1)Consists of (i) 5,053,895 shares purchased by Insight Venture Partners (Cayman) X, L.P., (ii) 977,627 shares purchased by Insight Venture Partners (Delaware) X, L.P., and (iii) 146,644 shares purchased by Insight Venture Partners X (Co-Investors), L.P., which together with their affiliates, collectively hold more than 5% of our outstanding capital stock. Teddie Wardi, a member of our board of directors, is a Managing Director of Insight Venture Partners.
(2)Third Point Ventures holds more than 5% of our outstanding capital stock. Robert Schwartz, a member of our board of directors, is a Managing Partner of Third Point Ventures.
(3)Consists of 1,977,543 shares purchased by Tiger Global Private Investment Partners VII, L.P., which together with its affiliates, collectively holds more than 5% of our outstanding capital stock.
(4)Anchorage Illiquid Opportunities Offshore Master V, L.P. holds more than 5% of our outstanding capital stock.
(5)Consists of (i) 24,683 shares purchased by Redpoint Omega Associates II, LLC and (ii) 798,074 shares purchased by Redpoint Omega II, L.P., which together with their affiliates, collectively hold more than 5% of our outstanding capital stock.
(6)Consists of 51,422 shares purchased by Data Collective II, L.P.,which together with its affiliates, collectively holds more than 5% of our outstanding capital stock.
Series D Redeemable Convertible Preferred Stock Financing
Between December 2018 and May 2019, we sold an aggregate of 29,078,931 shares of our Series D redeemable convertible preferred stock at a purchase price of $3.2833 per share for an aggregate purchase price of $95,475,823. Each share of our Series D redeemable convertible preferred stock will convert automatically into one share of our Class B common stock upon the completion of this offering.
The purchasers of our Series D redeemable convertible preferred stock are entitled to specified registration rights. For additional information, see the section titled “Description of Capital Stock—Registration Rights.” The terms of these purchases were the same for all purchasers of our Series D redeemable convertible preferred stock. See the section titled “Principal Stockholders” for more details regarding the shares held by certain of these entities.
The following table summarizes the Series D redeemable convertible preferred stock purchased by an affiliate of a member of our board of directors and holder of more than 5% of our outstanding capital stock:
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Stockholder
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Shares of
Series D Redeemable Convertible Preferred Stock
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Total
Purchase
Price
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Entities affiliated with Insight Venture Partners(1)
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13,705,581
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$
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44,999,991
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Entities affiliated with Anchorage Capital(2)
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|
4,568,529
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$
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15,000,004
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Entities affiliated with Third Point Ventures(3)
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2,436,549
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$
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8,000,003
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Entities affiliated with Redpoint Ventures(4)
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2,255,583
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$
|
7,405,831
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Entities affiliated with Data Collective(5)
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1,544,163
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$
|
5,070,002
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________________
(1)Consists of (i) 5,612,553 shares purchased by Insight Venture Partners (Cayman) X, L.P., (ii) 1,085,694 shares purchased by Insight Venture Partners (Delaware) X, L.P., and (iii) 162,855 shares of purchased by Insight Venture Partners X (Co-Investors), L.P., which together with their affiliates, collectively hold more than 5% of our outstanding capital stock. Teddie Wardi, a member of our board of directors, is a Managing Director of Insight Venture Partners.
(2)Anchorage Illiquid Opportunities Offshore Master V, L.P. holds more than 5% of our outstanding capital stock.
(3)Third Point Ventures, holds more than 5% of our outstanding capital stock. Robert Schwartz, a member of our board of directors, is a Managing Partner of Third Point Ventures.
(4)Consists of (i) 67,668 shares purchased by Redpoint Omega Associates II, LLC and (ii) 2,187,915 shares purchased by Redpoint Omega II, L.P., which together with their affiliates, collectively hold more than 5% of our outstanding capital stock.
(5)Consists of 1,544,163 shares purchased by DCVC Opportunity Fund II, L.P., which together with its affiliates, collectively holds more than 5% of our outstanding capital stock.
Stock Transfers
June 2019
On June 17, 2019, entities affiliated with Insight Venture Partners, a holder of more than 5% of our capital stock:
•purchased an aggregate of 111,273 shares of our Class B common stock from Nicholas Warner, one of our executive officers, at a purchase price of $2.7908 per share, for an aggregate purchase price of $0.3 million; and
•purchased an aggregate of 788,487 shares of our Class B common stock from Tomer Weingarten, one of our executive officers, at a purchase price of $2.7908 per share, for an aggregate purchase price of $2.2 million.
December 2020
On December 31, 2020, entities affiliated with Insight Venture Partners, a holder of more than 5% of our capital stock purchased an aggregate of 503,007 shares of our outstanding common stock from Nicholas Warner, one of our executive officers, at a purchase price of $12.0614 per share, for an aggregate purchase price of $6.1 million.
Investors’ Rights Agreement
We are party to an amended and restated investors’ rights agreement, or our IRA, which provides, among other things, that certain holders of our capital stock, including entities affiliated with Anchorage Capital, Data Collective, Insight Venture Partners, Redpoint Ventures, Third Point Ventures, and Tiger Global, which each hold more than 5% of our outstanding capital stock, have the right to demand that we file a registration statement or request that their shares of our capital stock be included on a registration statement that we are otherwise filing. See the section titled “Description of Capital Stock—Registration Rights” for more information regarding these registration rights.
Voting Agreement
Pursuant to our Voting Agreement, certain holders of our capital stock have agreed to vote their shares on certain matters, including with respect to the election of members of our board of directors. See the section titled “Management—Board of Directors” for more information regarding the election of members of our board of directors pursuant to our Voting Agreement. Holders of our capital stock, including entities affiliated with Anchorage Capital, Data Collective, Insight Venture Partners, Redpoint Ventures, Third Point Ventures, and Tiger Global, which each hold more than 5% of our outstanding capital stock, as well as Tomer Weingarten, the chairman of our board of directors, president, and chief executive officer, and Daniel Scheinman, a member of our board of directors, are parties to our Voting Agreement. The Voting Agreement will terminate upon the completion of this offering.
Co-Founder Voting Agreement
Tomer Weingarten, our co-founder, the Chairman of our board of directors, President, and Chief Executive Officer and Almog Cohen, our co-founder and former director, have entered into a voting agreement, or the Co-Founder Voting Agreement, to be effective as of the closing of this offering. Pursuant to the Co-Founder Voting Agreement, Mr. Cohen granted Mr. Weingarten an irrevocable proxy to vote all shares of Class B common stock and other voting securities held by Mr. Cohen at Mr. Weingarten’s discretion on all matters to be voted upon by our stockholders. The Co-Founder Agreement covers an aggregate of of the voting power of our outstanding capital stock after this offering. The Co-Founder Voting Agreement will terminate upon the earliest to occur of: (i) the liquidation, dissolution, or winding up of our business operations, (ii) the death or Disability (as such term is defined in our restated certificate of incorporation), (iii) the explicit written consent of Mr. Weingarten, (iv) the date on which no shares of Class B common stock remain outstanding, and (v) such time as no shares of Class B common stock are held by Mr. Cohen.
Directed Share Program
At our request, the underwriters have reserved up to 5% of the shares of Class A common stock offered by this prospectus for sale at the initial public offering price through a directed share program available to senior executives and their friends and family members, directors, certain of our channel partners, and other individuals identified by our leadership.
Policies and Procedures for Related Party Transactions
Following the completion of this offering, our audit committee will have the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons and in which a related person has or will have a direct or indirect material interest.
Upon completion of this offering, our policy regarding transactions between us and related persons will provide that a related person is defined as a director, executive officer, nominee for director or greater than 5% beneficial owner of our securities, in each case since the beginning of the most recently completed year, and any of their immediate family members. Our audit committee charter that will be in effect upon completion of this offering will provide that our audit committee shall review and approve or disapprove any related party transactions.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 30, 2021, and as adjusted to reflect the sale of our Class A common stock in this offering assuming no exercise of the underwriters’ over-allotment option, for:
•each of our named executive officers;
•each of our directors that were members of our board of directors as of April 30, 2021;
•all of our directors and executive officers as a group as of April 30, 2021; and
•each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our Class A or Class B common stock.
We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable community property laws.
Applicable percentage ownership of our common stock before this offering is based on zero shares of our Class A common stock and 219,942,711 shares of our Class B common stock outstanding, in each case, as of April 30, 2021 and assumes the occurrence of the Capital Stock Conversion as of April 30, 2021 and the redesignation of our outstanding common stock as Class B common stock as if such redesignation had occurred on April 30, 2021. For purposes of the table below, we have assumed that shares of Class A common stock will be issued in this offering. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of Class B common stock subject to options held by that person or entity that are currently exercisable or that will become exercisable within 60 days of April 30, 2021. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner in the table below is c/o SentinelOne, Inc., 444 Castro Street, Suite 400, Mountain View, California 94041.
The table below does not reflect any shares of Class A common stock that may be purchased in this offering, including through our directed share program described in the section titled “Underwriters—Directed Share Program.”
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Shares
Beneficially Owned
Before this Offering
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% of Total Outstanding
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% Total Voting Power Before this Offering
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Shares
Beneficially Owned
After this Offering
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% of Total Outstanding
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% Total Voting Power After this Offering
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Class B
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Class A
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Class B
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Name of Beneficial Owner
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Shares
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%
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Shares
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%
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Shares
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%
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Named Executive Officers and Directors:
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Tomer Weingarten(1)
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8,671,915
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3.95
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%
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3.95
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%
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3.95
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%
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David Bernhardt
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—
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—
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—
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—
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Nicholas Warner(2)
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2,480,493
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1.13
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%
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1.13
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%
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1.13
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%
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Charlene T. Begley(3)
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4,125
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—
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*
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—
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Daniel Scheinman(4)
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1,423,149
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0.65
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%
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*
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0.65
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%
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Robert Schwartz(5)
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—
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—
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—
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—
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Teddie Wardi(6)
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—
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—
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—
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—
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All executive officers and directors as of April 30, 2021 as a group (9 persons)
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13,124,390
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5.92
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%
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5.92
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%
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5.92
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%
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Other 5% Stockholders:
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Entities affiliated with Insight Venture Partners(7)
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34,221,087
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15.73
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%
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15.73
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%
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15.73
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%
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Entities affiliated with Tiger Global(8)
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26,982,259
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12.40
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%
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12.40
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%
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12.40
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%
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Entities affiliated with Third Point Ventures(9)
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24,483,469
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11.25
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%
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11.25
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%
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11.25
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%
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Entities affiliated with Redpoint Ventures(10)
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17,458,982
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8.02
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%
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8.02
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%
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8.02
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%
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Entities affiliated with Data Collective(11)
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11,398,690
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5.24
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%
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5.24
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%
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5.24
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%
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Entities affiliated with Anchorage Capital(12)
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11,062,170
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5.08
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%
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5.08
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%
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5.08
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%
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________________
*Represents beneficial ownership of less than one percent of the shares of our common stock.
(1)Consists of (i) 6,267,306 shares of Class B common stock, (ii) 200,000 shares of Class B common stock held of record by Mr. Weingarten, as Trustee of the Tomer Weingarten 2021 Grantor Retained Annuity Trust dated April 29, 2021, (iii) 400,000 shares of Class B common stock held by a trust over whose trustee Mr. Weingarten can exercise remove and replace powers, and (iv) 1,804,609 shares underlying options to purchase Class B common stock that are exercisable within 60 days of April 30, 2021.
(2)Consists of (i) 507,283 shares of Class B common stock and (ii) 1,973,210 shares underlying options to purchase Class B common stock that are exercisable within 60 days of April 30, 2021.
(3)Consists of 4,125 shares underlying options to purchase Class B common stock that are exercisable within 60 days of April 30, 2021.
(4)Consists of 1,423,149 shares of Class B common stock held by the Dan and Zoe Scheinman Family Trust, Dated 2/23/01, or the Scheinman Trust. Daniel Scheinman is the trustee and a beneficiary of the Scheinman Trust and has sole voting and dispositive power over the shares held by the Scheinman Trust.
(5)Mr. Schwartz is the Managing Partner at Third Point Ventures, and does not have voting or investment power over the shares held by Third Point Ventures. Mr. Schwartz disclaims beneficial ownership over the shares of Class B common stock held by Third Point Ventures except to the extent of his pecuniary interest. See note (9) below for more information regarding Third Point Ventures.
(6)Mr. Wardi is a Managing Director at Insight Venture Management, LLC, the investment manager of Insight Partners (Cayman) XI, L.P., Insight Partners (Delaware) XI, L.P., Insight Partners (EU) XI, S.C.Sp., Insight Partners XI (Co-Investors) (B), L.P., Insight Partners XI (Co-Investors), L.P., Insight Partners XI, L.P., Insight Venture Partners X, L.P., Insight Venture Partners X (Co-Investors), L.P., Insight Venture Partners (Cayman) X, L.P. and Insight Venture Partners (Delaware) X, L.P., or Insight, and collectively, the Insight Entities, and does not have voting or investment power over the shares held by the Insight Entities. Mr. Wardi disclaims beneficial ownership of the Class B common stock held by the Insight Entities except to the extent of his pecuniary interest. See note (7) below for more information regarding Insight.
(7)Consists of (i) 1,329,872 shares of Class B common stock held of record by Insight Partners (Cayman) XI, L.P.; (ii) 169,801 shares of Class B common stock held of record by Insight Partners (Delaware) XI, L.P.; (iii) 157,732 shares of Class B common stock held of record by Insight Partners (EU) XI, S.C. Sp.; (iv) 27,860 shares of Class B common stock held of record by Insight Partners XI (Co-Investors)(B), L.P.; (v) 20,213 shares of Class B common stock held of record by Insight Partners XI (Co-Investors), L.P.; (vi) 1,213,884 shares of Class B common stock held of record by Insight Partners XI, L.P.; (vii) 12,818,328 shares of Class B common stock held of record by Insight Venture Partners (Cayman) X, L.P.; (viii) 2,479,581 shares of Class B common stock held of record by Insight Venture Partners (Delaware) X, L.P.; (ix) 371,937
shares of Class B common stock held of record by Insight Venture Partners X (Co-Investors), L.P.; and (x) 15,631,879 shares of Class B common stock held of record by Insight Venture Partners X, L.P. The general partner of Insight Partners (Cayman) XI, L.P., Insight Partners (Delaware) XI, L.P., Insight Partners XI (Co-Investors) (B), L.P., Insight Partners XI (Co-Investors), L.P. and Insight Partners XI, L.P. is Insight Associates XI, L.P. The general partner of Insight Associates XI, L.P. is Insight Associates XI, Ltd. The general partner of Insight Partners (EU) XI, S.C.Sp is Insight Associates (EU) XI, S.à.r.l. The general partner of Insight Venture Partners X, L.P., Insight Venture Partners X (Co-Investors), L.P., Insight Venture Partners (Cayman) X, L.P. and Insight Venture Partners (Delaware) X, L.P. is Insight Venture Associates X, L.P. The general partner of Insight Venture Associates X, L.P. is Insight Venture Associates X, Ltd. All of (i) Insight Venture Associates X, Ltd., (ii) Insight Associates XI, Ltd. and (iii) Insight Associates (EU) XI, S.à.r.l. are entirely owned by Insight Holdings Group, LLC. Each of Jeffrey L. Horing, Deven Parekh, Peter Sobiloff, Jeffrey Lieberman and Michael Triplett is a member of the board of managers of Insight Holdings Group, LLC. While the board of managers controls Insight Holdings Group, LLC, certain matters are decided solely by Jeffrey Horing, including the sale of Insight Holdings Group, LLC and the terms thereof and all decisions relating to compensation (other than in respect of the other owners of Insight Holdings Group, LLC), including carried interest. The foregoing is not an admission by Insight Associates XI, L.P., Insight Associates XI, Ltd., Insight Associates (EU) XI, S.à.r.l., Insight Venture Associates X, L.P., Insight Venture Associates X, Ltd., Jeffrey Horing or Insight Holdings Group, LLC that it is the beneficial owner of the shares held by Fund X or Fund XI. The address of each of the persons and entities named in this footnote is 1114 Avenue of the Americas, 36th Floor, New York, New York 10036.
(8)Consists of 26,986,239 shares of Class B common stock held by Tiger Global Private Investment Partners VII, L.P., Tiger Global Private Investment Partners XII, L.P. and other entities or persons affiliated with Tiger Global Management, LLC, or Tiger Global. Tiger Global is controlled by Chase Coleman and Scott Shleifer. The business address of each of these entities and the persons is 9 West 57th Street, 35th Floor, New York, New York 10019.
(9)Consists of 24,483,469 shares of Class B common stock directly held by Third Point Ventures LLC. Daniel S. Loeb is the Chief Executive Officer of Third Point and exercised sole voting and investment power over the shares held by Third Point Ventures LLC. The address of each of the persons and entities named in this footnote is 55 Hudson Yards, 51st Floor New York, New York 10001.
(10)Consists of (i) 523,768 shares of Class B common stock held by Redpoint Omega Associates II, LLC, and (ii) 16,935,214 shares of Class B common stock held by Redpoint Omega II, L.P. The sole general partner of Redpoint Omega II, L.P. is Redpoint Omega II, LLC. Voting and dispositive decisions with respect to the shares held by Redpoint Omega II, L.P. and Redpoint Omega Associates II, LLC are made by the managers of Redpoint Omega II, LLC and Redpoint Omega Associates II, LLC: W. Allen Beasley, Jeffrey D. Brody, Satish Dharmaraj, R. Thomas Dyal, a member of our board of directors, Timothy M. Haley, Christopher B. Moore, Scott C. Raney, John L. Walecka and Geoffrey Y. Yang. The address of each of the persons named in this footnote is 2969 Woodside Road, Woodside, California 94062.
(11)Consists of (i) 6,418,147 shares of Class B common stock held by Data Collective II, L.P., or DCVC II, and (ii) 4,980,543 shares of Class B common stock held by DCVC Opportunity Fund II, L.P., or DCVC Opportunity Fund II. The general partner of DCVC II is Data Collective II GP, LLC, or DCVC II GP, and the general partner of DCVC Opportunity Fund II is DCVC Opportunity Fund II GP, LLC, or DCVC Opportunity Fund II GP. Zachary Bogue and Matthew Ocko are the managing members of each of DCVC II GP and DCVC Opportunity Fund II GP and exercise voting and dispositive power over the shares held by DCVC II and DCVC Opportunity Fund II. Each of DCVC II GP, DCVC Opportunity Fund II GP, Zachary Bogue and Matthew Ocko disclaim beneficial ownership of the capital stock held by DCVC II and DCVC Opportunity Fund II, except to the extent of their respective pecuniary interest therein, if any. The address of the entities named in this footnote is 270 University Avenue, Palo Alto, California 94301.
(12)Consists of 11,062,170 shares of Class B common stock held by Anchorage Illiquid Opportunities Offshore Master V, L.P., or AIO V. AIO V is a Delaware limited partnership. Anchorage Capital Group, L.L.C., a Delaware limited liability company, or Capital Group, is the investment manager of AIO V and, in such capacity, exercises voting and investment power over the shares of Class B common stock held for the account of AIO V. Anchorage Advisors Management, L.L.C., or Management, is the sole managing member of Capital Group. Kevin M. Ulrich is the Chief Executive Officer of Capital Group and the senior managing member of Management. Each of AIO V, Capital Group, Management and Mr. Ulrich may be deemed the beneficial owner of these shares of Class B common stock for purposes of Rule 13d-3 under the Exchange Act. Each of Capital Group, Management and Mr. Ulrich disclaims beneficial ownership of the Class B common stock held by AIO V, except to the extent of any pecuniary interest therein. The address of each of the persons named in this footnote is 610 Broadway, 6th Floor, New York, New York 10012.
DESCRIPTION OF CAPITAL STOCK
General
The following description summarizes the most important terms of our capital stock, as they will be in effect following this offering. Because it is only a summary, it does not contain all the information that may be important to you. We expect to adopt a restated certificate of incorporation and restated bylaws that will become effective immediately prior to the completion of this offering, and this description summarizes provisions that are expected to be included in these documents. For a complete description, you should refer to our restated certificate of incorporation, restated bylaws, and our IRA, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law.
Upon the completion of this offering, our authorized capital stock will consist of 1,500,000,000 shares of our Class A common stock, $0.0001 par value per share, 300,000,000 shares of our Class B common stock, $0.0001 par value per share, and 50,000,000 shares of undesignated preferred stock, $0.0001 par value per share.
Assuming the occurrence of the Capital Stock Conversion, as of April 30, 2021, there were outstanding:
•zero shares of our Class A common stock;
•219,942,711 shares of our Class B common stock, held by 514 stockholders of record;
•49,719,846 shares of our Class B common stock issuable upon the exercise of stock options; and
•954,884 shares of our Class B common stock issuable upon the exercise of warrants to purchase shares of Class B common stock.
Class A Common Stock and Class B Common Stock
Dividend Rights
Subject to preferences that may apply to any shares of convertible preferred stock outstanding at the time, the holders of shares of our common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. See the section titled “Dividend Policy.”
Voting Rights
Holders of shares of our Class A common stock are entitled to one vote for each share of Class A common stock held on all matters submitted to a vote of stockholders and holders of our Class B common stock are entitled to 20 votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Following this offering, the holders of our outstanding Class B common stock will hold % of the voting power of our outstanding capital stock, with our directors, executive officers, and beneficial owners of 5% or greater of our outstanding capital stock and their respective affiliates holding % of the voting power in the aggregate. Holders of shares of our Class A common stock and Class B common stock vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless, otherwise required by Delaware law or our restated certificate of incorporation. Delaware law could require either holders of our Class A common stock or Class B common stock to vote separately as a single class in the following circumstances:
•if we were to seek to amend our restated certificate of incorporation to increase or decrease the par value of a class of our capital stock, then that class would be required to vote separately to approve the proposed amendment; and
•if we were to seek to amend our restated certificate of incorporation in a manner that alters or changes the powers, preferences, or special rights of a class of our capital stock in a manner that affected its holders adversely, then that class would be require to vote separately to approve the proposed amendment.
We have not provided for cumulative voting for the election of directors in our restated certificate of incorporation that will become effective immediately prior to the completion of this offering. Accordingly, holders of a majority of the shares of our common stock will be able to elect all of our directors.
No Preemptive or Similar Rights
Our common stock is not entitled to preemptive rights, and is not subject to redemption or sinking fund provisions.
Right to Receive Liquidation Distributions
Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
Conversion
Following the completion of this offering, each share of our Class B common stock will be convertible into one share of our Class A common stock at any time and will convert automatically upon certain transfers and upon the earlier of (i) the date specified by a vote of the holders of 66 2/3% of the then outstanding shares of Class B common stock, (ii) seven years from the date of this prospectus, (iii) the first date following the completion of this offering on which the number of shares of outstanding Class B common stock (including shares of Class B common stock subject to outstanding stock options) held by Tomer Weingarten, including certain permitted entities that Mr. Weingarten controls, is less than 25% of the number of shares of Class B common stock (including shares of Class B common stock subject to outstanding stock options) that Mr. Weingarten originally held as of the date of this prospectus, (iv) the date fixed by our board of directors, following the first date following the completion of this offering when Mr. Weingarten is no longer providing services to us as an officer, employee, consultant or member of our board of directors, (v) the date fixed by our board of directors following the date, if applicable, on which Mr. Weingarten is terminated for cause, as defined in our restated certificate of incorporation, and (vi) the date that is 12 months after the death or disability, as defined in our restated certificate of incorporation, of Mr. Weingarten.
Preferred Stock
Pursuant to the provisions of our currently in effect amended and restated certificate of incorporation, each currently outstanding share of Series A, Series B, Series C, Series D, and Series F redeemable convertible preferred stock will automatically be converted into one share of Class B common stock, and each share of Series E redeemable convertible preferred stock will automatically be converted into a number of shares of Class B common stock pursuant to the Series E Conversion Formula, effective upon the completion of this offering. Following this offering, no shares of redeemable convertible preferred stock will be outstanding.
Series E Redeemable Convertible Preferred Stock Conversion Price
Our currently in effect amended and restated certificate of incorporation provides for an adjustment to the conversion price of our Series E redeemable convertible preferred stock such that the Series E redeemable convertible preferred stock would convert into an increasing number of shares of Class B common stock each day the Series E redeemable convertible preferred stock remains outstanding for a maximum period of five years ending on February 7, 2025. The adjustment is set forth in the following formula: (1+(Y/4))(4*Z)), where Y=6.0% and Z = (A) a number of days calculated commencing from the date that a share of Series E redeemable convertible preferred stock is issued and outstanding, up to a maximum number of days ending on the fifth anniversary of the issuance date for each such share of Series E redeemable convertible preferred stock, divided by (B) 365, such formula, the Series E Conversion Formula. Following the conversion of the Series E redeemable convertible preferred stock to Class B common stock in connection with this offering, the shares of Class B common stock issuable upon conversion of the Series E redeemable convertible preferred stock shall not be subject to further adjustment. If the completion of this offering occurred on April 30, 2021, the 31,405,183 shares of Series E redeemable convertible preferred stock would have converted into 33,785,191 shares of Class B common stock. Assuming the completion of
this offering on June 30, 2021, the 31,405,183 shares of Series E redeemable convertible preferred stock would convert into 34,123,132 shares of our Class B common stock.
Following this offering, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue up to 50,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. The number of authorized shares of our 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 stock, without a separate vote of the holders of the preferred stock, irrespective of the provisions of Section 242(b)(2) of the DGCL, unless a separate vote of the holders of one or more series is required pursuant to the terms of any applicable certificate of designation. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in our control and might adversely affect the market price of our Class A common stock and the voting and other rights of the holders of our Class A common stock and Class B common stock. We have no current plan to issue any shares of preferred stock.
Options
As of April 30, 2021, we had outstanding options to purchase an aggregate of 49,719,846 shares of our Class B common stock, with a weighted-average exercise price of $3.72 per share. Subsequent to April 30, 2021, we granted options to purchase 759,131 shares of our Class B common stock under our 2013 Plan, with a weighted-average exercise price of $16.19 per share.
Warrants
As of April 30, 2021, we had granted warrants to purchase 954,884 shares of our Class B common stock, with an exercise price of $0.62 per share.
Registration Rights
Following the completion of this offering, certain holders of shares of our Class B common stock or their permitted transferees will be entitled to rights with respect to the registration of these shares under the Securities Act. These rights are provided under the terms of our IRA, which was entered into in connection with our redeemable convertible preferred stock financings, and include demand registration rights, Form S-3 registration rights and piggyback registration rights. In any registration made pursuant to our IRA, all fees, costs and expenses of underwritten registrations will be borne by us and all selling expenses, including estimated underwriting discounts, selling commissions and stock transfer taxes, will be borne by the holders of the shares being registered.
The registration rights terminate (i) five years following the completion of this offering or a direct listing (as defined in our IRA), (ii) upon a deemed liquidation event, as defined in the amended and restated investors’ rights agreement, or (iii) with respect to any particular stockholder who holds 1% or less of registrable securities (as defined in our IRA), at the time that such stockholder can sell all of its shares during any 90-day period pursuant to Rule 144 or another similar exemption under the Securities Act.
Demand Registration Rights
Following the completion of this offering (assuming that the completion of this offering occurs on April 30, 2021), holders of 179,239,257 shares of our Class B common stock will be entitled to demand registration rights if we are eligible to file a registration statement on Form S-3. Under the terms of our IRA, we will be required, upon the written request of holders of at least 30% of the shares that are entitled to registration rights under our IRA, to register, as soon as practicable, all or a portion of these shares for public resale, if the aggregate price to the public of
the shares offered is at least $10.0 million. We may postpone the filing of a registration statement once for up to 120 days in a 12-month period if our board of directors determines that the filing would be materially detrimental to us. We are not required to effect a demand registration under certain additional circumstances specified in our IRA, including at any time earlier than 180 days after the effective date of this offering.
Form S-3 Registration Rights
Following the completion of this offering (assuming that the completion of this offering occurs on April 30, 2021), holders of 179,239,257 shares of our Class B common stock will be entitled to Form S-3 registration rights. The holders representing at least 30% of the then-outstanding shares having registration rights can request that we register all or part of their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $5.0 million. The holders may only require us to effect at most two registration statements on Form S-3 in any 12-month period. We may postpone the filing of a registration statement on Form S-3 no more than once during any 12-month period, for a period of not more than 120 days if our board of directors determines that the filing would be materially detrimental to us.
Piggyback Registration Rights
If we register any of our securities for public sale (assuming that the completion of this offering occurs on April 30, 2021), holders of 179,239,257 shares of our Class B common stock having registration rights will have the right to include their shares in the registration statement. However, this right does not apply to a registration relating to employee benefit plans, a registration relating to an SEC Rule 145 transaction, 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 our common stock, or a registration in which the only common stock being registered is common stock issuable upon conversion of debt securities that are also being registered. The underwriters of any underwritten offering will have the right to limit the number of shares registered by these holders if they determine that marketing factors require limitation, in which case the number of shares to be registered will be apportioned pro rata among these holders, according to the total amount of securities entitled to be included by each holder. However, the number of shares to be registered by these holders cannot be reduced below 30% of the total shares covered by the registration statement, other than in the initial public offering.
Anti-Takeover Provisions
The provisions of the DGCL, our restated certificate of incorporation, and our restated bylaws following this offering could have the effect of delaying, deferring or discouraging another person from acquiring control of our company. These provisions, which are summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and encourage persons seeking to acquire control of SentinelOne to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Delaware Law
We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
•before the stockholder became interested, our board of directors approved either the business combination or the transaction, which resulted in the stockholder becoming an interested stockholder;
•upon consummation of the transaction, which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock
outstanding, shares owned by persons who are directors and also officers, and employee stock plans in some instances, but not the outstanding voting stock owned by the interested stockholder; or
•at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock, which is not owned by the interested stockholder.
Section 203 defines a business combination to include:
•any merger or consolidation involving the corporation and the interested stockholder;
•any sale, transfer, lease, pledge, or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
•subject to exceptions, any transaction that results in the issuance of transfer by the corporation of any stock of the corporation to the interested stockholder;
•subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and
•the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits provided by or through the corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Restated Certificate of Incorporation and Restated Bylaw Provisions
Our restated certificate of incorporation and our restated bylaws will include a number of provisions that may have the effect of deterring hostile takeovers, or delaying or preventing changes in control of our management team or changes in our board of directors or our governance or policy, including the following:
•Dual Class Common Stock. As described above in the section titled “—Common Stock—Voting Rights,” our restated certificate of incorporation will provide for a dual class common stock structure pursuant to which holders of our Class B common stock will have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets. Current investors, executives, and employees will have the ability to exercise significant influence over those matters.
•Board of Directors Vacancies. Our restated certificate of incorporation and our restated bylaws and will authorize generally only our board of directors to fill vacant directorships resulting from any cause or created by the expansion of our board of directors. In addition, the number of directors constituting our board of directors may be set only by resolution adopted by a majority vote of our entire board of directors. These provisions prevent a stockholder from increasing the size of our board of directors and gaining control of our board of directors by filling the resulting vacancies with its own nominees.
•Classified Board. Our restated certificate of incorporation and our restated bylaws will provide that our board of directors is classified into three classes of directors. The existence of a classified board of directors could delay a successful tender offeror from obtaining majority control of our board of directors, and the prospect of that delay might deter a potential offeror. For additional information, see the section titled “Management—Corporate Governance—Classified Board of Directors.”
•Directors Removed Only for Cause. Our restated certificate of incorporation will provide that stockholders may remove directors only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding capital stock.
•Supermajority Requirements for Amendments of Our Restated Certificate of Incorporation and Restated Bylaws. Our restated certificate of incorporation will further provide that the affirmative vote of holders of at least two-thirds of the voting power of all of the then outstanding shares of capital stock will be required to amend certain provisions of our restated certificate of incorporation, including provisions relating to the classified board, the size of our board of directors, removal of directors, special meetings, actions by written consent and designation of our preferred stock. In addition, the affirmative vote of holders of two-thirds (2/3) of the voting power of each of our Class A common stock and Class B common stock, voting separately by class, will be required to amend the provisions of our restated certificate of incorporation relating to the terms of our Class A or Class B common stock. The affirmative vote of holders of at least two-thirds (2/3) of the voting power of all of the then outstanding shares of capital stock will be required to amend or repeal our restated bylaws, although our restated bylaws may be amended by a simple majority vote of our board of directors. Additionally, in the case of any proposed adoption, amendment, or repeal of any provisions of the restated bylaws that is approved by our board of directors and submitted to the stockholders for adoption, if two-thirds of our board of directors has approved such adoption, amendment, or repeal of any provisions of our restated bylaws, then only the affirmative vote of a majority of the voting power of all of the then outstanding shares of capital stock shall be required to adopt, amend, or repeal any provision of our restated bylaws.
•Stockholder Action; Special Meetings of Stockholders. Our restated certificate of incorporation will provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, holders of our capital stock would not be able to amend our restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our restated bylaws. Our restated certificate of incorporation and our restated bylaws will provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chairman of our board of directors or our chief executive officer, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders to take any action, including the removal of directors.
•Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our restated bylaws will provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. Our restated bylaws also will specify certain requirements regarding the form and content of a stockholder’s notice. These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
•No Cumulative Voting. The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our restated certificate of incorporation and restated bylaws will not provide for cumulative voting.
•Issuance of Undesignated Preferred Stock. We anticipate that after the filing of our restated certificate of incorporation, our board of directors will have the authority, without further action by the stockholders, to issue up to 50,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock enables our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise.
•Choice of Forum. In addition, our restated certificate of incorporation will provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for any
derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation or our restated bylaws; any action asserting a claim against us that is governed by the internal affairs doctrine; or any to interpret, apply, enforce, or determine the validity of the restated certificate of incorporation or restated bylaws. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. Our restated certificate of incorporation will also provide that the federal district courts of the United States will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or the Federal Forum Provision. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court which recently found that such provisions are facially valid under Delaware law or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. In addition, the Federal Forum Provision applies, to the fullest extent permitted by law, to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder. Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
Transfer Agent and Registrar
Upon the completion of this offering, the transfer agent and registrar for our Class A common stock and Class B common stock will be Computershare Trust Company, N.A. The transfer agent’s address is 150 Royall Street, Canton, Massachusetts 02021.
Exchange Listing
We have applied to list our Class A common stock on the NYSE under the symbol “S.”
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our Class A common stock, and we cannot predict the effect, if any, that market sales of shares of our Class A common stock or the availability of shares of our Class A common stock for sale will have on the market price of our Class A common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of our Class A common stock, including shares issued upon exercise of outstanding stock options, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
Upon the completion of this offering, based on the 219,942,711 shares of our capital stock outstanding as of April 30, 2021, we will have a total of shares of our Class A common stock outstanding and shares of our Class B common stock outstanding. Of these outstanding shares, all of the shares of Class A common stock sold in this offering will be freely tradable, except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act, only would be able to be sold in compliance with the Rule 144 limitations described below.
The remaining outstanding shares of our Class A common stock and Class B common stock will be deemed “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which rules are summarized below.
As a result of the lock-up and market standoff agreements described below and the provisions of our IRA described in the section titled “Description of Capital Stock—Registration Rights,” and subject to the provisions of Rule 144 or Rule 701, shares of our common stock will be available for sale in the public market as follows:
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Earliest Date Available for Sale in the Public Market
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Number of Shares of Class A Common Stock
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The 91st day following the date of this prospectus, or the “first release window.”
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Up to shares of our Class A common stock and other securities directly or indirectly convertible into or exchangable or exercisable for our Class A Common Stock, including (i) shares held by our current and former employees (excluding current executive officers, current employees with the title of senior vice president or above, and current directors) (ii) shares held by our current directors and our current executive officers, (iiii) shares held by certain of our senior employees (title of senior vice president or above), and (iv) our other security holders, provided, that in the case of (ii), (iii), and (iv), such release will only occur if the closing price of our Class A common stock is at least 30% greater than the initial public offering price per share set forth on the cover page of our final prospectus for at least ten of the 15 trading days immediately preceding the first release window.
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The second trading day immediately following our public release of earnings for the third quarter of our fiscal year ending January 31, 2022 following the most recent period for which financial statements are included in this prospectus.
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All remaining shares held by our stockholders not previously eligible for sale, subject to volume limitations applicable to “affiliates” under Rule 144 as described below.
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Lock-Up and Market Standoff Agreements
We anticipate that we and each of our directors, our executive officers and the holders of a substantial majority of all of our capital stock and securities convertible into our capital stock will enter into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, may not, without the prior written consent of Morgan Stanley & Co. LLC and Goldman Sachs &
Co. LLC, or their representatives, during the period ending on the second trading day immediately following our public release of earnings for the third quarter of our fiscal year ending January 31, 2022:
(i)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 our Class A common stock or any securities convertible into or exercisable or exchangeable for our Class A common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers and stockholders in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), provided, however, that such shares held by Tomer Weingarten, our chief executive officer, may be pledged in bona fide transactions that are disclosed in writing to the representatives five business days prior to their consummation;
(ii)enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or such other securities, in cash or otherwise; or
(iii)make any demand for or exercise any right with respect to the registration of any shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock.
In the case of (i) and (ii) above, the lock-up party acknowledges and agrees that the lock-up party is precluded from engaging in any hedging or other transaction designed or intended, or which could reasonably be expected to lead to or result in, a sale or disposition of any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock, even if any such sale or disposition transaction or transactions would be made or executed by or on behalf of someone other than the lock-up party.
These agreements are described in the section titled “Underwriters.”
In addition, our executive officers, directors and holders of a substantial majority of all of our capital stock and securities convertible into or exchangeable for our capital stock have entered into market standoff agreements with us under which they have agreed that, subject to certain exceptions, for a period of 180 days after the date of this prospectus, they will not, without our prior written consent, dispose of or hedge any shares or any securities convertible into or exchangeable for shares of our common stock.
Notwithstanding the foregoing,
(A)up to 15% of the shares of our outstanding Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock held by our current or former employees (but excluding current executive officers, current employees with titles of senior vice president and above, and our current directors), may be sold beginning on the 91st day following the date of this prospectus; and
(B)up to 15% of the shares of our outstanding Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock held by our current executive officers, our current employees with titles of senior vice president and above, our current directors and our other security holders, may be sold beginning on the 91st day following the date of this prospectus, provided that the closing price of our Class A common stock on the NYSE is at least 30% greater than the initial public offering price per share set forth on the cover page of our final prospectus for at least ten of the 15 trading days immediately preceding this first release window.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed
to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up and market standoff agreements described above, within any three-month period, a number of shares that does not exceed the greater of:
•1% of the number of shares of our Class A common stock then outstanding, which will equal approximately shares immediately after this offering; or
•the average weekly trading volume of our Class A common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of SentinelOne during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of SentinelOne to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.
Stock Options
As soon as practicable after the completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act covering all of the shares of our Class B common stock subject to outstanding options and the shares of our Class A common stock reserved for issuance under our equity incentive plans. In addition, we intend to file a registration statement on Form S-8 or such other form as may be required under the Securities Act for the resale of shares of our common stock issued upon the exercise of options that were not granted under Rule 701. We expect to file this registration statement as soon as permitted under the Securities Act. However, the shares registered on Form S-8 may be subject to the volume limitations and the manner of sale, notice and public information requirements of Rule 144 and will not be eligible for resale until expiration of the lock-up and market standoff agreements to which they are subject.
Registration Rights
We have granted demand, piggyback and Form S-3 registration rights to certain of our stockholders to sell our common stock. Registration of the sale of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. For a further description of these rights, see the section titled “Description of Capital Stock—Registration Rights.”
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK
The following summary describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our Class A common stock acquired in this offering by Non-U.S. Holders (as defined below). This discussion does not address all aspects of U.S. federal income taxes, does not discuss the potential application of the alternative minimum tax or the Medicare contribution tax on net investment income, and does not deal with state or local taxes, U.S. federal gift or estate tax laws (except to the limited extent provided below), or any non-U.S. tax consequences that may be relevant to Non-U.S. Holders in light of their particular circumstances.
Special rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under the Internal Revenue Code, such as:
•insurance companies, banks, and other financial institutions;
•tax-exempt organizations (including private foundations) and tax-qualified retirement plans;
•persons required for U.S. federal income tax purposes to conform the timing of income accruals to their financial statements under Section 451(b) of the Internal Revenue Code;
•“qualified foreign pension funds” as defined in Section 897(l)(2) of the Internal Revenue Code and entities all of the interests of which are held by qualified foreign pension funds;
•persons subject to special tax accounting rules as a result of any item of gross income with respect to our Class A common stock being taken into account in an applicable financial statement;
•non-U.S. governments and international organizations;
•broker-dealers and traders in securities;
•U.S. expatriates and certain former citizens or long-term residents of the United States;
•persons that own, or are deemed to own, more than 5% of our Class A common stock;
•“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;
•persons that hold our Class A common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security,” or integrated investment or other risk reduction strategy;
•persons who do not hold our Class A common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code (generally, for investment purposes); and
•partnerships and other pass-through entities, and investors in such pass-through entities (regardless of their places of organization or formation).
Such Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local, and other tax consequences that may be relevant to them.
Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code, Treasury regulations, rulings, and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked, or modified, possibly retroactively, and are subject to differing interpretations which could result in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the Internal Revenue Service, or IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions or that the IRS will not take a contrary position regarding the tax consequences described herein, or that any such contrary position would not be sustained by a court.
PERSONS CONSIDERING THE PURCHASE OF OUR CLASS A COMMON STOCK PURSUANT TO THIS OFFERING SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF OUR CLASS A COMMON STOCK IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION, INCLUDING ANY STATE, LOCAL, OR NON-U.S. TAX CONSEQUENCES OR ANY U.S. FEDERAL NON-INCOME TAX CONSEQUENCES, AND THE POSSIBLE APPLICATION OF TAX TREATIES.
For the purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of Class A common stock that is not a U.S. Holder or a partnership for U.S. federal income tax purposes. A “U.S. Holder” means a beneficial owner of our Class A common stock that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, (2) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes), created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or (4) a trust if it (i) is subject to the primary supervision of a court within the United States and one or more United States persons (within the meaning of Section 7701(a)(30) of the Internal Revenue Code) have the authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
If you are an individual non-U.S. citizen, you may be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. Generally, for this purpose, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year are counted.
Resident aliens are generally subject to U.S. federal income tax as if they were U.S. citizens. Individuals who are uncertain of their status as resident or nonresident aliens for U.S. federal income tax purposes are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership or disposition of our Class A common stock.
Distributions
We do not anticipate paying any dividends on our capital stock in the foreseeable future. If we do make distributions on our Class A common stock, however, such distributions made to a Non-U.S. Holder of our Class A common stock will constitute dividends for U.S. tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a Non-U.S. Holder’s adjusted tax basis in our Class A common stock. Any remaining excess will be treated as gain realized on the sale or exchange of our Class A common stock as described below under “—Gain on Disposition of Our Class A Common Stock.”
Any distribution on our Class A common stock that is treated as a dividend paid to a Non-U.S. Holder that is not effectively connected with the holder’s conduct of a trade or business in the United States will generally be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and the Non-U.S. Holder’s country of residence. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to provide the applicable withholding agent with a properly executed IRS Form W-8BEN, IRS Form W-8BEN-E, or other appropriate form, certifying the Non-U.S. Holder’s entitlement to benefits under that treaty. Such form must be provided prior to the payment of dividends and must be updated periodically. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to such agent. The holder’s agent will then be required to provide certification to the applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.
We generally are not required to withhold tax on dividends paid to a Non-U.S. Holder that are effectively connected with the holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the holder maintains in the United States) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to the applicable withholding agent. In general, such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates applicable to U.S. persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional “branch profits tax,” which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder’s effectively connected earnings and profits, subject to certain adjustments.
See also the section below titled “—Foreign Accounts” for additional withholding rules that may apply to dividends paid to certain foreign financial institutions or non-financial foreign entities.
Gain on Disposition of Our Class A Common Stock
Subject to the discussions below under the sections titled “—Backup Withholding and Information Reporting” and “—Foreign Accounts,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain realized on a sale or other disposition of our Class A common stock unless (1) the gain is effectively connected with a trade or business of the holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that the holder maintains in the United States), (2) the Non-U.S. Holder is a nonresident alien individual and is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (3) we are or have been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Internal Revenue Code at any time within the shorter of the five-year period preceding such disposition or the holder’s holding period in the Class A common stock.
If you are a Non-U.S. Holder, gain described in (1) above will be subject to tax on the net gain derived from the sale at the regular U.S. federal income tax rates applicable to U.S. persons. If you are a corporate Non-U.S. Holder, gain described in (1) above may also be subject to the additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. If you are an individual Non-U.S. Holder described in (2) above, you will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by certain U.S. source capital losses (even though you are not considered a resident of the United States), provided you have timely filed U.S. federal income tax returns with respect to such losses. With respect to (3) above, in general, we would be a United States real property holding corporation if United States real property interests (as defined in the Internal Revenue Code and the Treasury Regulations) comprised (by fair market value) at least half of our assets. We believe that we are not, and do not anticipate becoming, a United States real property holding corporation. However, there can be no assurance that we will not become a United States real property holding corporation in the future. Even if we are treated as a United States real property holding corporation, gain realized by a Non-U.S. Holder on a disposition of our Class A common stock will not be subject to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly, and constructively, no more than five percent of our Class A common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the holder’s holding period and (2) our Class A common stock is regularly traded on an established securities market for purposes of the relevant rules. There can be no assurance that our Class A common stock will qualify as regularly traded on an established securities market for this purpose.
U.S. Federal Estate Tax
The estates of nonresident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S. corporation, our Class A common stock will be U.S. situs property and, therefore, will be included in the taxable estate of a nonresident alien decedent, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise. The terms “resident” and “nonresident” are defined differently for U.S. federal estate tax purposes than for U.S. federal income tax purposes. Investors are urged to consult their own tax advisors regarding the U.S. federal estate tax consequences of the ownership or disposition of our Class A common stock.
Backup Withholding and Information Reporting
Generally, we or an applicable withholding agent must report information to the IRS with respect to any dividends we pay on our Class A common stock, including the amount of any such dividends, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder to whom any such dividends are paid. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.
Dividends paid by us (or our paying agents) to a Non-U.S. Holder may also be subject to U.S. backup withholding. U.S. backup withholding generally will not apply to a Non-U.S. Holder who provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise establishes an exemption, provided that the applicable withholding agent does not have actual knowledge or reason to know the holder is a U.S. person.
Under current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the proceeds of a disposition of our Class A common stock effected by or through a U.S. office of any broker, U.S. or non-U.S., unless the Non-U.S. Holder provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise meets documentary evidence requirements for establishing non-U.S. person status or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. Information reporting and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge, or reason to know, that the holder is, in fact, a U.S. person. For information reporting purposes only, certain brokers with substantial U.S. ownership or operations will generally be treated in a manner similar to U.S. brokers.
Backup withholding is not an additional tax. If backup withholding is applied to you, you should consult with your own tax advisor to determine whether you are able to obtain a tax refund or credit of the overpaid amount.
Foreign Accounts
In addition, U.S. federal withholding taxes may apply under the Foreign Account Tax Compliance Act, or FATCA, on certain types of payments, including dividends on our Class A common stock, made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on our Class A common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Internal Revenue Code), unless (1) the foreign financial institution agrees to undertake certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Internal Revenue Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. The 30% federal withholding tax described in this paragraph is not generally subject to reduction under income tax treaties with the United States. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Internal Revenue Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under previously finalized Treasury Regulations and administrative guidance, withholding under FATCA generally also would apply to payments of gross proceeds from the sale or other disposition of Class A common stock, but proposed Treasury Regulations provide that no withholding will apply with respect to payments of gross proceeds with respect to the disposition of our Class A common stock. The preamble to the proposed regulations specifies that taxpayers are permitted to rely on such proposed Treasury Regulations pending finalization.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our Class A common stock.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF OUR CLASS A COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS SUCH AS ESTATE AND GIFT TAX, AND THE POSSIBLE APPLICATION OF TAX TREATIES.
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 Goldman Sachs & Co. LLC are acting as representatives, will severally agree to purchase, and we will agree to sell to them the number of shares of Class A common stock indicated below:
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Name
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Number of Shares
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Morgan Stanley & Co. LLC
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Goldman Sachs & Co. LLC
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BofA Securities, Inc.
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Barclays Capital Inc.
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Wells Fargo Securities, LLC
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UBS Securities LLC
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Jefferies LLC
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Deutsche Bank Securities Inc.
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Piper Sandler & Co.
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BTIG, LLC
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Cowen and Company, LLC
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Needham & Company, LLC
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Loop Capital Markets LLC
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Drexel Hamilton LLC
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R. Seelaus & Co., LLC
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Total
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The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of Class A common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement will provide that the obligations of the several underwriters to pay for and accept delivery of the shares of Class A 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 Class A 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 Class A common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers. After the initial offering of the shares of Class A common stock, the offering price and other selling terms may from time to time be varied by the representatives.
We have granted to the underwriters an over-allotment option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares of Class A 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 Class A 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 Class A common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of Class A 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 and full
exercise of the underwriters’ over-allotment option to purchase up to an additional shares of Class A common stock.
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Total
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Per
Share
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No Exercise
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Full Exercise
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Public offering price
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$
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$
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$
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Underwriting discounts and commissions to be paid by us
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $ . We have agreed to reimburse the underwriters for expense relating to clearance of this offering with the Financial Industry Regulatory Authority up to $ . The underwriters have agreed to reimburse us upon closing of this offering for certain expenses incurred by us in connection with this offering in an amount up to $ .
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of Class A common stock offered by them.
We have applied to list our Class A common stock on the NYSE under the trading symbol “S.” The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.
We anticipate that we and each of our directors, our executive officers and the holders of a substantial majority of all of our capital stock and securities convertible into our capital stock will enter into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, may not, without the prior written consent of Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC, during the period ending on the second trading day immediately following our public release of earnings for the third quarter of our fiscal year ending January 31, 2022:
(i)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 our common stock or any securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers and stockholders in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), provided, however, that such shares held by Tomer Weingarten, our chief executive officer, may be pledged in bona fide transactions that are disclosed in writing to the representatives five business days prior to their consummation;
(ii)enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or such other securities, in cash or otherwise; or
(iii)make any demand for or exercise any right with respect to the registration of any shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock.
In the case of (i) and (ii) above, the lock-up party acknowledges and agrees that the lock-up party is precluded from engaging in any hedging or other transaction designed or intended, or which could reasonably be expected to lead to or result in, a sale or disposition of any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock, even if any such sale or disposition transaction or transactions would be made or executed by or on behalf of someone other than the lock-up party.
Notwithstanding the foregoing,
(A)up to 15% of the shares of our outstanding Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock held by our current or former employees (but excluding current executive officers, current employees with titles of senior vice president and above, and our current directors), may be sold on the 91st day following the date of this prospectus; and
(B)up to 15% of the shares of our outstanding Class A common stock and securities directly or indirectly convertible into or exchangeable or exercisable for our Class A common stock held by our current executive officers, our current employees with titles of senior vice president and above, our current directors and our other security holders, may be sold beginning on the 91st day following the date of this prospectus, provided that the closing price of our Class A common stock on the NYSE is at least 30% greater than the initial public offering price per share set forth on the cover page of our final prospectus for at least ten of the 15 trading days immediately preceding this first release window.
The restrictions described in (i)–(iii) above are subject to certain exceptions including the following:
a.transactions relating to shares of our Class A common stock or other securities acquired in this offering or in open market transactions after the completion of this offering, provided that no public announcement or filing under Section 16(a) of the Exchange Act or any other public filing or disclosure reporting a reduction in beneficial ownership of shares of our Class A common stock, shall be required or shall be voluntarily made during the restricted period under the lock-up agreements in connection with subsequent sales of our Class A common stock or other securities acquired either in this offering or in such open market transactions;
b.transfers of shares of our Class A common stock or any security convertible into or exercisable or exchangeable for our Class A common stock (i) as a bona fide gift, or to a charitable organization or educational institution or (ii) for bona fide estate planning purposes, in each case, in a transfer not involving a disposition for value;
c.transfers or dispositions of shares of our Class A common stock or any security convertible into or exercisable or exchangeable for our Class A common stock to (i) any member of the immediate family of the lock-up party or any trust for the direct or indirect benefit of the lock-up party or the immediate family of the lock-up party, or if the lock-up party is a trust, to any beneficiary (including such beneficiary’s estate), and (ii) in a transaction not involving a disposition for value;
d.transfers or dispositions of shares of our Class A common stock or other securities convertible into or exercisable or exchangeable for our Class A common stock to any corporation, partnership, limited liability company or other entity all of the beneficial ownership interests of which are held by the lock-up party or the immediate family of the lock-up party in a transaction not involving a disposition for value;
e.transfers or dispositions of shares of our Class A common stock or any security convertible into or exercisable or exchangeable for our Class A common stock (i) by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of the lock-up party upon the death of the lock-up party, or (ii) by operation of law pursuant to orders of a court or regulatory agency, in connection with a negotiated divorce settlement or pursuant to a qualified domestic relations order;
f.if the lock-up party is a corporation, partnership, limited liability company, trust or other entity, (x) transfers or dispositions of shares of our Class A common stock or other securities convertible into or exercisable or exchangeable for our Class A common stock to another corporation, member, managers, partnership, limited liability company, trust or other entity (or in each case its nominee or custodian) that is a direct or indirect affiliate (as defined under Rule 12b-2 of the Exchange Act) of the lock-up party, or to an investment fund or other entity that controls or manages, or is under common control with, the lock-up party or affiliates of the lock-up party, or (y) distributions of shares of our Class A common stock or any security convertible into or exercisable or exchangeable for our Class A common stock to partners,
members, managers, stockholders, beneficiaries or other equity holders of the lock-up party (or in each case its nominee or custodian);
g.transfers or dispositions of shares of our Class A common stock or other securities to us in connection with the conversion of any convertible security into, the vesting or settlement of restricted stock units or the exercise of any option or warrant for, shares of Class A common stock (including by way of “net” or “cashless” exercise solely to cover withholding tax obligations in connection with such exercise or transfer to us for the payment of taxes as a result of such vesting, settlement or exercise); provided that (i) any such shares of our Class A common stock received by the lock-up party shall be subject to the terms of the lock-up agreement, (ii) except as set forth in (iii), no public announcement or filing under Section 16(a) of the Exchange Act, or any other public filing or disclosure reporting a reduction in beneficial ownership of shares of our Class A common stock, shall be voluntarily made during the restricted period and (iii) to the extent a filing under Section 16(a) of the Exchange Act is required during the restricted period as a result of such transfers or dispositions pursuant to this clause (g), it shall clearly indicate that the filing relates to the circumstances described in this clause (g);
h.the establishment of a trading plan on behalf of our stockholders, officers or directors pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of our Class A common stock, provided that (i) such plan does not provide for the transfer of our Class A common stock during the restricted period under the lock-up agreement 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 lock-up party or us regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of our Class A common stock may be made under such plan during the restricted period;
i.transfers of shares of our Class A common stock or any securities convertible into or exercisable or exchangeable for our Class A common stock to us pursuant to arrangements under which we have the option to repurchase such shares of our Class A common stock or any security convertible into or exercisable or exchangeable for our Class A common stock or a right of first refusal with respect to such securities;
j.in connection with (i) the conversion or reclassification of the outstanding preferred stock or other classes of our capital stock into shares of our Class B common stock, in connection with the consummation of this offering and (ii) the conversion of our Class B common stock to Class A common stock, in each case, in accordance with our then in effect restated certificate of incorporation, provided, that, any such shares of common stock received upon such conversion or reclassification shall remain subject to the provisions of the lock-up agreement;
k.(i) transfers of shares of our Class A common stock or any securities convertible into or exercisable or exchangeable for our Class A 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, made to all holders of our capital stock involving a Change of Control (as defined below) and (ii) entry into any lock-up, voting or similar agreement pursuant to which the lock-up party may agree to transfer, sell, tender or otherwise dispose of shares of our Class A common stock or such other securities in connection with a transaction described in (i) above; provided, that, in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the shares of our Class A common stock or any securities convertible into or exercisable or exchangeable for our Class A common stock beneficially owned by the lock-up party shall remain subject to the restrictions contained in the lock-up agreement. For purposes of this clause (k), For purposes of this item (k), “Change of Control” means the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, 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 us or the underwriters in this offering, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of more than 50% of the total voting power of our or the surviving entity’s voting stock; or
l.with the prior written consent of the representatives on behalf of the underwriters.
provided, in the case of any transfer, disposition or distribution pursuant to clauses (b) through (f), that (i) each transferee, donee or distributee shall sign and deliver a lock‑up agreement substantially in the form of the lock-up agreement and (ii) no public announcement or filing under Section 16(a) of the Exchange Act or any other public filing or disclosure reporting a reduction in beneficial ownership of shares of our Class A common stock, shall be required or shall be voluntarily made during the restricted period with respect to such transfer, disposition or distribution (other than, in the case of a transfer or other disposition pursuant to clause (e) above, any Form 4 or Form 5 required to be filed under the Exchange Act if the lock-up party is subject to Section 16 reporting with respect to us under the Exchange Act, any such filing will indicate by footnote disclosure or otherwise the nature of the transfer or disposition).
Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC, in their sole discretion, may release shares of our Class A 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 our Class A common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of our Class A 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 our Class A 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 our Class A common stock in the open market to stabilize the price of our Class A common stock. These activities may raise or maintain the market price of our Class A common stock above independent market levels or prevent or retard a decline in the market price of our Class A 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 will agree 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 Class A 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.
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 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 Class A common stock. The initial public offering price was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.
Directed Share Program
At our request, the underwriters have reserved up to 5% of the shares of Class A common stock offered by this prospectus for sale at the initial public offering price through a directed share program available to senior executives and their friends and family members, directors, certain of our channel partners, and other individuals identified by our leadership. The number of shares of Class A common stock available for sale to the general public will be reduced to the extent that such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. Additionally, except in the case of shares purchased by any director or officers, shares purchased through the directed share program will not be subject to a lock-up restriction. Other than the underwriting discount described on the front cover of this prospectus, the underwriters will not be entitled to any commission with respect to shares of Class A common stock sold pursuant to the directed share program. We will agree to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with sales of the shares reserved for the directed share program. The sales will be administered by Morgan Stanley & Co. LLC, an underwriter in this offering.
Selling Restrictions
European Economic Area
This prospectus has been prepared on the basis that any offer of our Class A common stock in any Member State of the European Economic Area will be made pursuant to an exemption under the Prospectus Regulation from the requirement to publish a prospectus for offers of Class A common stock. Accordingly, any person making or intending to make an offer in that Member State of shares of Class A common stock which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for us or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation, in each case in relation to such offer. Neither we nor any of the underwriters have authorized, nor do we or they authorize, the making of any offer of Class A common stock in circumstances in which an obligation arises for us or any of the underwriters to publish or supplement a prospectus for such offer. Neither we nor any of the underwriters have authorized, nor do we or they authorize, the making of any offer of Class A common stock through any financial intermediary, other than offers made by the underwriters, which constitute the final placement of the Class A common stock contemplated in this prospectus. The expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended or superseded).
In relation to each Member State of the European Economic Area, each underwriter has represented and agreed that it has not made and will not make an offer of shares of Class A common stock which are the subject of the offering contemplated by this prospectus to the public in that Member State, except that it may make an offer of such Class A common stock to the public in that Member State:
(a)to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
(b)to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the representatives; or
(c)in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of shares shall require us or any of our representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
For the purposes of this provision, the expression an “offer to the public” in relation to any shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended).
United Kingdom
This prospectus has been prepared on the basis that any offer of shares of Class A common stock in the United Kingdom, will be made pursuant to an exemption from the obligation to publish a prospectus under section 85 of the Financial Services and Markets Act 2000, or the FSMA. Accordingly, any person making or intending to make an offer in the United Kingdom may only do so in circumstances in which no obligation arises for us or any of the underwriters to publish a prospectus pursuant to section 85 of the FSMA or supplement a prospectus pursuant to the U.K. Prospectus Regulation, in each case in relation to such offer. Neither we nor any of the underwriters have authorized, nor do we or they authorize, the making of any offer of Class A common stock in circumstances in which an obligation arises for us or any of the underwriters to publish or supplement a prospectus for such offer. Neither we nor any of the underwriters have authorized, nor do we or they authorize, the making of any offer of shares through any financial intermediary, other than offers made by the underwriters, which constitute the final placement of the shares of Class A common stock contemplated in this prospectus. The expression “U.K. Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 in the United Kingdom.
In relation to the United Kingdom, each underwriter has represented and agreed that it has not made and will not make an offer of shares of Class A common stock which are the subject of the offering contemplated by this prospectus to the public in the United Kingdom, except that it may make an offer of such shares to the public in the United Kingdom:
(a)to any legal entity which is a qualified investor as defined in the U.K. Prospectus Regulation;
(b)to fewer than 150 natural or legal persons (other than qualified investors as defined in the U.K. Prospectus Regulation), subject to obtaining the prior consent of the representatives; or
(c)in any other circumstances falling within section 86 of the FSMA,
provided that no such offer of shares shall require us or any underwriters to publish a prospectus pursuant to section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the U.K. Prospectus Regulation.
For the purposes of this provision, the expression “an offer of shares to the public” in relation to any shares means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares.
Each underwriter has represented and agreed that:
(a)it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares of our Class A common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and
(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 Class A common stock in, from or otherwise involving the United Kingdom.
Switzerland
This prospectus is not intended to constitute an offer or solicitation to purchase or invest in the shares of Class A common stock. The shares of Class A common stock may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act, or the FinSA, and no application has or will be made to admit the shares of Class A common stock to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares of Class A common stock constitutes a prospectus pursuant to the FinSA, and neither this prospectus nor any other offering or marketing material relating to the shares of Class A common stock may be publicly distributed or otherwise made publicly available in Switzerland.
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 the 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.
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission 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 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.
Canada
The shares 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 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 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 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.
Hong Kong
The shares of Class A 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 (i) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (ii) 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 Class A 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 Class A 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 Class A common stock may not be circulated or distributed, nor may the shares of Class A 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 Class A 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 Class A common stock pursuant to an offer made under Section 275 of the SFA except: (i) 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; (ii) where no consideration is or will be given for the transfer; (iii) where the transfer is by operation of law; (iv) as specified in Section 276(7) of the SFA; or (v) as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
Solely for the purposes of its obligations pursuant to Section 309B of the SFA, we have determined, and hereby notify all relevant persons (as defined in the CMP Regulations 2018), that the shares are “prescribed capital markets products” (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
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 Class A common stock.
Accordingly, the shares of Class A 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 resale, 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 Class A 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 Class A common stock. The shares of Class A 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 Class A 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 Class A common stock. The shares of Class A common stock may only be transferred en bloc without subdivision to a single investor.
Israel
In the State of Israel this prospectus shall not be regarded as an offer to the public to purchase shares of Class A common stock under the Israeli Securities Law, 5728 - 1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728 - 1968, including, inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions (the Addressed Investors); or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728 - 1968, subject to certain conditions (the Qualified Investors). The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. We have not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728 - 1968. We have not and will not distribute this prospectus or make, distribute or direct an offer to subscribe for our Class A common stock to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.
Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728 - 1968. In particular, we may request, as a condition to be offered Class A common stock, that Qualified Investors will each represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728 - 1968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728 - 1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728 - 1968 and the regulations promulgated thereunder in connection with the offer to be issued Class A common stock; (iv) that the shares of Class A common stock that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728 - 1968: (a) for its own account, (b) for investment purposes only, and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728 - 1968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification number.
LEGAL MATTERS
Fenwick & West LLP, Mountain View, California, which has acted as our counsel in connection with this offering, will pass upon the validity of the issuance of the shares of our Class A common stock offered by this prospectus. As of the date of this prospectus, individuals and entities associated with Fenwick & West LLP beneficially own an aggregate of 2,370 shares of our Class B common stock. Latham & Watkins LLP, Menlo Park, California is acting as counsel to the underwriters.
EXPERTS
The financial statements as of January 31, 2021 and 2020, and for each of the two years in the period ended January 31, 2021, included in this Prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements have been so included in reliance upon the report of such firm given upon their authority 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 Class A common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and our Class A common stock offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We currently do not file periodic reports with the SEC.
Upon completion of this offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
We also maintain a website at www.sentinelone.com. Upon the completion of this offering, you may access these materials at our website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this prospectus.
SENTINELONE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of SentinelOne, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SentinelOne, Inc. (formerly Sentinel Labs, Inc.) and subsidiaries (the Company) as of January 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended January 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
May 15, 2021
We have served as the Company’s auditor since 2018.
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SENTINELONE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
As of April 30,
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
45,360
|
|
|
$
|
395,472
|
|
|
$
|
362,188
|
|
|
Short-term investments
|
340
|
|
|
364
|
|
|
367
|
|
|
Accounts receivable, net
|
30,995
|
|
|
39,315
|
|
|
36,663
|
|
|
Deferred contract acquisition costs, current
|
8,431
|
|
|
14,733
|
|
|
15,634
|
|
|
Prepaid expenses and other current assets
|
3,590
|
|
|
14,173
|
|
|
14,259
|
|
|
Total current assets
|
88,716
|
|
|
464,057
|
|
|
429,111
|
|
|
Property and equipment, net
|
8,329
|
|
|
13,373
|
|
|
14,971
|
|
|
Operating lease right-of-use assets
|
—
|
|
|
18,026
|
|
|
22,003
|
|
|
Deferred contract acquisition costs, non-current
|
12,826
|
|
|
21,940
|
|
|
22,137
|
|
|
Restricted cash, non-current
|
2,320
|
|
|
2,694
|
|
|
3,144
|
|
|
Intangible assets, net
|
263
|
|
|
470
|
|
|
17,538
|
|
|
Goodwill
|
—
|
|
|
—
|
|
|
108,193
|
|
|
Other assets
|
—
|
|
|
—
|
|
|
2,872
|
|
|
Total assets
|
$
|
112,454
|
|
|
$
|
520,560
|
|
|
$
|
619,969
|
|
|
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Deficit
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
$
|
4,624
|
|
|
$
|
11,822
|
|
|
$
|
11,492
|
|
|
Accrued liabilities
|
2,283
|
|
|
3,671
|
|
|
7,622
|
|
|
Accrued payroll and benefits
|
12,006
|
|
|
20,134
|
|
|
22,042
|
|
|
Operating lease liabilities, current
|
—
|
|
|
3,634
|
|
|
4,436
|
|
|
Deferred revenue, current
|
52,823
|
|
|
89,645
|
|
|
103,332
|
|
|
Total current liabilities
|
71,736
|
|
|
128,906
|
|
|
148,924
|
|
|
Deferred revenue, non-current
|
39,946
|
|
|
52,190
|
|
|
53,246
|
|
|
Long-term debt
|
19,598
|
|
|
19,621
|
|
|
19,662
|
|
|
Operating lease liabilities, non-current
|
—
|
|
|
18,839
|
|
|
22,088
|
|
|
Other liabilities
|
3,561
|
|
|
401
|
|
|
784
|
|
|
Total liabilities
|
134,841
|
|
|
219,957
|
|
|
244,704
|
|
|
Commitments and contingencies (Note 15)
|
|
|
|
|
|
|
Redeemable convertible preferred stock; $0.0001 par value; 113,523,948, 168,985,413, and 168,985,413 shares authorized as of January 31, 2020, January 31, 2021, and April 30, 2021 (unaudited), respectively; 113,523,948, 167,058,113, and 167,058,113 shares issued and outstanding as of January 31, 2020, January 31, 2021, and April 30, 2021 (unaudited), respectively; liquidation preference of $202,824, $622,414, and $622,414 as of January 31, 2020, January 31, 2021, and April 30, 2021 (unaudited), respectively
|
201,826
|
|
|
621,139
|
|
|
621,139
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
SENTINELONE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock; $0.0001 par value; 183,000,000, 264,659,000, and 276,300,000 shares authorized as of January 31, 2020, January 31, 2021, and April 30, 2021 (unaudited), respectively; 33,550,809, 39,242,316, and 50,504,590 shares issued and outstanding as of January 31, 2020, January 31, 2021, and April 30, 2021 (unaudited), respectively
|
1
|
|
|
2
|
|
|
3
|
|
|
Additional paid-in capital
|
8,986
|
|
|
29,869
|
|
|
166,974
|
|
|
Accumulated other comprehensive income (loss)
|
(201)
|
|
|
165
|
|
|
355
|
|
|
Accumulated deficit
|
(232,999)
|
|
|
(350,572)
|
|
|
(413,206)
|
|
|
Total stockholders’ deficit
|
(224,213)
|
|
|
(320,536)
|
|
|
(245,874)
|
|
|
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit
|
$
|
112,454
|
|
|
$
|
520,560
|
|
|
$
|
619,969
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
SENTINELONE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Revenue
|
$
|
46,474
|
|
|
$
|
93,056
|
|
|
$
|
17,957
|
|
|
$
|
37,395
|
|
|
Cost of revenue
|
18,331
|
|
|
39,332
|
|
|
7,613
|
|
|
18,283
|
|
|
Gross profit
|
28,143
|
|
|
53,724
|
|
|
10,344
|
|
|
19,112
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
36,683
|
|
|
62,444
|
|
|
13,865
|
|
|
27,820
|
|
|
Sales and marketing
|
51,322
|
|
|
77,740
|
|
|
17,751
|
|
|
36,180
|
|
|
General and administrative
|
15,122
|
|
|
29,059
|
|
|
4,957
|
|
|
16,724
|
|
|
Total operating expenses
|
103,127
|
|
|
169,243
|
|
|
36,573
|
|
|
80,724
|
|
|
Loss from operations
|
(74,984)
|
|
|
(115,519)
|
|
|
(26,229)
|
|
|
(61,612)
|
|
|
Interest income
|
886
|
|
|
231
|
|
|
150
|
|
|
23
|
|
|
Interest expense
|
(2,015)
|
|
|
(1,401)
|
|
|
(300)
|
|
|
(303)
|
|
|
Other income (expense), net
|
(217)
|
|
|
(424)
|
|
|
(193)
|
|
|
(593)
|
|
|
Loss before provision for income taxes
|
(76,330)
|
|
|
(117,113)
|
|
|
(26,572)
|
|
|
(62,485)
|
|
|
Provision for income taxes
|
237
|
|
|
460
|
|
|
66
|
|
|
149
|
|
|
Net loss
|
$
|
(76,567)
|
|
|
$
|
(117,573)
|
|
|
$
|
(26,638)
|
|
|
$
|
(62,634)
|
|
|
Net loss per share attributable to common stockholders, basic and diluted
|
$
|
(2.34)
|
|
|
$
|
(3.31)
|
|
|
$
|
(0.78)
|
|
|
$
|
(1.37)
|
|
|
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
|
32,712,350
|
|
|
35,482,444
|
|
|
33,973,809
|
|
|
45,725,703
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
SENTINELONE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Net loss
|
$
|
(76,567)
|
|
|
$
|
(117,573)
|
|
|
$
|
(26,638)
|
|
|
$
|
(62,634)
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
(378)
|
|
|
366
|
|
|
361
|
|
|
190
|
|
|
Total comprehensive loss
|
$
|
(76,945)
|
|
|
$
|
(117,207)
|
|
|
$
|
(26,277)
|
|
|
$
|
(62,444)
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
SENTINELONE, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible Preferred Stock
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Total Stockholders’ Deficit
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Balances as of February 1, 2019
|
97,686,390
|
|
|
$
|
149,955
|
|
|
|
31,679,835
|
|
|
$
|
1
|
|
|
$
|
3,660
|
|
|
$
|
177
|
|
|
$
|
(156,432)
|
|
|
$
|
(152,594)
|
|
|
Issuance of Series D redeemable convertible preferred stock, net of issuance costs of $0.1 million
|
15,837,558
|
|
|
51,871
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Issuance of common stock upon exercise of stock options
|
—
|
|
|
—
|
|
|
|
1,870,974
|
|
|
—
|
|
|
899
|
|
|
—
|
|
|
—
|
|
|
899
|
|
|
Vesting of early exercised stock options
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
68
|
|
|
—
|
|
|
—
|
|
|
68
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
4,359
|
|
|
—
|
|
|
—
|
|
|
4,359
|
|
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(378)
|
|
|
—
|
|
|
(378)
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(76,567)
|
|
|
(76,567)
|
|
|
Balances as of January 31, 2020
|
113,523,948
|
|
|
$
|
201,826
|
|
|
|
33,550,809
|
|
|
$
|
1
|
|
|
$
|
8,986
|
|
|
$
|
(201)
|
|
|
$
|
(232,999)
|
|
|
$
|
(224,213)
|
|
|
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $0.1 million
|
31,405,183
|
|
|
152,539
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Issuance of Series F redeemable convertible preferred stock, net of issuance costs of $0.1 million
|
22,128,982
|
|
|
266,774
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Issuance of common stock upon exercise of stock options
|
—
|
|
|
—
|
|
|
|
5,358,692
|
|
|
1
|
|
|
4,607
|
|
|
—
|
|
|
—
|
|
|
4,608
|
|
|
Issuance of common stock upon exercise of warrants
|
—
|
|
|
—
|
|
|
|
321,802
|
|
|
—
|
|
|
200
|
|
|
—
|
|
|
—
|
|
|
200
|
|
|
Issuance of common stock for services provided
|
—
|
|
|
—
|
|
|
|
11,013
|
|
|
—
|
|
|
47
|
|
|
—
|
|
|
—
|
|
|
47
|
|
|
Vesting of early exercised stock options
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
15,958
|
|
|
—
|
|
|
—
|
|
|
15,958
|
|
|
Foreign currency translation adjustments
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
366
|
|
|
—
|
|
|
366
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(117,573)
|
|
|
(117,573)
|
|
|
Balances as of January 31, 2021
|
167,058,113
|
|
|
$
|
621,139
|
|
|
|
39,242,316
|
|
|
$
|
2
|
|
|
$
|
29,869
|
|
|
$
|
165
|
|
|
$
|
(350,572)
|
|
|
$
|
(320,536)
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
SENTINELONE, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible Preferred Stock
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Total Stockholders’ Deficit
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Balances as of February 1, 2020
|
113,523,948
|
|
|
$
|
201,826
|
|
|
|
33,550,809
|
|
|
$
|
1
|
|
|
$
|
8,986
|
|
|
$
|
(201)
|
|
|
$
|
(232,999)
|
|
|
$
|
(224,213)
|
|
|
Issuance of Series E redeemable convertible preferred stock, net of issuance costs (unaudited)
|
31,405,183
|
|
|
152,539
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Issuance of common stock upon exercise of stock options (unaudited)
|
—
|
|
|
—
|
|
|
|
865,668
|
|
|
—
|
|
|
640
|
|
|
—
|
|
|
—
|
|
|
640
|
|
|
Vesting of early exercised stock options (unaudited)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
Stock-based compensation (unaudited)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
3,661
|
|
|
—
|
|
|
—
|
|
|
3,661
|
|
|
Foreign currency translation adjustments (unaudited)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
361
|
|
|
—
|
|
|
361
|
|
|
Net loss (unaudited)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,638)
|
|
|
(26,638)
|
|
|
Balances as of April 30, 2020 (unaudited)
|
144,929,131
|
|
|
$
|
354,365
|
|
|
|
34,416,477
|
|
|
$
|
1
|
|
|
$
|
13,305
|
|
|
$
|
160
|
|
|
$
|
(259,637)
|
|
|
$
|
(246,171)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible Preferred Stock
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Deficit
|
|
Total Stockholders’ Deficit
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
Balances as of February 1, 2021
|
167,058,113
|
|
|
$
|
621,139
|
|
|
|
39,242,316
|
|
|
$
|
2
|
|
|
$
|
29,869
|
|
|
$
|
165
|
|
|
$
|
(350,572)
|
|
|
$
|
(320,536)
|
|
|
Issuance of common stock upon exercise of stock options (unaudited)
|
—
|
|
|
—
|
|
|
|
2,649,961
|
|
|
—
|
|
|
3,210
|
|
|
—
|
|
|
—
|
|
|
3,210
|
|
|
Issuance of common stock in connection with acquisition (unaudited)
|
—
|
|
|
—
|
|
|
|
7,277,214
|
|
|
1
|
|
|
120,318
|
|
|
—
|
|
|
—
|
|
|
120,319
|
|
|
Issuance of restricted common stock (unaudited)
|
—
|
|
|
—
|
|
|
|
1,315,099
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Issuance of restricted stock for services provided (unaudited)
|
—
|
|
|
—
|
|
|
|
20,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Vesting of early exercised stock options (unaudited)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
Stock-based compensation (unaudited)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
13,560
|
|
|
—
|
|
|
—
|
|
|
13,560
|
|
|
Foreign currency translation adjustments (unaudited)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
190
|
|
|
—
|
|
|
190
|
|
|
Net loss (unaudited)
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62,634)
|
|
|
(62,634)
|
|
|
Balances as of April 30, 2021 (unaudited)
|
167,058,113
|
|
|
$
|
621,139
|
|
|
|
50,504,590
|
|
|
$
|
3
|
|
|
$
|
166,974
|
|
|
$
|
355
|
|
|
$
|
(413,206)
|
|
|
$
|
(245,874)
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
SENTINELONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
CASH FLOW FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(76,567)
|
|
|
$
|
(117,573)
|
|
|
$
|
(26,638)
|
|
|
$
|
(62,634)
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
1,855
|
|
|
2,837
|
|
|
629
|
|
|
1,659
|
|
|
Amortization of deferred contract acquisition costs
|
5,749
|
|
|
11,518
|
|
|
2,265
|
|
|
4,375
|
|
|
Non-cash operating lease costs
|
—
|
|
|
3,085
|
|
|
1,001
|
|
|
766
|
|
|
Stock-based compensation expense
|
4,346
|
|
|
15,912
|
|
|
3,651
|
|
|
13,437
|
|
|
Other
|
(35)
|
|
|
(22)
|
|
|
291
|
|
|
(672)
|
|
|
Changes in operating assets and liabilities, net of effects of acquisition
|
|
|
|
|
|
|
|
|
Accounts receivable
|
(18,986)
|
|
|
(8,320)
|
|
|
14,277
|
|
|
6,317
|
|
|
Prepaid expenses and other current assets
|
(1,237)
|
|
|
(9,438)
|
|
|
126
|
|
|
257
|
|
|
Deferred contract acquisition costs
|
(14,606)
|
|
|
(26,934)
|
|
|
(2,378)
|
|
|
(5,472)
|
|
|
Accounts payable
|
2,854
|
|
|
7,429
|
|
|
782
|
|
|
(2,211)
|
|
|
Accrued liabilities
|
643
|
|
|
1,374
|
|
|
(243)
|
|
|
2,724
|
|
|
Accrued payroll and benefits
|
5,644
|
|
|
7,758
|
|
|
(3,189)
|
|
|
1,291
|
|
|
Operating lease liabilities
|
—
|
|
|
(3,261)
|
|
|
(1,003)
|
|
|
(717)
|
|
|
Deferred revenue
|
46,264
|
|
|
49,065
|
|
|
(1,366)
|
|
|
9,702
|
|
|
Other liabilities
|
(348)
|
|
|
—
|
|
|
—
|
|
|
380
|
|
|
Net cash used in operating activities
|
(44,424)
|
|
|
(66,570)
|
|
|
(11,795)
|
|
|
(30,798)
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
(953)
|
|
|
(3,283)
|
|
|
(278)
|
|
|
(780)
|
|
|
Purchases of intangible assets
|
(200)
|
|
|
(224)
|
|
|
—
|
|
|
—
|
|
|
Capitalization of internal-use software
|
(1,700)
|
|
|
(2,758)
|
|
|
(647)
|
|
|
(1,013)
|
|
|
Purchases of short-term investments
|
(334)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Cash paid for acquisition, net of cash and restricted cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,449)
|
|
|
Net cash used in investing activities
|
(3,187)
|
|
|
(6,265)
|
|
|
(925)
|
|
|
(5,242)
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Series D redeemable convertible preferred stock, net of issuance costs
|
51,871
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Proceeds from issuance of Series E redeemable convertible preferred stock, net of issuance costs
|
—
|
|
|
152,539
|
|
|
152,539
|
|
|
—
|
|
|
Proceeds from issuance of Series F redeemable convertible preferred stock, net of issuance costs
|
—
|
|
|
266,774
|
|
|
—
|
|
|
—
|
|
|
Payments of deferred offering costs
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,826)
|
|
|
Proceeds from revolving line of credit
|
—
|
|
|
19,857
|
|
|
—
|
|
|
—
|
|
|
Repayment of term loan
|
—
|
|
|
(20,000)
|
|
|
—
|
|
|
—
|
|
|
Proceeds from exercise of stock options
|
899
|
|
|
4,608
|
|
|
640
|
|
|
3,743
|
|
|
Proceeds from exercise of warrants
|
—
|
|
|
200
|
|
|
—
|
|
|
—
|
|
|
Net cash provided by financing activities
|
52,770
|
|
|
423,978
|
|
|
153,179
|
|
|
1,917
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
36
|
|
|
289
|
|
|
(25)
|
|
|
1,289
|
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
5,195
|
|
|
351,432
|
|
|
140,434
|
|
|
(32,834)
|
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH–Beginning of period
|
42,485
|
|
|
47,680
|
|
|
47,680
|
|
|
399,112
|
|
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH–End of period
|
$
|
47,680
|
|
|
$
|
399,112
|
|
|
$
|
188,114
|
|
|
$
|
366,278
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Interest paid
|
$
|
1,844
|
|
|
$
|
1,379
|
|
|
$
|
400
|
|
|
$
|
263
|
|
|
Income taxes paid (refunded), net
|
$
|
363
|
|
|
$
|
298
|
|
|
$
|
29
|
|
|
$
|
(20)
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
SENTINELONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation capitalized as internal-use software
|
$
|
13
|
|
|
$
|
46
|
|
|
$
|
10
|
|
|
$
|
123
|
|
|
Property and equipment purchased but not yet paid
|
$
|
152
|
|
|
$
|
78
|
|
|
$
|
141
|
|
|
$
|
595
|
|
|
Vesting of early exercised stock options
|
$
|
68
|
|
|
$
|
71
|
|
|
$
|
18
|
|
|
$
|
17
|
|
|
Deferred offering costs accrued but not yet paid
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,045
|
|
|
Issuance of common stock and assumed equity awards in connection with acquisition
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
120,319
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
1.ORGANIZATION AND DESCRIPTION OF BUSINESS
SentinelOne, Inc. (SentinelOne, we, our, or us) was incorporated in January 2013 in the State of Delaware. On March 29, 2021, we amended our certificate of incorporation to change our name from Sentinel Labs, Inc. to SentinelOne, Inc. We are a cybersecurity provider that delivers an artificial intelligence-powered platform to enable autonomous cybersecurity defense. Our headquarters is located in Mountain View, California with various other global office locations.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the accounts of SentinelOne and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
Our fiscal year ends on January 31. References to fiscal 2020 refer to the fiscal year ended January 31, 2020, and references to fiscal 2021 refer to the fiscal year ended January 31, 2021.
Forward Stock Split
On February 6, 2020, we effected a one-to-three forward stock split of our issued and outstanding shares of common stock and redeemable convertible preferred stock. The par values of common stock and redeemable convertible preferred stock were not adjusted as a result of the stock split. All references to shares of common stock, options, warrants, and redeemable convertible preferred stock and per share amounts have been retroactively adjusted to reflect the forward stock split for the periods presented.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation.
Use of Estimates
The preparation of the consolidated 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. These estimates include, but are not limited to, the valuation of common stock and stock-based awards, the period of benefit for deferred contract acquisition costs, standalone selling prices (SSP) for each performance obligation, useful lives of long-lived assets, the incremental borrowing rate (IBR) used for operating lease liabilities, and accounting for income taxes. Actual results could differ from those estimates.
As the impact of the COVID-19 pandemic continues to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. These estimates and assumptions may change in future periods and will be recognized in the consolidated financial statements as new events occur and additional information becomes known. To the extent our actual results differ materially from those estimates and assumptions, our future financial statements could be affected.
Segment and Geographic Information
We have a single operating and reportable segment. Our chief operating decision maker (CODM) is our Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and assessing financial performance. For information regarding our revenue and long-lived assets by geography, see Notes 3 and 14, respectively.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Unaudited Interim Consolidated Financial Information
The accompanying interim consolidated balance sheet as of April 30, 2021, the interim consolidated statements of operations, of comprehensive loss, of cash flows, and of redeemable convertible preferred stock and stockholders’ deficit for the three months ended April 30, 2020 and 2021, and the related notes to such interim consolidated financial statements are unaudited. These unaudited interim consolidated financial statements are presented in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the SEC) and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of our financial position as of April 30, 2021 and the results of operations and cash flows for the three months ended April 30, 2020 and 2021. The results of operations for the three months ended April 30, 2021 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.
Foreign Currency
The functional currency of our foreign subsidiaries is their respective local currency. Assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date, and income and expenses are translated at average exchange rates during the period. The resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are recorded in other income (expense), net in the consolidated statements of operations. Foreign currency transaction gains and losses were not material for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited).
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers.
Revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for the subscriptions and services. We apply the following five-step approach to recognize revenue:
(i)Identification of the Contract, or Contracts, with the Customer—We determine that we have a contract with a customer when the contract is approved, the payment terms for the services can be identified, each party’s rights regarding the services to be transferred can be identified, the customer has the ability and intent to pay, and the contract has commercial substance. We apply judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information of the customer.
We sell through our indirect relationships with our channel partners or direct relationships with end customers through our internal sales force. Apart from certain sales arrangements where channel partners are determined to be our customers, we have concluded that the end customer is our customer.
(ii)Identification of the Performance Obligations in the Contract—Performance obligations in a contract are identified based on the services that will be transferred to a customer that are both capable of being distinct, where the customer can benefit from the service either on its own or together with other resources that are readily available to the customer, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, we apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
We have concluded that our contracts with customers do not contain warranties that give rise to a separate performance obligation.
(iii)Determination of the Transaction Price—The transaction price is the amount of consideration we expect to be entitled from a customer in exchange for providing the subscriptions and services. Variable consideration is included in the transaction price if, in our judgment, it is probable that no significant future reversal of cumulative revenue under the contract will occur.
Some of our end customers are entitled to receive service level commitment credits, in which we may be contractually obligated to provide partial refunds, and in rare instances, termination rights, each representing a form of variable consideration. We have historically not experienced any significant incidents affecting the defined guarantees of performance levels or service response affecting the defined guarantees of performance levels or service response rates, and accordingly, estimated refunds related to service level commitment credits in the consolidated financial statements were not material during fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited).
None of our contracts contain a significant financing component. The transaction price excludes amounts collected on behalf of third parties, such as sales taxes.
(iv)Allocation of the Transaction Price to the Performance Obligations in the Contract—If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on relative SSP.
(v)Recognition of Revenue when, or as, Performance Obligations are Satisfied—Revenue is recognized when control of the related performance obligation is transferred to the customer in an amount that reflects the consideration expected to be received in exchange for the subscriptions or services.
We generate substantially all of our revenue from subscriptions to our Singularity Platform. Our Singularity Platform delivers artificial intelligence-powered threat prevention, detection, and response capabilities, enabling an automatic protection against a full spectrum of cyber threats. We built our Singularity Platform to be deployed as a cloud service or in private and hybrid clouds. Customers can extend the functionality of their subscription to our platform by subscribing to additional Singularity Modules. The nature of our promise to the customer under the subscription is to stand ready to provide protection for the duration of the contractual term. As a result, we recognize revenue for these performance obligations ratably over the contractual term. Premium support and maintenance and other Singularity Modules are distinct from subscriptions and are recognized ratably over the term as the performance obligations are satisfied.
We generally invoice our customers upfront upon signing for the entire term of the contract, periodically, or in arrears. Most of our subscription contracts have a term of one to three years. Our payment terms typically range between 30 to 45 days. The invoiced amounts are treated as deferred revenue on the consolidated balance sheets and are recognized ratably over the term of the contract beginning on the date the customer is given access to our platform. Our contracts are generally non-cancelable over the contractual term.
Contracts with Multiple Performance Obligations
Our contracts with customers may contain multiple promised services consisting of subscriptions to our Singularity Platform, premium support and maintenance, and other Singularity Modules that are distinct and accounted for separately. The transaction price is allocated to separate performance obligations on a relative SSP basis. Our best evidence for SSP is the price we charge for the subscription or service when we sell it separately in similar circumstances to similar customers. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include, but is not limited to, product groupings or applying the expected cost-plus margin approach to estimate the price we would charge if the service was sold separately.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Cost of Revenue
Cost of revenue consists primarily of third-party cloud infrastructure expenses incurred in connection with the hosting and maintenance of our platform, personnel-related costs associated with our customer support and services organization, including salaries, benefits, bonuses, and stock-based compensation, amortization of capitalized internal-use software, software and subscription services used by our customer support and services team, and allocated overhead costs.
Research and Development
Research and development costs are expensed as incurred, unless they qualify for recognition as capitalized internal-use software. Research and development expenses consist primarily of personnel-related costs, including salaries, benefits, bonuses, and stock-based compensation, consulting fees, software and subscription services, third-party cloud infrastructure expenses incurred in developing our platform and modules, and allocated overhead costs.
Advertising Expenses
Advertising costs are expensed as incurred and included in sales and marketing expenses in the consolidated statements of operations. Advertising expenses were $4.2 million, $6.2 million, $0.9 million, and $3.4 million for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited), respectively.
Stock-Based Compensation
We account for stock-based awards issued to employees and directors based on the fair value of the awards at grant date. The fair value of stock option awards granted is generally estimated using the Black-Scholes option pricing model. For awards with market-based vesting conditions, a Monte Carlo simulation model is used. Stock-based compensation expense for awards with only service-based vesting conditions is recognized on a straight-line basis over the requisite service period of the awards. Forfeitures are accounted for in the period in which they occur.
Income Taxes
We are subject to income taxes in the United States and other foreign jurisdictions.
We utilize the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, as well as from net operating loss carryforwards, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
A valuation allowance is established if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations, and risks associated with estimates of future taxable income in assessing the need for a valuation allowance.
We recognize income tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. We recognize penalties and accrued interest related to unrecognized tax benefits as a component of other income (expense), net and interest expense, respectively, in the consolidated statements of operations.
Net Loss per Share Attributable to Common Stockholders
We compute basic and diluted net loss per share attributable to common stockholders using the two-class method required for participating securities. We consider our redeemable convertible preferred stock, restricted common stock, and shares issued upon the early exercise of stock options subject to repurchase to be participating securities. Under the two-class method, the net loss is not allocated to the redeemable convertible preferred stock, restricted common stock, and early exercised stock options as the holders do not have a contractual obligation to share in our losses.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase. Diluted net loss per share attributable to common stockholders is computed by giving effect to all potentially dilutive securities. For periods in which we report net losses, all potentially dilutive securities are anti-dilutive and accordingly, basic net loss per share is the same as diluted net loss per share.
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist of amounts invested in money market funds. Restricted cash consists of collateralized letters of credit established in connection with lease agreements for our office facilities. Restricted cash, current is included within prepaid expenses and other current assets on our consolidated balance sheets.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash to the total of these amounts shown in the consolidated statements of cash flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
As of April 30,
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Cash and cash equivalents
|
$
|
45,360
|
|
|
$
|
395,472
|
|
|
$
|
362,188
|
|
|
Restricted cash, current
|
—
|
|
|
946
|
|
|
946
|
|
|
Restricted cash, non-current
|
2,320
|
|
|
2,694
|
|
|
3,144
|
|
|
|
$
|
47,680
|
|
|
$
|
399,112
|
|
|
$
|
366,278
|
|
Short-Term Investments
We determine the appropriate classification of investments at the time of purchase based on their maturities and our reasonable expectation with regard to those securities (i.e., expectations of sales and redemptions) and re-evaluate such designations as of each reporting period. Short-term investments are classified as available-for-sale at the time of purchase and are recorded at fair value with unrealized gains and losses, if any, reported in accumulated other comprehensive income (loss). Unrealized gains and losses and declines in value that are considered to be other-than-temporary are recognized in other income (expense), net in the consolidated statements of operations. We did not identify any investments with other-than-temporary impairments as of January 31, 2020 and 2021 and as of April 30, 2021 (unaudited). Realized gains and losses on the sale of short-term investments are determined on a specific identification method and are recorded in other income (expense), net in the consolidated statements of operations. There were no realized gains or losses on the sale of short-term investments during fiscal 2020 and fiscal 2021 and the three months ended April 30, 2021 (unaudited).
Deferred Offering Costs
Deferred offering costs consist primarily of accounting, legal, and other fees related to the anticipated sale of our common stock in an initial public offering (IPO). The deferred offering costs will be recorded against IPO proceeds upon the completion of the IPO. In the event the IPO is abandoned, deferred offering costs will be expensed in the period the IPO is abandoned. There were no deferred offering costs as of January 31, 2021. Deferred offering costs totaled $2.9 million as of April 30, 2021 (unaudited) and were recorded as other assets on the consolidated balance sheets.
Fair Value of Financial Instruments
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The carrying amounts reported on the consolidated balance sheets for cash equivalents, short-term investments, accounts receivable, accounts payable, accrued liabilities, and accrued payroll and benefits approximate their respective fair values due to their short-term nature. The carrying amount of
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
debt also approximates fair value as the stated interest rate approximates market rates available to us. The debt is categorized as Level 2 in the fair value hierarchy.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments, and accounts receivable. We maintain our cash, cash equivalents, restricted cash, and short-term investments with high-credit-quality financial institutions mainly in the U.S. and Israel. We have not experienced any credit losses relating to our cash, cash equivalents, restricted cash, and short-term investments. For accounts receivable, we are exposed to credit risk in the event of nonpayment by customers to the extent of the amounts recorded on the consolidated balance sheets. We perform periodic credit evaluations of our customers and generally do not require collateral.
Channel partners and end customers that represented 10% or more of accounts receivable, net as of January 31, 2020 and 2021 and April 30, 2021 (unaudited) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
As of April 30,
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Channel partner A
|
28
|
%
|
|
23
|
%
|
|
19
|
%
|
|
Channel partner B
|
10
|
%
|
|
*
|
|
*
|
|
Channel partner C
|
10
|
%
|
|
*
|
|
*
|
|
End customer A
|
10
|
%
|
|
*
|
|
*
|
_______________
*Less than 10%
Channel partners and end customers that represented 10% or more of our total revenue for the periods presented were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Channel partner A
|
19
|
%
|
|
19
|
%
|
|
19
|
%
|
|
17
|
%
|
|
Channel partner B
|
14
|
%
|
|
13
|
%
|
|
14
|
%
|
|
10
|
%
|
There were no end customers that represented 10% or more of total revenue for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited).
Accounts Receivable
Accounts receivable are recorded at invoiced amounts and are non-interest bearing. We have a well-established collection history from our channel partners and end customers. We periodically evaluate the collectability of our accounts receivable and provide an allowance for doubtful accounts as necessary, based on the age of the receivable, expected payment ability, and collection experience. As of January 31, 2020 and 2021 and April 30, 2021 (unaudited), the allowance for doubtful accounts was not material.
Deferred Contract Acquisition Costs
We capitalize sales commissions and associated payroll taxes that are incremental to obtaining a customer contract, which are recorded as deferred contract acquisition costs on the consolidated balance sheets. Sales commissions for the renewal of a contract are not considered commensurate with commissions paid for the initial contracts, given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid on a new contract are amortized on a straight-line basis over an estimated period of benefit of four years, while commissions paid on renewal contracts are amortized over the contractual term of the renewal. We
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
determine the estimated period of benefit based on both quantitative and qualitative factors, including the duration of our relationships with customers and the estimated useful life of our technology. Amortization of deferred contract acquisition costs is included in sales and marketing expenses in the consolidated statements of operations.
We periodically review these deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. We did not recognize any impairment of deferred contract acquisition costs during fiscal 2020 and fiscal 2021 and the three months ended April 30, 2021 (unaudited).
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets as follows:
|
|
|
|
|
|
|
|
|
Estimated Useful Life
|
|
Office furniture and equipment
|
5 years
|
|
Computers, software, and electronic equipment
|
3 years
|
|
Capitalized internal-use software
|
4 years
|
|
Leasehold improvements
|
Shorter of useful life or remaining term of lease
|
Costs for maintenance and repairs are expensed as incurred.
Capitalized Internal-Use Software
We capitalize certain internal-use software development costs related to our cloud platform. Costs incurred in the preliminary stages of development and post-development are expensed as incurred. Internal and external costs incurred during the development phase, if direct, are capitalized until the software is substantially complete and ready for our intended use. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Maintenance and training costs are expensed as incurred. Capitalized internal-use software is included in property and equipment and is amortized to cost of revenue on a straight-line basis over its expected useful life.
Impairment of Long-Lived Assets (Including Goodwill and Intangible Assets)
Long-lived assets, including intangible assets with finite lives, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset or asset group to the future undiscounted cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group. No impairment loss was recorded during fiscal 2020 and fiscal 2021 and the three months ended April 30, 2021 (unaudited).
Goodwill is not amortized but rather tested for impairment at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that impairment may exist. Goodwill impairment is recognized when the quantitative assessment results in the carrying value of the reporting unit exceeding its fair value, in which case an impairment charge is recorded to goodwill to the extent the carrying value exceeds the fair value, limited to the amount of goodwill. We did not recognize any impairment of goodwill during the three months ended April 30, 2021 (unaudited).
Business Combinations
We account for our acquisitions using the acquisition method of accounting. We allocate the fair value of purchase consideration to the tangible and intangible assets acquired, and liabilities assumed, based on their estimated fair values. The excess of the fair value of purchase consideration over the values of these identifiable
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|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain identifiable assets include, but are not limited to, the selection of valuation methodologies, future expected cash flows, discount rates, and useful lives. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Acquisition costs, such as legal and consulting fees, are expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations. See Note 17 for additional information regarding our acquisitions.
Leases
The consolidated financial statements as of and for the year ended January 31, 2021 reflect the adoption of ASC 842, Leases, effective February 1, 2020, using the modified retrospective method. Refer to “Recently Adopted Accounting Pronouncements” below regarding the adoption impact of ASC 842. In accordance with ASC 842, we determine if an arrangement is or contains a lease at inception by evaluating various factors, including if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration and other facts and circumstances. Operating lease right-of-use (ROU) assets and operating lease liabilities are recognized on the consolidated balance sheets at the lease commencement date based on the present value of lease payments over the lease term, which is the non-cancelable period stated in the contract adjusted for any options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Lease payments consist of the fixed payments under the arrangement, less any lease incentives, such as tenant improvement allowances. Variable costs, such as maintenance and utilities based on actual usage, are not included in the measurement of operating lease ROU assets and operating lease liabilities and are expensed when the event determining the amount of variable consideration to be paid occurs. When the implicit rate of the leases is not determinable, we use an IBR based on the information available at the lease commencement date in determining the present value of lease payments. Lease cost for lease payments is recognized on a straight-line basis over the lease term.
We account for lease components and non-lease components as a single lease component. In addition, we do not recognize operating lease ROU assets and operating lease liabilities for leases with lease terms of 12 months or less.
In addition, we sublease certain of our unoccupied facilities to third parties. We recognize sublease income on a straight-line basis over the sublease term.
We did not have any material finance leases during fiscal 2020 and fiscal 2021 and for the three months ended April 30, 2020 and 2021 (unaudited).
Prior to the adoption of ASC 842, we accounted for leases in accordance with ASC 840, Leases. We recognized rent expense on a straight-line basis over the term of the lease. Lease incentives were recorded as a reduction of rent expense on a straight-line basis over the term of the lease.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases, that supersedes ASC Topic 840 (ASC 840), Leases. Subsequently, the FASB issued several updates to ASU No. 2016-02, codified in ASC Topic 842 (ASC 842). We early adopted ASC 842, Leases, on February 1, 2020 using the modified retrospective method for all leases not substantially completed as of the date of adoption. The consolidated financial statements as of and for the year ended January 31, 2021 reflect the application of ASC 842 guidance while the consolidated financial statements as of and for the year ended January 31, 2020 were prepared under the previous guidance of ASC 840.
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|
|
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|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
We elected the following practical expedients permitted under the transition guidance within ASC 842:
•The package of practical expedients that allows for not reassessing (1) whether existing contracts contain leases, (2) the lease classification of existing leases, and (3) whether existing initial direct costs meet the new definition.
•The practical expedient not to separate non-lease components from lease components and instead account for each separate lease component and non-lease components associated with that lease component as a single lease component by class of the underlying assets.
•The practical expedient not to recognize ROU assets and lease liabilities for short-term leases, which have a lease term of 12 months or less.
We did not elect the hindsight practical expedient.
The cumulative impact of the adoption of ASC 842 was not material; therefore, we did not record any adjustments to accumulated deficit. As a result of adopting ASC 842, we recorded operating lease ROU assets of $13.8 million and operating lease liabilities of $17.1 million, primarily related to corporate office leases, based on the present value of the future lease payments on the date of adoption.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition to new reference rates. This ASU may be applied prospectively through December 31, 2022. We adopted this guidance on May 1, 2020, which did not have a material impact on our consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07). ASU 2018-07 was issued in order to expand the guidance for stock-based compensation, to include stock-based payment transactions for acquiring goods and services from nonemployees. We adopted this guidance on February 1, 2020, which did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The new guidance aligns the requirements for capitalizing implementation costs in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We early adopted this guidance on February 1, 2020, which did not have a material impact on our consolidated financial statements.
Recently Adopted Accounting Pronouncements (Unaudited)
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides new authoritative guidance with respect to the measurement of credit losses on financial instruments. This update changes the impairment model for most financial assets and certain other instruments by introducing a current expected credit loss (CECL) model. The CECL model is a more forward-looking approach based on expected losses rather than incurred losses, requiring entities to estimate and record losses expected over the remaining contractual life of an asset. We adopted this guidance on February 1, 2021, which did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the measurement of goodwill by eliminating step two of the two-step impairment test. Step two measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. This ASU requires an entity to compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider
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SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. We adopted this guidance on February 1, 2021, which did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and the allocation of consolidated income taxes to separate financial statements of entities not subject to income tax. The guidance is effective for us on February 1, 2022. We are currently evaluating the impact of this guidance on our consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. Additionally, ASU 2020-06 requires the application of the if-converted method for all convertible instruments in the diluted earnings per share calculation and the inclusion of the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. The guidance is effective for us on February 1, 2024. Early adoption on February 1, 2021 is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.
3.REVENUE AND CONTRACT BALANCES
Disaggregation of Revenue
The following table summarizes revenue by geography based on the shipping address of end customers who have contracted to use our platform for the periods presented (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31, 2020
|
|
Year Ended January 31, 2021
|
|
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
|
United States
|
$
|
33,972
|
|
|
73
|
%
|
|
$
|
65,497
|
|
|
70
|
%
|
|
International
|
12,502
|
|
|
27
|
%
|
|
27,559
|
|
|
30
|
%
|
|
Total
|
$
|
46,474
|
|
|
100
|
%
|
|
$
|
93,056
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30, 2020
|
|
Three Months Ended April 30, 2021
|
|
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
|
|
(unaudited)
|
|
United States
|
$
|
12,214
|
|
|
68
|
%
|
|
$
|
26,176
|
|
|
70
|
%
|
|
International
|
5,743
|
|
|
32
|
%
|
|
11,219
|
|
|
30
|
%
|
|
Total
|
$
|
17,957
|
|
|
100
|
%
|
|
$
|
37,395
|
|
|
100
|
%
|
No single country other than the United States represented 10% or more of our revenue during fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited).
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|
|
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|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
The following table summarizes revenue from contracts by type of customer for the periods presented (in thousands, except percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31, 2020
|
|
Year Ended January 31, 2021
|
|
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
|
Channel partners
|
$
|
42,881
|
|
|
92
|
%
|
|
$
|
88,954
|
|
|
96
|
%
|
|
Direct customers
|
3,593
|
|
|
8
|
%
|
|
4,102
|
|
|
4
|
%
|
|
Total
|
$
|
46,474
|
|
|
100
|
%
|
|
$
|
93,056
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 30, 2020
|
|
Three Months Ended April 30, 2021
|
|
|
Amount
|
|
% of Revenue
|
|
Amount
|
|
% of Revenue
|
|
|
(unaudited)
|
|
Channel partners
|
$
|
17,115
|
|
|
95
|
%
|
|
$
|
34,112
|
|
|
91
|
%
|
|
Direct customers
|
842
|
|
|
5
|
%
|
|
3,283
|
|
|
9
|
%
|
|
Total
|
$
|
17,957
|
|
|
100
|
%
|
|
$
|
37,395
|
|
|
100
|
%
|
Contract Balances
Contract assets consist of unbilled accounts receivable, which arise when a right to consideration for our performance under the customer contract occurs before invoicing the customer. The amount of unbilled accounts receivable included within accounts receivable, net on the consolidated balance sheets was zero, $1.5 million, and $1.3 million as of January 31, 2020, January 31, 2021, and April 30, 2021 (unaudited), respectively.
Contract liabilities consist of deferred revenue, which represents invoices billed in advance of performance under a contract. Deferred revenue is recognized as revenue over the contractual period. The deferred revenue balance as of February 1, 2019, 2020, and 2021 was $46.5 million, $92.8 million, and $141.8 million, respectively. During fiscal 2020 and fiscal 2021, we recognized revenue of $25.9 million and $53.8 million, respectively, that was included in the deferred revenue balance at the beginning of the year. During the three months ended April 30, 2020 and 2021 (unaudited), we recognized revenue of $15.8 million and $29.1 million, respectively, that was included in the deferred revenue balance at the beginning of the period.
Remaining Performance Obligations
Our contracts with customers typically range from one to three years. Revenue allocated to remaining performance obligations represents non-cancelable contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced in future periods.
As of January 31, 2021, our remaining performance obligations were $160.3 million, of which we expect to recognize 86% as revenue over the next 24 months, with the remainder to be recognized thereafter. As of April 30, 2021 (unaudited), our remaining performance obligations were $180.2 million, of which we expect to recognize 88% as revenue over the next 24 months, with the remainder to be recognized thereafter.
4.FAIR VALUE MEASUREMENTS
We measure fair value based on a three-level hierarchy, maximizing the use of observable inputs, where available, and minimizing the use of unobservable inputs, as follows:
Level 1:Assets and liabilities whose values are based on observable inputs such as quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2:Assets and liabilities whose values are based on inputs from quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.
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|
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|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Level 3:Assets and liabilities whose values are based on unobservable inputs that are supported by little or no market activity and that are significant to the overall fair value measurement.
The following table summarizes the respective fair value and the classification by level within the fair value hierarchy (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2020
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Money market funds
|
$
|
37,799
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
37,799
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
—
|
|
|
340
|
|
|
—
|
|
|
340
|
|
|
Total assets measured and recorded at fair value
|
$
|
37,799
|
|
|
$
|
340
|
|
|
$
|
—
|
|
|
$
|
38,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2021
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Money market funds
|
$
|
40,518
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,518
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
—
|
|
|
364
|
|
|
—
|
|
|
364
|
|
|
Total assets measured and recorded at fair value
|
$
|
40,518
|
|
|
$
|
364
|
|
|
$
|
—
|
|
|
$
|
40,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 30, 2021
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
(unaudited)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Money market funds
|
$
|
40,519
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,519
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
—
|
|
|
367
|
|
|
—
|
|
|
367
|
|
|
Total assets measured and recorded at fair value
|
$
|
40,519
|
|
|
$
|
367
|
|
|
$
|
—
|
|
|
$
|
40,886
|
|
There were no transfers between the levels of the fair value hierarchy during fiscal 2020 and fiscal 2021 and the three months ended April 30, 2021 (unaudited).
As of January 31, 2020 and 2021 and April 30, 2021 (unaudited), the aggregate fair value of our cash equivalents and short-term investments approximated amortized cost and, as such, there were no unrealized gains or losses, either individually or in the aggregate. As of January 31, 2020 and 2021 and April 30, 2021 (unaudited), our cash and cash equivalents had contractual maturities of three months or less and short-term investments had contractual maturities within one year of each respective date.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
5.PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
As of April 30,
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Office furniture and equipment
|
$
|
757
|
|
|
$
|
837
|
|
|
$
|
1,409
|
|
|
Computers, software, and electronic equipment
|
3,009
|
|
|
3,489
|
|
|
4,168
|
|
|
Capitalized internal-use software
|
3,947
|
|
|
6,959
|
|
|
8,157
|
|
|
Leasehold improvements
|
4,761
|
|
|
4,568
|
|
|
7,580
|
|
|
Construction in progress
|
—
|
|
|
2,925
|
|
|
—
|
|
|
Total property and equipment
|
12,474
|
|
|
18,778
|
|
|
21,314
|
|
|
Less: Accumulated depreciation and amortization
|
(4,145)
|
|
|
(5,405)
|
|
|
(6,343)
|
|
|
Total property and equipment, net
|
$
|
8,329
|
|
|
$
|
13,373
|
|
|
$
|
14,971
|
|
We capitalized $1.7 million, $2.8 million, $0.6 million, and $1.0 million of internal-use software costs during fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited), respectively.
Depreciation and amortization expense related to property and equipment was $1.9 million, $2.8 million, $0.6 million, and $0.9 million for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited), respectively, including amortization expense related to capitalized internal-use software of $0.7 million, $1.3 million, $0.3 million, and $0.4 million for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited), respectively.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
6.INTANGIBLE ASSETS
Intangible assets, net as of April 30, 2021 (unaudited) consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
As of April 30,
|
|
|
2021
|
|
Developed technology
|
$
|
15,500
|
|
|
Customer relationship
|
1,500
|
|
|
Non-compete agreements
|
650
|
|
|
Trademarks
|
150
|
|
|
Patents
|
544
|
|
|
Total intangible assets
|
18,344
|
|
|
Less: accumulated amortization
|
(806)
|
|
|
Total intangible assets, net
|
$
|
17,538
|
|
Intangible assets, net as of January 31, 2020 and 2021 were not material.
Amortization expense of intangible assets was not material for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 (unaudited). Amortization expense of intangible assets for the three months ended April 30, 2021 (unaudited) was $0.7 million.
As of April 30, 2021 (unaudited), estimated future amortization expense is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending January 31,
|
|
|
|
Remainder of 2022
|
|
$
|
2,506
|
|
|
2023
|
|
3,314
|
|
|
2024
|
|
2,510
|
|
|
2025
|
|
2,285
|
|
|
2026
|
|
2,273
|
|
|
Thereafter
|
|
4,650
|
|
|
Total
|
|
$
|
17,538
|
|
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
7.LONG-TERM DEBT
Loan and Security Agreement
In May 2018, we entered into a loan and security agreement (Loan and Security Agreement) with a lender for a term loan of up to $20.0 million (Term Loan) and a revolving line of credit of up to $7.5 million (Line of Credit).
Term Loan
The Term Loan bore an annual floating interest rate equal to the prime rate, as published by the Wall Street Journal, plus 3.75% and matures in May 2022. Upon execution of the Loan and Security Agreement, we received proceeds of $10.0 million. In connection with this initial term loan, we issued warrants to purchase 559,860 shares of common stock with an exercise price of $0.62 per share.
In July 2018, we borrowed an additional $5.0 million and issued warrants to purchase 279,930 shares of common stock with an exercise price of $0.62 per share. In November 2018, we borrowed an additional $5.0 million and issued warrants to purchase 436,896 shares of common stock with an exercise price of $0.62 per share.
The warrants were recorded at fair value using the Black-Scholes option pricing model, which incorporated assumptions and estimates to value the common stock warrants on the date of issuance. The fair value of the warrants was recorded to additional paid-in capital and as a debt discount that is amortized to interest expense over the term of the loan. The total fair value of common stock warrants recorded was $0.4 million. As of January 31, 2020, all warrants were outstanding and exercisable.
During fiscal 2021, we issued 321,802 shares of common stock upon the exercise of warrants. The remaining warrants to purchase 954,884 shares of common stock were outstanding and exercisable as of January 31, 2021 and April 30, 2021 (unaudited).
Line of Credit
Borrowings under the Line of Credit accrue interest at the prime rate, as published by the Wall Street Journal, plus 0.50%. Availability under the Line of Credit is the lesser of $7.5 million or 80% of eligible accounts receivable. No amount was outstanding under the Line of Credit as of January 31, 2020.
Amended Loan and Security Agreement
In May 2020, we entered into an amendment to the Loan and Security Agreement (Amended Loan and Security Agreement). The Amended Loan and Security Agreement replaced the existing Loan and Security Agreement in its entirety, with a revolving line of credit of up to $45.0 million (Amended Line of Credit), maturing in May 2023. The amendment was deemed to be a debt modification for accounting purposes.
Amended Line of Credit
In May 2020, we drew down $20.0 million under the Amended Line of Credit and repaid in full the outstanding Term Loan under the Loan and Security Agreement of $20.0 million. In connection with the repayment, we incurred $0.1 million of transaction fees, which were recorded as debt issuance costs that will be amortized to interest expense in our consolidated statement of operations using the effective interest method.
Borrowings under the Amended Line of Credit accrue interest at a floating per annum rate equal to the greater of (i) three-quarters of one percent (0.75%) above the prime rate and (ii) five percent (5.0%). Availability under the Amended Line of Credit is the lesser of $45.0 million or a borrowing limit based on our eligible revenue. The outstanding principal under the Amended Line of Credit was $20.0 million as of January 31, 2021 and April 30, 2021 (unaudited).
Total unamortized debt discount related to our borrowings as of January 31, 2020 and 2021 and April 30, 2021 (unaudited) was $0.4 million for all periods presented. During fiscal 2020 and fiscal 2021 and the three months
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
ended April 30, 2020 and 2021 (unaudited), we incurred $2.0 million, $1.4 million, $0.3 million, and $0.3 million, respectively, in interest expense associated with our long-term debt.
All borrowings under the Loan and Security Agreement and Amended Loan and Security Agreement (the Agreements) are secured by substantially all of our assets. In addition, the Agreements contain certain affirmative covenants that, among other things, require us to maintain certain annual revenue targets during a given covenant period. The Agreements also contain covenants limiting us and our subsidiaries’ abilities to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, and make investments, in each case subject to certain exceptions. Failure to comply with these covenants, along with other non-financial covenants, could result in an event of default, which may lead to acceleration of the amounts owed and other remedies. We were in compliance with all covenants as of January 31, 2020 and 2021 and April 30, 2021 (unaudited).
8.LEASES
We have entered into non-cancelable operating lease agreements with various expiration dates through fiscal 2029. Our operating lease arrangements do not contain any restrictive covenants or residual value guarantees.
Supplemental cash flow information related to our operating leases for fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited) as well as the weighted-average remaining lease term and weighted-average discount rate as of January 31, 2021 and April 30, 2021 (unaudited) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
(unaudited)
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
Cash paid for amount included in the measurement of operating lease liabilities
|
$
|
3,999
|
|
|
$
|
1,164
|
|
|
$
|
990
|
|
|
Operating lease ROU assets obtained in exchange for operating lease liabilities
|
$
|
6,579
|
|
|
$
|
—
|
|
|
$
|
4,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
As of April 30,
|
|
|
2021
|
|
2021
|
|
|
|
|
(unaudited)
|
|
Lease Term and Discount Rate
|
|
|
|
|
Weighted-average remaining lease term (years)
|
7.42
|
|
|
7.26
|
|
|
Weighted-average discount rate
|
4.3
|
%
|
|
4.3
|
%
|
The components of lease costs consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
(unaudited)
|
|
Operating lease costs
|
$
|
3,844
|
|
|
$
|
1,179
|
|
|
$
|
1,038
|
|
|
Short-term lease costs
|
509
|
|
|
90
|
|
|
509
|
|
|
Variable lease costs
|
702
|
|
|
166
|
|
|
299
|
|
|
Total lease costs
|
$
|
5,055
|
|
|
$
|
1,435
|
|
|
$
|
1,846
|
|
Sublease income was $0.9 million, $0.2 million, and $0.2 million for fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited), respectively, and was recorded as a reduction of lease costs.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
As of January 31, 2021, we had total undiscounted future payments of $5.4 million under an operating lease that had not yet commenced, which were not included on the consolidated balance sheets. This operating lease commenced in February 2021 and has a lease term of 7.8 years.
The maturities of our non-cancelable operating lease liabilities as of January 31, 2021 were as follows (in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ending January 31,
|
Amount
|
|
2022
|
$
|
3,752
|
|
|
2023
|
3,490
|
|
|
2024
|
3,494
|
|
|
2025
|
3,486
|
|
|
2026
|
3,520
|
|
|
Thereafter
|
8,620
|
|
|
Total operating lease payments
|
$
|
26,362
|
|
|
Less: Imputed interest
|
(3,889)
|
|
|
Present value of operating lease liabilities
|
$
|
22,473
|
|
The maturities of our non-cancelable operating lease liabilities as of April 30, 2021 (unaudited) were as follows (in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ending January 31,
|
Amount
|
|
Remainder of 2022
|
$
|
3,570
|
|
2023
|
4,191
|
|
2024
|
4,209
|
|
2025
|
4,215
|
|
2026
|
4,250
|
|
Thereafter
|
10,505
|
|
Total operating lease payments
|
$
|
30,940
|
|
Less: Imputed interest
|
(4,416)
|
|
Present value of operating lease liabilities
|
$
|
26,524
|
Future minimum payments under non-cancelable operating leases determined in accordance with ASC 840, Leases, as of January 31, 2020 were as follows (in thousands):
|
|
|
|
|
|
|
|
Fiscal Year Ending January 31,
|
Amount
|
|
2021
|
$
|
3,055
|
|
|
2022
|
1,982
|
|
|
2023
|
1,442
|
|
|
Total minimum lease payments
|
$
|
6,479
|
|
Rent expense was $3.8 million for fiscal 2020. Sublease income was $1.0 million for fiscal 2020 and was recorded as a reduction of rent expense.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
9.REDEEMABLE CONVERTIBLE PREFERRED STOCK
Our redeemable convertible preferred stock (Preferred Stock) as of January 31, 2020 and 2021 consisted of the following (in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2020
|
|
|
Shares Authorized
|
|
Shares Issued and Outstanding
|
|
Liquidation Amount
|
|
Carrying Value
|
|
Original Issuance Price per Share
|
|
Series Seed
|
10,962,327
|
|
|
10,962,327
|
|
|
$
|
2,577
|
|
|
$
|
2,553
|
|
|
$
|
0.2351
|
|
|
Series A
|
12,855,123
|
|
|
12,855,123
|
|
|
10,000
|
|
|
9,948
|
|
|
0.7779
|
|
|
Series B
|
20,288,700
|
|
|
20,288,700
|
|
|
24,338
|
|
|
24,241
|
|
|
1.1996
|
|
|
Series C
|
40,338,867
|
|
|
40,338,867
|
|
|
70,433
|
|
|
69,845
|
|
|
1.7460
|
|
|
Series D
|
29,078,931
|
|
|
29,078,931
|
|
|
95,476
|
|
|
95,239
|
|
|
3.2833
|
|
|
Total
|
113,523,948
|
|
|
113,523,948
|
|
|
$
|
202,824
|
|
|
$
|
201,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2021
|
|
|
Shares Authorized
|
|
Shares Issued and Outstanding
|
|
Liquidation Amount
|
|
Carrying Value
|
|
Original Issuance Price per Share
|
|
Series Seed
|
10,962,327
|
|
|
10,962,327
|
|
|
$
|
2,577
|
|
|
$
|
2,553
|
|
|
$
|
0.2351
|
|
|
Series A
|
12,855,123
|
|
|
12,855,123
|
|
|
10,000
|
|
|
9,948
|
|
|
0.7779
|
|
|
Series B
|
20,288,700
|
|
|
20,288,700
|
|
|
24,338
|
|
|
24,241
|
|
|
1.1996
|
|
|
Series C
|
40,338,867
|
|
|
40,338,867
|
|
|
70,433
|
|
|
69,845
|
|
|
1.7460
|
|
|
Series D
|
29,078,931
|
|
|
29,078,931
|
|
|
95,476
|
|
|
95,239
|
|
|
3.2833
|
|
|
Series E
|
31,405,183
|
|
|
31,405,183
|
|
|
152,683
|
|
|
152,539
|
|
|
4.8617
|
|
|
Series F
|
24,056,282
|
|
|
22,128,982
|
|
|
266,907
|
|
|
266,774
|
|
|
12.0614
|
|
|
Total
|
168,985,413
|
|
|
167,058,113
|
|
|
$
|
622,414
|
|
|
$
|
621,139
|
|
|
|
As of April 30, 2021 (unaudited), there were no changes to our redeemable convertible preferred stock since January 31, 2021.
During fiscal 2020, we issued 15,837,558 shares of Series D Preferred Stock at a price of $3.2833 per share for aggregate proceeds of $51.9 million, net of issuance costs of $0.1 million.
During fiscal 2021, we issued 31,405,183 shares of Series E Preferred Stock at a price of $4.8617 per share for aggregate proceeds of $152.5 million, net of issuance costs of $0.1 million and 22,128,982 shares of Series F Preferred Stock at a price of $12.0614 per share for aggregate proceeds of $266.8 million, net of issuance costs of $0.1 million.
The rights, powers, preferences, privileges, restrictions, qualifications, and limitations of Preferred Stock were as follows:
Voting—The holders of Preferred Stock are entitled to the number of votes equal to the number of shares of common stock into which such shares of Preferred Stock can be converted.
The holders of Series Seed, Series B, Series C, and Series D Preferred Stock, exclusively and as a separate class, are entitled to each elect one member of the Board of Directors, so long as at least twenty percent (20%) of the applicable series of Preferred Stock are issued and outstanding (subject to appropriate adjustments for stock splits, dividends, combinations, recapitalizations, and certain similar events). The holders of common stock, exclusively and as a separate class, are entitled to elect two members of the Board of Directors. The holders of common stock and Preferred Stock, voting together as a single class and on an as-converted basis, are entitled to elect one member of the Board of Directors.
Dividends—The holders of Series Seed, Series A, Series B, Series C, Series D, Series E, and Series F Preferred Stock are entitled to receive, on a pari passu basis, non-cumulative dividends in an amount at least equal to eight percent (8%) of the original issuance price of the applicable series of Preferred Stock, when and if declared by the
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Board of Directors, as adjusted for any stock dividends, splits, combinations, recapitalizations, and certain similar events. No dividends per share shall be paid on common stock greater than that paid to the holders of the Preferred Stock on an as-converted basis. As of January 31, 2021 and April 30, 2021 (unaudited), no dividends have been declared or paid.
Liquidation—In the event of a liquidation, dissolution, or winding-up of SentinelOne, the holders of Series C, Series D, Series E, and Series F Preferred Stock shall be paid out of the proceeds before any payment shall be made to the holders of Series Seed, Series A, and Series B Preferred Stock, in the amount equal to original issuance price per share, as adjusted for any stock dividends, combinations, splits, recapitalizations, and certain similar events, plus any declared but unpaid dividends.
If upon liquidation, dissolution, or winding-up of SentinelOne, the distributable proceeds are insufficient to pay the holders of Series C, Series D, Series E, and Series F Preferred Stock, the distributable proceeds shall be distributed ratably among the holders of Series C, Series D, Series E, and Series F Preferred Stock in proportion to the full preferential amount each holder is otherwise entitled to receive.
Upon completion of distributions to the holder of Series C, Series D, Series E, and Series F Preferred Stock, the holders of Series B Preferred Stock shall be paid before any payment is made to the holders of Series Seed and Series A Preferred Stock, in an amount per share of Series B Preferred Stock equal to the original issuance price per share, as adjusted for any stock dividends, combinations, splits, recapitalizations, and certain similar events, plus any declared but unpaid dividends.
If upon liquidation, dissolution, or winding-up of SentinelOne, the distributable proceeds are insufficient to pay the holders of Series B Preferred Stock, the distributable proceeds shall be distributed ratably among the holders of Series B Preferred Stock in proportion to the full preferential amount each holder is otherwise entitled to receive.
Upon completion of distributions to the holder of Series B Preferred Stock, the holders of Series Seed and Series A Preferred Stock shall be paid before any payment is made to the holders of common stock, in an amount per share of Series Seed and Series A Preferred Stock equal to the original issuance price, as adjusted for any stock dividends, combinations, splits, recapitalizations, and certain similar events, plus any declared but unpaid dividends.
If upon liquidation, dissolution, or winding-up of SentinelOne, the distributable proceeds are insufficient to pay the holders of Series Seed and Series A Preferred Stock, the distributable proceeds shall be distributed ratably among the holders of Series Seed and Series A Preferred Stock in proportion to the full preferential amount each holder is otherwise entitled to receive.
After full payment has been made to the holders of Preferred Stock, all remaining proceeds will be paid out to the holders of common stock on pro rata based on the number of shares of common stock held by each such holder.
Conversion—Each share of Preferred Stock is convertible at the option of the holder at any time after issuance of such share into the number of shares of common stock as is determined by dividing the applicable original purchase price by the applicable conversion price in effect at the time of conversion, as adjusted for any stock dividends, combinations, splits, recapitalizations, and certain similar events.
The applicable conversion price is $0.2351 per share, $0.7779 per share, $1.1996 per share, $1.7460 per share, $3.2833 per share, and $12.0614 per share for Series Seed, Series A, Series B, Series C, Series D, and Series F Preferred Stock, respectively.
For Series E Preferred Stock, the initial conversion price of $4.8617 per share is compounded quarterly at a rate of 6.0% per annum, and the result is added to the conversion price for a period of five years thereafter. The conversion price for Series E was $3.6097 per share as of January 31, 2021 and $4.5192 as of April 30, 2021 (unaudited).
Each share of Preferred Stock will automatically be converted into common stock at the then applicable conversion rate immediately upon (i) the closing of an underwritten initial public offering with gross proceeds to us of at least $50.0 million, (ii) our initial listing of our common stock on Nasdaq, the New York Stock Exchange, or
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
another national securities exchange approved by our Board of Directors, or (iii) the date or the occurrence of an event, specified by vote or written consent of agreements of the holders of a majority of the then outstanding shares of Preferred Stock, voting together as a single class and not as separate series and on an as-converted basis.
However, if the automatic conversion is in connection with a liquidation event in which the proceeds to which the holders of Series C, Series D, Series E, and Series F Preferred Stock would be entitled is less than the amount in proportion to the full preferential amount each holder is otherwise entitled to receive, then the shares of Series C, Series D, Series E, and Series F Preferred Stock shall not be automatically converted into shares of common stock without the vote or written consent of the holders of at least 66 2/3% of the then outstanding shares of Preferred Stock.
Redemption—The Preferred Stock is not mandatorily redeemable, but is contingently redeemable upon a deemed liquidation event. Since a deemed liquidation event would constitute a redemption event outside of our control, all shares of Preferred Stock have been presented outside of permanent equity on the consolidated balance sheets.
10.COMMON STOCK
Our common stock reserved for future issuance on an as-converted basis as of January 31, 2020 and 2021 and April 30, 2021 (unaudited) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
As of April 30,
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Conversion of redeemable convertible preferred stock
|
113,523,948
|
|
|
168,951,059
|
|
|
169,438,121
|
|
|
Exercise of common stock warrants
|
1,276,686
|
|
|
954,884
|
|
|
954,884
|
|
|
Stock options outstanding
|
26,892,219
|
|
|
37,231,191
|
|
|
49,719,846
|
|
|
Stock options available for future grants
|
9,875,052
|
|
|
5,642,142
|
|
|
4,275,089
|
|
|
Total shares of common stock reserved
|
151,567,905
|
|
|
212,779,276
|
|
|
224,387,940
|
|
11.STOCK-BASED COMPENSATION
2013 Equity Incentive Plan
In July 2013, our Board of Directors adopted the 2013 Equity Incentive Plan (2013 Plan). The 2013 Plan provides for the grant of stock-based awards to employees, officers, directors, and other service providers.
In February 2020, October 2020, and March 2021 (unaudited), we increased the number of authorized shares of common stock by 57,000,000 shares, 24,659,000 shares, and 11,641,000 shares, respectively. As of January 31, 2021, we had 54,511,184 shares reserved for issuance pursuant to grants under our 2013 Plan, of which 5,642,142 shares remained available for grant. As of April 30, 2021 (unaudited), we had 66,145,509 shares reserved for issuance pursuant to grants under our 2013 Plan, of which 4,275,089 shares remained available for grant.
Options granted under the 2013 Plan expire ten years from the date of grant. The options generally vest 25% on the first anniversary of the grant date and monthly over the course of the following three years.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
A summary of our stock option plan activity under the 2013 Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term (in years)
|
|
Aggregate Intrinsic Value (in thousands)
|
|
Outstanding as of February 1, 2020
|
26,892,219
|
|
|
$
|
0.96
|
|
|
8.60
|
|
|
$
|
11,792
|
|
|
Granted
|
17,809,625
|
|
|
$
|
2.48
|
|
|
|
|
|
|
Exercised
|
(5,358,692)
|
|
|
$
|
0.86
|
|
|
|
|
|
|
Forfeited
|
(2,111,961)
|
|
|
$
|
1.36
|
|
|
|
|
|
|
Outstanding as of January 31, 2021
|
37,231,191
|
|
|
$
|
1.68
|
|
|
8.34
|
|
|
$
|
442,515
|
|
|
Granted (unaudited)
|
13,289,492
|
|
|
$
|
9.28
|
|
|
|
|
|
|
Exercised (unaudited)
|
(1,588,346)
|
|
|
$
|
1.19
|
|
|
|
|
|
|
Forfeited (unaudited)
|
(288,114)
|
|
|
$
|
2.38
|
|
|
|
|
|
|
Outstanding as of April 30, 2021 (unaudited)
|
48,644,223
|
|
|
$
|
3.77
|
|
|
8.60
|
|
|
$
|
1,024,149
|
|
|
Vested and exercisable as of January 31, 2021
|
13,051,372
|
|
|
$
|
1.07
|
|
|
7.23
|
|
|
$
|
163,166
|
|
|
Vested and exercisable as of April 30, 2021 (unaudited)
|
14,415,707
|
|
|
$
|
1.24
|
|
|
7.22
|
|
|
$
|
339,878
|
|
The weighted-average grant-date fair value of options granted during fiscal 2020 and fiscal 2021 was $0.43 per share and $1.63 per share, respectively. The aggregate grant-date fair value of options vested during fiscal 2020 and fiscal 2021 was $1.5 million and $5.1 million, respectively.
The weighted-average grant-date fair value of options granted during the three months ended April 30, 2020 and 2021 (unaudited) was $1.04 per share and $12.85 per share, respectively. The aggregate grant-date fair value of options vested during the three months ended April 30, 2020 and 2021 (unaudited) was $0.9 million and $4.2 million, respectively.
The aggregate intrinsic value is the difference between the exercise price and the estimated fair value of the underlying common stock. The aggregate intrinsic value of options exercised during fiscal 2020 and fiscal 2021 was $1.7 million and $27.0 million, respectively. The aggregate intrinsic value of options exercised during the three months ended April 30, 2020 and 2021 (unaudited) was $1.2 million and $27.1 million, respectively.
As of January 31, 2021, we had unrecognized stock-based compensation expense related to unvested options of $26.6 million that is expected to be recognized on a straight-line basis over a weighted-average period of 2.8 years.
As of April 30, 2021, we had unrecognized stock-based compensation expense related to unvested options of $173.3 million that is expected to be recognized on a straight-line basis over a weighted-average period of 2.1 years.
Performance Milestone Options
In February 2021, we granted 1,243,636 performance milestone options to purchase shares of common stock under the 2013 Plan. The performance milestone options are subject to service-based vesting conditions and achievements of certain milestones. We recognize compensation cost on a graded basis over the total requisite service period for each separately vesting portion of the performance tranches related to these performance milestone options. The grant-date fair value of the performance milestone options was $8.46, $8.57, and $8.69 per share for each of the performance tranches using the Black-Scholes option-pricing model. We assess the probability that the performance condition will be met for each of the performance tranches at the end of each reporting period, and recognize cumulative expense only for the performance tranches that are assessed to be probable of vesting.
During the three months ended April 30, 2021 (unaudited), we recorded $3.1 million of stock-based compensation expense.
Milestone Options
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
In March 2021, we granted 1,404,605 options to purchase shares of common stock subject to service-based, performance-based, and market-based vesting conditions to our Chief Executive Officer and Chief Financial Officer under the 2013 Plan. These stock options will vest 100% upon the occurrence of our IPO (the performance-based vesting condition) and the achievement of certain milestone events and our share price targets (the market-based vesting conditions), subject to the executive’s continued service to us from the grant date through the milestone events. For these options, we used a Monte Carlo simulation to determine the fair value at the grant date and the implied service period. We have not recognized any stock-based compensation expense associated with these options as the occurrence of an IPO is not deemed probable until consummated. In connection with our IPO, we expect to recognize stock-based compensation expense for the requisite service period rendered from the grant date through the IPO date.
Restricted Common Stock
In connection with the Scalyr, Inc. (Scalyr) acquisition, we granted 1,315,099 shares of restricted common stock with a fair value of $14.59 per share at the time of grant, that vest over a period of two years. During the three months ended April 30, 2021 (unaudited), we recorded $2.4 million of stock-based compensation expense. As of April 30, 2021 (unaudited), we had unrecognized stock-based compensation expense related to this unvested restricted common stock of $16.8 million that is expected to be recognized over the remaining vesting period of 1.8 years.
2011 Stock Incentive Plan
As part of the Scalyr acquisition, we assumed 2,138,347 options to purchase shares of common stock under the 2011 Stock Incentive Plan (2011 Plan), at a weighted-average exercise price of $1.74 per share and weighted-average fair value of $13.10 per share, of which 1,075,623 options remained outstanding with a weighted-average exercise price of $1.72 per share as of April 30, 2021 (unaudited). As of April 30, 2021 (unaudited), 283,861 options were vested and exercisable with a weighted-average exercise price of $1.72 per share. The aggregate grant-date fair value of options vested during the three months ended April 30, 2021 (unaudited) was $4.0 million. The total unrecognized stock-based compensation expense related to these options was $12.1 million, that is expected to be recognized on a straight-line basis over a weighted-average period of 1.1 years. During the three months ended April 30, 2021 (unaudited), 1,061,615 options were exercised with an aggregate intrinsic value of $15.7 million.
Secondary Stock Sales
In June 2019, we facilitated a secondary stock sale of our common stock. Under the terms of the sale, certain holders of Preferred Stock purchased 1,791,579 shares of common stock from certain employees at $2.7908 per share for an aggregate purchase price of $5.0 million. We recognized stock-based compensation expense of $2.5 million during fiscal 2020 in connection with the sale, which represented the difference between the purchase price and the fair value of the common stock on the date of the sale.
In February 2020, August 2020, and December 2020, we facilitated secondary stock sales of our common stock. Under the terms of each sale, certain holders of Preferred Stock purchased 1,371,252, 529,411, and 3,316,749 shares of common stock, respectively, from certain employees and non-employees at $3.65, $8.50, and $12.0614 per share, respectively. The aggregate purchase price was $5.0 million, $4.5 million, and $40.0 million for each respective sale. We recognized stock-based compensation expense of $8.7 million during fiscal 2021 in connection with these sales, which represented the difference between the purchase price and the fair value of the common stock on the date of each sale.
In April 2021 (unaudited), we facilitated a secondary sale of our common stock. Under the terms of the sale, certain Preferred Stock investors purchased 214,597 shares of common stock from an employee at $23.00 per share for an aggregate purchase price of $4.9 million. We recognized stock-based compensation expense of $0.2 million
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
during the three months ended April 30, 2021 (unaudited) in connection with this sale, which represented the difference between the purchase price and the fair value of the common stock on the date of the sale.
Common Stock Subject to Repurchase
Common stock purchased by employees pursuant to an early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest according to their respective vesting schedules and accordingly, the consideration received for early exercises are initially recorded as a liability and reclassified to common stock and additional paid-in capital as the underlying awards vest. These unvested shares may be repurchased by us in case of employment termination at the price paid by the purchaser for such shares. As of January 31, 2020 and 2021 and April 30, 2021 (unaudited), the balance of common stock subject to repurchase was not material.
Stock-Based Compensation Expense
We estimate the fair value of stock options granted using the Black-Scholes option pricing model based on the following assumptions:
Expected term – We determine expected term based on the average period the options are expected to remain outstanding using the simplified method, calculated as the midpoint of the options’ vesting term and contractual expiration period, until sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior becomes available.
Expected volatility – Since there is no trading history of our common stock, expected volatility is estimated based on the historical volatilities of a group of comparable publicly traded companies.
Risk-free interest rate – The risk-free interest rate is based on U.S. Treasury yields for a period that corresponds with the expected term of the award.
Dividend yield – As we do not currently issue dividends and do not expect to issue dividends on our common stock in the foreseeable future, the expected dividend yield is zero.
Fair value of underlying common stock – As our common stock is not publicly traded, the fair value was determined by the Board of Directors by considering a number of objective and subjective factors including input from management and contemporaneous third-party valuations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Expected term (in years)
|
6.0
|
|
6.0
|
|
6.0
|
|
6.0
|
|
Expected volatility
|
29.9%–30.7%
|
|
47.3%–48.7%
|
|
48.5
|
%
|
|
63.2%–66.0%
|
|
Risk-free interest rate
|
1.4%–2.5%
|
|
0.4%–0.6%
|
|
0.5
|
%
|
|
0.8%–1.1%
|
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
The components of stock-based compensation expense recognized in the consolidated statements of operations consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Cost of revenue
|
$
|
138
|
|
|
$
|
308
|
|
|
$
|
70
|
|
|
$
|
383
|
|
|
Research and development
|
1,686
|
|
|
6,590
|
|
|
2,763
|
|
|
7,139
|
|
|
Sales and marketing
|
1,034
|
|
|
3,835
|
|
|
461
|
|
|
2,047
|
|
|
General and administrative
|
1,488
|
|
|
5,179
|
|
|
357
|
|
|
3,868
|
|
|
Total
|
$
|
4,346
|
|
|
$
|
15,912
|
|
|
$
|
3,651
|
|
|
$
|
13,437
|
|
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
12.INCOME TAXES
Our loss before provision for income taxes for fiscal 2020 and fiscal 2021 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
2020
|
|
2021
|
|
Domestic
|
$
|
(1,700)
|
|
|
$
|
(18,159)
|
|
|
Foreign
|
(74,630)
|
|
|
(98,954)
|
|
|
Loss before provision for income taxes
|
$
|
(76,330)
|
|
|
$
|
(117,113)
|
|
The components of the provision for income taxes for fiscal 2020 and fiscal 2021 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
2020
|
|
2021
|
|
Current:
|
|
|
|
|
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
State
|
52
|
|
|
62
|
|
|
Foreign
|
185
|
|
|
398
|
|
|
Total current
|
237
|
|
|
460
|
|
|
Deferred
|
—
|
|
|
—
|
|
|
Total provision for income taxes
|
$
|
237
|
|
|
$
|
460
|
|
A reconciliation of the expected provision for (benefit from) income taxes at the statutory federal income tax rate to our recorded provision for income taxes consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
|
2020
|
|
2021
|
|
Benefit from income taxes at U.S. federal statutory rate
|
$
|
(16,029)
|
|
|
$
|
(24,594)
|
|
|
State taxes, net of federal benefit
|
41
|
|
|
49
|
|
|
Foreign tax rate differential
|
(6,852)
|
|
|
(1,836)
|
|
|
Stock-based compensation
|
771
|
|
|
1,195
|
|
|
Non-deductible expenses
|
109
|
|
|
84
|
|
|
Change in valuation allowance
|
22,857
|
|
|
25,564
|
|
|
Other
|
(660)
|
|
|
(2)
|
|
|
Total provision for income taxes
|
$
|
237
|
|
|
$
|
460
|
|
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Significant components of our net deferred tax assets and liabilities as of January 31, 2020 and 2021 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
|
2020
|
|
2021
|
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carryforwards
|
$
|
47,334
|
|
|
$
|
70,735
|
|
|
Research and development expenses
|
10,190
|
|
|
11,479
|
|
|
Accruals and reserves
|
5,574
|
|
|
12,986
|
|
|
Operating lease liabilities
|
—
|
|
|
5,416
|
|
|
Stock-based compensation
|
203
|
|
|
140
|
|
|
Other
|
126
|
|
|
532
|
|
|
Gross deferred tax assets
|
63,427
|
|
|
101,288
|
|
|
Valuation allowance
|
(57,977)
|
|
|
(86,032)
|
|
|
Total deferred tax assets
|
5,450
|
|
|
15,256
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Property and equipment and intangible assets
|
(179)
|
|
|
(1,217)
|
|
|
Deferred contract acquisition costs
|
(5,271)
|
|
|
(9,697)
|
|
|
Operating lease right-of-use assets
|
—
|
|
|
(4,342)
|
|
|
Total deferred tax liabilities
|
(5,450)
|
|
|
(15,256)
|
|
|
Net deferred tax assets
|
$
|
—
|
|
|
$
|
—
|
|
Based upon available objective evidence, we believe it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, we have established a valuation allowance for gross deferred tax assets. As of January 31, 2020 and 2021, we had a valuation allowance of $58.0 million and $86.0 million, respectively, against our deferred tax assets. During fiscal 2020 and fiscal 2021, the total valuation allowance increased by $22.9 million and $28.0 million, respectively, primarily due to additional net operating losses.
As of January 31, 2021, we had federal net operating loss carryforwards of $20.7 million, which will begin to expire in 2034, and state net operating loss carryforwards of $74.0 million, which will begin to expire in 2027. We also had foreign net operating loss carryforwards of $266.8 million, which do not expire.
In addition, we had federal research and development credit carryforwards of $0.1 million, which will begin to expire in 2039, and state research and development credit carryforwards of $0.2 million, which do not expire.
Federal and state tax laws impose substantial restrictions on the utilization of the net operating loss carryforwards and tax credit carryforwards in the event of an ownership change as defined in Section 382 of the Internal Revenue Code of 1986, as amended. Accordingly, our ability to utilize these carryforwards may be limited as a result of such ownership change. Such a limitation could result in the expiration of carryforwards before they are utilized. The carryforwards are currently subject to a valuation allowance, as discussed above.
Foreign withholding taxes have not been provided for the cumulative undistributed earnings of certain foreign subsidiaries of us as of January 31, 2020 and 2021 due to our intention to permanently reinvest such earnings. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.
As of January 31, 2020 and 2021, we do not have any material uncertain tax positions. As of and for the years ended January 31, 2020 and 2021, no interest and penalties have been accrued with respect to unrecognized tax benefits.
We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Our tax years generally remain open and subject to examination by federal, state, or foreign tax authorities. We are currently under examination by the Israel Tax Authorities for the 2015 through 2018 tax years. We are not currently under audit in any other tax jurisdictions.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Three Months Ended April 30, 2020 and 2021 (Unaudited)
We compute our tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjusting for discrete items arising in that quarter.
We had an effective tax rate of (0.2)% and (0.2)% for the three months ended April 30, 2020 and 2021, respectively. We have incurred U.S. operating losses and have minimal profits or offsetting loss carryforwards in certain foreign jurisdictions.
13.NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic and diluted net loss per share attributable to common stockholders was as follows (in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
$
|
(76,567)
|
|
|
$
|
(117,573)
|
|
|
$
|
(26,638)
|
|
|
$
|
(62,634)
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
|
32,712,350
|
|
|
35,482,444
|
|
|
33,973,809
|
|
|
45,725,703
|
|
|
Net loss per share attributable to common stockholders, basic and diluted
|
$
|
(2.34)
|
|
|
$
|
(3.31)
|
|
|
$
|
(0.78)
|
|
|
$
|
(1.37)
|
|
The following potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders because their inclusion would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
Redeemable convertible preferred stock
|
113,523,948
|
|
168,951,059
|
|
145,355,821
|
|
169,438,121
|
|
Stock options
|
26,892,219
|
|
37,231,191
|
|
34,890,227
|
|
49,719,846
|
|
Common stock warrants
|
1,276,686
|
|
954,884
|
|
1,276,686
|
|
954,884
|
|
Shares subject to repurchase
|
42,500
|
|
37,500
|
|
105,000
|
|
344,975
|
|
Restricted common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
1,315,099
|
|
Contingently issuable shares
|
—
|
|
|
—
|
|
|
—
|
|
|
1,317,079
|
14.GEOGRAPHIC INFORMATION
Long-lived assets, consisting of property and equipment, net, by geography were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
As of April 30,
|
|
|
2020
|
|
2021
|
|
2021
|
|
|
|
|
|
|
(unaudited)
|
|
United States
|
$
|
1,607
|
|
|
$
|
4,694
|
|
|
$
|
5,177
|
|
|
Israel
|
6,719
|
|
|
8,653
|
|
|
9,774
|
|
|
Rest of world
|
3
|
|
|
26
|
|
|
20
|
|
|
Total
|
$
|
8,329
|
|
|
$
|
13,373
|
|
|
$
|
14,971
|
|
See Note 3 for revenue by geography.
|
|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
15.COMMITMENTS AND CONTINGENCIES
Legal Contingencies
From time to time, we may be a party to various legal proceedings and subject to claims in the ordinary course of business.
BlackBerry Litigation
Starting in October 2019, BlackBerry Corp. and its subsidiary Cylance, Inc. (BlackBerry) filed a total of nine proceedings (seven lawsuits and two arbitrations) against us and certain former BlackBerry employees who joined our company. In these proceedings, BlackBerry alleges that it has viable legal claims as a result of its former employees joining us. Many of these proceedings have now been dismissed. The status of each of the currently pending proceedings is discussed below. We have defended against these claims and expect to continue to defend against these claims.
BlackBerry Corp., et al. v. Coulter, et al. On October 17, 2019, BlackBerry commenced an action captioned BlackBerry Corp., et al. v. Coulter, et al., No. 953-10-19 (Vt. Super. Ct.) (Vermont Action) against Chris Coulter, an employee on our Vigilance services team. On October 23, 2019, BlackBerry filed an amended complaint that added us as a defendant. The amended complaint asserts claims against us for conspiracy, tortious interference with contract, aiding and abetting breach of fiduciary duties, and misappropriation of trade secrets. The court entered a preliminary injunction order enjoining Mr. Coulter from working for us through February 2021. As a result of the court’s order, Mr. Coulter chose to seek other employment and is no longer employed by us. On January 15, 2021, the court entered an order narrowing the scope of the case and limiting the claims against us in order to avoid conflict with a similar action that was previously filed in California and was dismissed. The Vermont Action is currently pending. On October 25, 2019, BlackBerry commenced an action captioned BlackBerry Corp., et al v. Coulter, et al., No. 2019-0854-JTL (Del. Ch.) against Mr. Coulter and us in Delaware Chancery Court. The court stayed this case pending resolution of the Vermont Action, and on February 7, 2020, BlackBerry voluntarily dismissed without prejudice all claims against Mr. Coulter and us. On December 3, 2019, BlackBerry initiated a largely duplicative action in arbitration solely against Mr. Coulter administered by JAMS, an alternative dispute resolution provider. That arbitration action, however, was dismissed on or about March 30, 2021, with JAMS informing us that they had closed their files on this matter on April 30, 2021.
BlackBerry Corp., et al. v. Page, et al. On November 18, 2019, BlackBerry commenced an action captioned BlackBerry Corp., et al. v. Page, et al., No. 2019-CP-07-2552 (S.C. Cir. Ct.) against Barnaby Page, a go-to-market employee, and us, in a South Carolina state court. The complaint asserts claims against us for aiding and abetting breach of fiduciary duties, tortious interference with contract, and misappropriation of trade secrets. Following initial discovery, on August 27, 2020, we and Mr. Page filed a joint motion for judgment on the pleadings. The motion is currently pending and discovery is ongoing.
Blackberry Corp. et al. v. Sentinel Labs, Inc., et al. On January 16, 2020, BlackBerry commenced the action captioned, BlackBerry Corp., et al. v. Sentinel Labs, Inc., et al., No. 20CV361950 (Cal. Super. Ct. Santa Clara Cnty.) (Current California Action), against us and unnamed “Doe” defendants, asserting claims against us for trade secret misappropriation and unfair business practices. We filed counterclaims that, in part, seek to invalidate any agreements allegedly supporting BlackBerry’s claims against its former employees. On December 14, 2020, we filed a motion requesting that BlackBerry sufficiently identify any trade secrets it alleges we misappropriated in accordance with California law. On February 12, 2021, the court granted that motion in part, including striking BlackBerry’s expert testimony, and limiting the scope of discovery to customer lists and sales-related information. On March 15, 2021, BlackBerry re-filed a statement identifying its trade secrets to pursue broader claims and discovery. In response, on April 6, 2021, we again filed a motion requesting that BlackBerry sufficiently identify any trade secrets under California law. On May 24, 2021, the court granted the motion in our favor, absent a few discrete areas permitted by the court, which order will be entered following any redactions requested by Blackberry. We continue to litigate this action and pursue counterclaims, and limited discovery regarding the trade secret claims
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|
|
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SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
from Blackberry that survived our motions and their non-trade secret claims, as well as discovery regarding our counterclaims, is ongoing.
BlackBerry Corp., et al. v. Quinn, et al. On February 17, 2020, BlackBerry commenced the action captioned BlackBerry Corp., et al. v. Quinn, et al., No. D-1-GN-20-00096 (Tex. Civ. Ct. – Travis Cnty.) against Sean Quinn, a go-to-market employee, and us, in Texas state court. On August 8, 2020, we and Mr. Quinn moved to stay or dismiss the case in light of the overlapping issues between this case and the Current California Action. On September 21, 2020, the court stayed this case pending resolution of the Current California Action. This lawsuit remains stayed and is pending in abeyance before the Texas court.
We have not recorded any accruals for loss contingencies associated with these legal proceedings, determined that an unfavorable outcome is probable, or determined that the amount or range of any possible loss is reasonably estimable. We believe that there are no other pending or threatened legal proceedings that are likely to have a material adverse effect on our consolidated financial statements.
Warranties and Indemnification
Our services are generally warranted to deliver and operate in a manner consistent with general industry standards that are reasonably applicable and materially conform with our documentation under normal use and circumstances. Our contracts generally include certain provisions for indemnifying customers against liabilities if our products or services infringe a third party’s intellectual property rights.
We also offer a limited warranty to certain customers, subject to certain conditions, to cover certain costs incurred by the customer in case of a cybersecurity breach on us. We have entered into an insurance policy to cover our potential liability arising from this limited warranty arrangement. We have not incurred any material costs related to such obligations and have not accrued any liabilities related to such obligations in the consolidated financial statements as of January 31, 2020 and 2021 and April 30, 2021 (unaudited).
In addition, we also indemnify certain of our directors and executive officers against certain liabilities that may arise while they are serving in good faith in their company capacities. We maintain director and officer insurance coverage that would generally enable us to recover a portion of any future amounts paid.
16.EMPLOYEE BENEFIT PLAN
Our U.S. employees participate in a 401(k) defined contribution plan sponsored by us. Contributions to the plan are discretionary. There were no matching contributions by us for fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited).
Israeli Severance Pay
Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. Pursuant to Section 14 of the Severance Compensation Act, 1963 (Section 14), all of our employees in Israel are entitled to monthly deposits made in their name with insurance companies, at a rate of 8.33% of their monthly salary.
These payments release us from any future severance payment obligation with respect to these employees; as such, any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset on our consolidated balance sheets. For fiscal 2020 and fiscal 2021 and the three months ended April 30, 2020 and 2021 (unaudited), we recorded $1.7 million, $2.7 million, $0.5 million, and $0.8 million, respectively, in severance expenses related to these employees.
17.ACQUISITIONS (UNAUDITED)
On February 6, 2021, we executed a merger agreement to acquire 100% of the issued and outstanding equity securities (the Acquisition) of Scalyr, a leading cloud-native, cloud-scale data analytics platform. This acquisition will allow us to advance our data ingestion, search, and retention capabilities. The Acquisition closed on February 9,
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|
|
|
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SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
2021 and has been accounted for as a business combination in accordance with ASC Topic 805, Business Combinations. The aggregate consideration transferred was $125.3 million, of which $5.0 million was paid in cash, $106.2 million was comprised of 7,277,214 shares of common stock, and $14.1 million was comprised of assumed options to purchase 2,138,347 shares of common stock. As part of the purchase agreement, we entered into non-compete agreements with the founder and the co-founder of Scalyr with a term of 3 years and a fair value of $0.7 million. The fair value of the non-compete agreements was excluded from the purchase consideration and the net assets acquired, resulting in purchase consideration of $124.6 million. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date.
The assets acquired and liabilities assumed in connection with the acquisition were recorded at their preliminary fair value on the date of acquisition as follows (in thousands):
|
|
|
|
|
|
|
|
|
Amount
|
|
Cash and cash equivalents
|
$
|
699
|
|
|
Accounts receivable
|
3,665
|
|
|
Restricted cash
|
444
|
|
|
Prepaid expense
|
277
|
|
|
Intangible assets
|
17,150
|
|
|
Goodwill
|
108,193
|
|
|
Accounts payable
|
(412)
|
|
|
Deferred revenue
|
(5,041)
|
|
|
Other liabilities
|
(347)
|
|
|
Total purchase consideration
|
$
|
124,628
|
|
The excess of the purchase price over the preliminary fair value of net tangible and intangible assets acquired has been assigned to goodwill. Goodwill represents the future benefits as a result of the acquisition that will enhance our product available to both new and existing customers and increase our competitive position. Goodwill is not deductible for tax purposes.
The following table sets forth the preliminary amounts allocated to the intangible assets identified and their estimated useful lives as of the date of acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Useful Life
|
|
|
(in thousands)
|
|
(in years)
|
|
Developed technology
|
$
|
15,500
|
|
|
7
|
|
|
Customer relationships
|
1,500
|
|
|
2
|
|
|
Trademarks
|
150
|
|
|
2
|
|
|
Total intangible assets acquired
|
$
|
17,150
|
|
|
|
The preliminary fair value assigned to the developed technology was determined using the multi-period excess earnings method of the income approach. The preliminary fair value assigned to the customer relationships was determined using the distributor method under the income approach, which includes estimates of customer attrition rates. The intangible assets acquired are expected to be amortized over their useful lives on a straight-line basis.
As part of the consideration transferred, we withheld 1,317,079 shares of our common stock with a fair value of $14.59 per share at the time of grant (Holdback Shares) and $0.4 million of cash related to certain obligations, including indemnification for potential breach of general representations and warranties of the sellers. The Holdback
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|
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|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Shares and cash are expected to be released 18 months from the Acquisition closing date, subject to claims for any obligations.
In connection with the Acquisition, we granted 1,315,099 shares of restricted common stock that vest over a period of two years contingent on continued employment, for which stock-based compensation expense will be recognized ratably over the vesting period.
There was no other contingent consideration or cash consideration expected to be paid out subsequent to the Acquisition. The results of operations of Scalyr have been included in our consolidated financial statements from the date of Acquisition.
We have incurred $1.4 million of transaction costs in connection with the Acquisition during fiscal 2021 and for the three months ended April 30, 2021. These costs were recorded as general and administrative expenses in the consolidated statements of operations.
The following unaudited pro forma financial information summarizes the results of operations of SentinelOne and Scalyr as if the Acquisition occurred on February 1, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31,
|
|
Three Months Ended April 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
Revenue
|
$
|
101,875
|
|
|
$
|
19,635
|
|
|
$
|
37,470
|
|
|
Net loss
|
$
|
(171,321)
|
|
|
$
|
(41,553)
|
|
|
$
|
(64,992)
|
|
Our consolidated statements of operations from the acquisition date to the period ended April 30, 2021 includes revenue and net loss of Scalyr of $2.4 million and $2.1 million, respectively. The pro forma results reflect certain adjustments for the amortization of acquired intangible assets, adjustments to revenue resulting from the fair value adjustment to deferred revenue, recognition of stock-based compensation, and acquisition-related costs. Such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the Acquisition been completed on the date indicated, nor is it indicative of our future operating results.
18.SUBSEQUENT EVENTS
We have evaluated subsequent events for the period from January 31, 2021, the date of these consolidated financial statements, through May 15, 2021, the date these consolidated financial statements were available to be issued.
On February 6, 2021, we executed a merger agreement to acquire 100% of the issued and outstanding equity securities (the Acquisition) of Scalyr, Inc. (Scalyr), which allows us to advance our data ingestion, search, and retention capabilities, for cash of $4.9 million, 7,277,214 shares of common stock, and assumed options to purchase 2,138,347 shares of common stock awards. The Acquisition closed on February 9, 2021. Due to the proximity of the close of the transaction to the issuance of these financial statements, we have not completed our measurement of the share-based components of the Acquisition-date fair value of consideration transferred nor have we completed our provisional valuation of net tangible and identifiable intangible assets acquired and liabilities assumed. We will recognize and disclose our measurement of the Acquisition-date fair value of consideration transferred and our provisional allocation of purchase consideration in the quarter ended April 30, 2021.
As part of the consideration transferred, we withheld 1,317,079 shares of our common stock (Holdback Shares) and $0.1 million of cash for indemnification obligations related to potential breach of general representations and warranties of the sellers. The Holdback Shares and cash will be released 18 months from the Acquisition closing date, subject to claims for any indemnification obligations. The Holdback Shares and cash have been included in the purchase consideration.
In connection with the Acquisition, we granted 1,315,099 shares of restricted common stock that vest over a period of two years, for which stock-based compensation expense will be recognized over the vesting period.
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|
|
|
|
SENTINELONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
There was no other contingent consideration or cash consideration expected to be paid out subsequent to the Acquisition. The results of operations of Scalyr will be included in our consolidated financial statements from the date of Acquisition.
We have incurred $1.1 million of transaction costs in connection with the Acquisition before and after fiscal 2021. These costs were recorded as general and administrative expenses in the consolidated statements of operations.
Subsequent to January 31, 2021, our Board of Directors authorized the grant of 1,243,636 performance milestone options and 10,641,251 service-based options to various officer and non-officer employees to purchase shares of common stock. The performance milestone options are subject to service-based vesting conditions and achievement of certain milestones. The service-based options are subject to continued service and generally vest over four to five years.
In March 2021, our Board of Directors authorized the grant of an aggregate of 1,404,605 options to purchase shares of common stock subject to service-based, performance-based, and market-based vesting conditions to our Chief Executive Officer and Chief Financial Officer under the 2013 Plan. These stock options will vest 100% upon the achievement of certain milestone events subject to the executive’s continued service to us from the date of the grant through the milestone events. For these options, we will use a Monte Carlo simulation to determine the fair value at the grant date and the implied service period. We have not recognized any stock-based compensation expense associated with these options as the achievement of the performance-based condition was not deemed probable.
In March 2021, we increased the number of authorized shares of common stock from 264,659,000 to 276,293,325.
In April 2021, we facilitated a secondary sale of our common stock. Under the terms of the sale, certain Preferred Stock investors purchased 214,597 shares of common stock from an employee at $23.00 per share for an aggregate purchase price of $4.9 million.
In April 2021, we entered into a non-cancellable purchase commitment with our cloud infrastructure vendor for a total value of $250.0 million over the next three years.
19.SUBSEQUENT EVENTS (UNAUDITED)
We have evaluated subsequent events through June 3, 2021, the date the unaudited interim consolidated financial statements were available to be issued.
In May 2021, we granted options to purchase 759,131 shares of common stock, subject to service-based vesting conditions, with a weighted-average exercise price of $16.19 per share to employees and directors.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all costs and expenses to be paid by the Registrant, other than underwriting discounts and commissions, in connection with the sale of Class A common stock being registered hereby. All amounts shown are estimates except for the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee and the NYSE listing fee:
|
|
|
|
|
|
|
|
|
Amount Paid or to be Paid
|
|
SEC registration fee
|
$
|
10,910
|
|
|
FINRA filing fee
|
15,500
|
|
|
NYSE listing fee
|
25,000
|
|
|
Printing and engraving expenses
|
*
|
|
Legal fees and expenses
|
*
|
|
Accounting fees and expenses
|
*
|
|
Transfer agent and registrar fees and expenses
|
*
|
|
Miscellaneous expenses
|
*
|
|
Total
|
$ *
|
__________________
*To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the DGCL, authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
As permitted by the DGCL, the Registrant’s restated certificate of incorporation to be effective upon the completion of this offering contains provisions that eliminate the personal liability of its directors for monetary damages for any breach of fiduciary duties as a director, except liability for the following:
•any breach of the director’s duty of loyalty to the Registrant or its stockholders;
•acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•under Section 174 of the DGCL (regarding unlawful dividends and stock purchases); or
•any transaction from which the director derived an improper personal benefit.
As permitted by the DGCL, the Registrant’s restated bylaws to be effective upon the completion of this offering, provide that:
•the Registrant is required to indemnify its directors and executive officers to the fullest extent permitted by the DGCL, subject to very limited exceptions;
•the Registrant may indemnify its other employees and agents as set forth in the DGCL;
•the Registrant is required to advance expenses, as incurred, to its directors and executive officers in connection with a legal proceeding to the fullest extent permitted by the DGCL, subject to very limited exceptions; and
•the rights conferred in the restated bylaws are not exclusive.
Prior to completion of this offering, the Registrant intends to enter into indemnification agreements with each of its then-current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in its restated certificate of incorporation and restated bylaws and to provide additional procedural protections. There is no pending litigation or proceeding involving a director or executive officer of the Registrant for which indemnification is sought. The indemnification provisions in its restated certificate of incorporation, restated bylaws and the indemnification agreements entered into or to be entered into between the Registrant and each of its directors and executive officers may be sufficiently broad to permit indemnification of the directors and executive officers for liabilities arising under the Securities Act.
The Registrant currently carries liability insurance for its directors and officers.
Certain of the Registrant’s directors are also indemnified by their employers with regard to service on the Registrant’s board of directors.
In addition, the underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification by the underwriters of the Registrant and its officers and directors for certain liabilities arising under the Securities Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since April 30, 2018, the Registrant has issued and sold the following securities:
1.In October 2020, the Registrant sold an aggregate of 22,128,982 shares of its Series F redeemable convertible preferred stock at a purchase price of $12.0614 per share for an aggregate purchase price of $266,906,504.
2.In February 2020, the Registrant sold an aggregate of 31,405,183 shares of its Series E redeemable convertible preferred stock at a purchase price of $4.8617 per share for an aggregate purchase price of $152,682,578.
3.In May 2019, the Registrant sold an aggregate of 29,078,931 shares of its Series D redeemable convertible preferred stock at a purchase price of $3.2833 per share for an aggregate purchase price of $95,475,823.
4.The Registrant granted options to its directors, officers, employees, consultants, and other service providers to purchase an aggregate of 53,758,983 shares of its Class B common stock under the 2013 Plan with per share exercise prices ranging from $0.65 to $16.19, and the Registrant issued 10,765,711 shares of its Class B common stock upon exercise of stock options under its 2013 Plan and issued 1,135,815 shares of its Class B common stock upon exercise of stock options under its 2011 Plan.
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 or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)Exhibits.
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|
|
|
|
|
|
|
|
|
|
Exhibit
Number
|
|
Description of Document
|
|
1.1*
|
|
Form of Underwriting Agreement.
|
|
2.1†
|
|
|
|
3.1
|
|
|
|
3.2
|
|
|
|
3.3
|
|
|
|
3.4
|
|
|
|
4.1*
|
|
Form of Class A Common Stock certificate of SentinelOne, Inc.
|
|
4.2
|
|
|
|
4.3
|
|
|
|
5.1*
|
|
Opinion of Fenwick & West LLP.
|
|
10.1
|
|
|
|
10.2#
|
|
|
|
10.3#
|
|
|
|
10.4#
|
|
|
|
10.5#
|
|
|
|
10.6
|
|
|
|
10.7
|
|
|
|
10.8
|
|
|
|
21.1
|
|
|
|
23.1
|
|
|
|
23.2*
|
|
Consent of Fenwick & West LLP (included in Exhibit 5.1).
|
|
24.1
|
|
|
|
99.1**
|
|
|
__________________
*To be filed by amendment.
# Represents management compensation plan, contract or arrangement.
† Portions of this exhibit have been omitted in compliance with Regulation S-K Item 601(a)(5). The registrant undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC
(b) Financial Statement Schedules.
All financial statement schedules are omitted because the information required to be set forth therein is not applicable or is shown in the consolidated financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(a)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.
(b)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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Mountain View, California, on the 3rd day of June, 2021.
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|
|
SENTINELONE, INC.
|
|
|
|
|
By:
|
/s/ Tomer Weingarten
|
|
|
Tomer Weingarten
|
|
|
Chairman of the Board of Directors, President, and Chief Executive Officer
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Tomer Weingarten and David Bernhardt, and each of them, as his or her true and lawful attorneys-in-fact, proxies, and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, proxies, and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, proxies, and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
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|
|
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|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Tomer Weingarten
|
|
Chairman of the Board of Directors, President, and Chief Executive Officer (Principal Executive Officer)
|
|
June 3, 2021
|
|
Tomer Weingarten
|
|
|
|
|
|
|
|
|
|
/s/ David Bernhardt
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
June 3, 2021
|
|
David Bernhardt
|
|
|
|
|
|
|
|
|
|
/s/ Charlene T. Begley
|
|
Director
|
|
June 3, 2021
|
|
Charlene T. Begley
|
|
|
|
|
|
|
|
|
|
/s/Aaron Hughes
|
|
Director
|
|
June 3, 2021
|
|
Aaron Hughes
|
|
|
|
|
|
|
|
|
|
/s/ Mark S. Peek
|
|
Director
|
|
June 3, 2021
|
|
Mark S. Peek
|
|
|
|
|
|
|
|
|
|
/s/ Daniel Scheinman
|
|
Director
|
|
June 3, 2021
|
|
Daniel Scheinman
|
|
|
|
|
|
|
|
|
|
/s/ Robert Schwartz
|
|
Director
|
|
June 3, 2021
|
|
Robert Schwartz
|
|
|
|
|
|
|
|
|
|
/s/ Teddie Wardi
|
|
Director
|
|
June 3, 2021
|
|
Teddie Wardi
|
|
|
|
/s/ Jeffery W. Yabuki
|
|
Director
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June 3, 2021
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Jeffery W. Yabuki
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Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
SENTINEL LABS, INC.,
a Delaware corporation,
SYRACUSE ACQUISITION SUB, INC.,
a Delaware corporation,
SCALYR, INC.,
a Delaware corporation,
and
FORTIS ADVISORS LLC, as the Stockholders’ Agent
__________________________
Dated as of February 6, 2021
__________________________
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
Exhibits
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Exhibit A
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Definitions
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Exhibit B
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Form of Non-Competition Agreement
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Exhibit C
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Form of Vesting Agreement
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Exhibit D
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Form of Benefits Agreement
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Exhibit E
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Form of Stockholder Agreement
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Exhibit F
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Form of Investor Representation Agreement
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Exhibit G
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Form of Written Consent
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Exhibit H
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Form of Certificate of Merger
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Exhibit I-1
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Form of FIRPTA Notice
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Exhibit I-2
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Form of FIRPTA Notification Letter
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Exhibit J
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Form of Parachute Payment Waiver
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Exhibit K
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Form of Generic Benefits Waiver
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Schedules
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Company Disclosure Letter
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Acquirer Disclosure Letter
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Schedule A-1
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Key Employees
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Schedule A-2
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Restricted Key Employees
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Schedule B
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Revest Employees
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Schedule C
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Specified Employees
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Schedule D
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Consenting Stockholders
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Schedule E-1
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Required Consents, Waivers and Approvals
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Schedule E-2
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Contracts to be Amended or Terminated
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Schedule F-1
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Confirmatory IP Assignments
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Schedule F-2
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Evidence of IP Ownership
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Schedule G
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Performance Milestones
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Schedule H
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Specific Indemnity Matter
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “Agreement”) is made and entered into as of February 6, 2021 (the “Agreement Date”), by and among Sentinel Labs, Inc., a Delaware corporation (“Acquirer”), Syracuse Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Acquirer (“Merger Sub”), Scalyr, Inc., a Delaware corporation (the “Company”), and Fortis Advisors LLC, a Delaware limited liability company, as the stockholders’ agent (the “Stockholders’ Agent”). Certain other terms used herein are defined in Exhibit A.
RECITALS
A. Acquirer, Merger Sub and the Company intend to effect a merger of Merger Sub with and into the Company, pursuant to which the Company would survive and become a wholly owned subsidiary of Acquirer (the “Merger”) in accordance with this Agreement, the DGCL.
B. The board of directors of the Company (the “Board”) has carefully considered the terms of this Agreement and has unanimously (1) declared this Agreement and the transactions contemplated by this Agreement and the documents referenced herein, including the Merger (collectively, the “Transactions”), upon the terms and subject to the conditions set forth herein, advisable, fair to and in the best interests of the Company and the Company Stockholders, (2) approved this Agreement in accordance with Applicable Law and (3) adopted a resolution directing that the adoption of this Agreement be submitted to the Company Stockholders for consideration and recommending that all of the Company Stockholders adopt this Agreement and approve the Merger.
C. Acquirer, Merger Sub and the Company intend that the Merger qualify as a “reorganization” within the meaning of Section 368(a) of the Code. The parties hereby adopt this Agreement as a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g).
D. Concurrently with the execution of this Agreement, and as a condition and inducement to Acquirer’s and Merger Sub’s willingness to enter into this Agreement, (1) each of the individuals set forth on Schedule A-1 (each, a “Key Employee”) has executed Acquirer’s customary form of employment offer letter, together with a confidential information and invention assignment agreement (together, an “Offer Letter”), each to become effective upon the Closing and (2) the Company’s Chief Executive Officer has executed an addendum to her offer letter with the Company regarding her post-Closing employment by the Company (the “CEO Offer Letter Addendum”).
E. Concurrently with the execution of this Agreement, and as a condition and inducement to Acquirer’s and Merger Sub’s willingness to enter into this Agreement, each of the Key Employees set forth on Schedule A-2 (each, a “Restricted Key Employee”) has executed a non-competition and non-solicitation agreement in substantially the form attached hereto as Exhibit B (a “Non-Competition Agreement”), each to become effective upon the Closing.
F. Concurrently with the execution of this Agreement, and as a condition and inducement to Acquirer’s and Merger Sub’s willingness to enter into this Agreement, each of the individuals set forth on Schedule B (the “Revest Employees”) has executed a vesting agreement in substantially the form attached hereto as Exhibit C (a “Vesting Agreement”) with respect to the vesting requirements of the shares of Acquirer Common Stock and options to acquire shares of Acquirer Common Stock such individual would receive pursuant to Section 1.3(a) of this Agreement, each
to become effective upon the Closing.
G. Concurrently with the execution of this Agreement, and as a condition and inducement to Acquirer’s and Merger Sub’s willingness to enter into this Agreement, each of the individuals set forth on Schedule C (the “Specified Employees”) has executed a benefits waiver in favor of the Company and Acquirer in substantially the form attached hereto as Exhibit D (a “Benefits Waiver”), to be effective as of the Closing.
H. Concurrently with the execution of this Agreement, and as a condition and inducement to Acquirer’s and Merger Sub’s willingness to enter into this Agreement, the Company Stockholders identified on Schedule D (collectively, the “Consenting Stockholders”), shall enter into and deliver to Acquirer (1) a stockholder agreement in substantially the form attached hereto as Exhibit E (the “Stockholder Agreement”) and (2) if an Accredited Investor, an investor representation agreement in substantially the form attached hereto as Exhibit F (the “Investor Representation Agreement”).
I. Immediately following the execution of this Agreement, the Company shall seek to obtain and deliver to Acquirer a written consent in substantially the form attached hereto as Exhibit G (a “Written Consent”) executed by the Consenting Stockholders, evidencing (1) adoption of this Agreement and approval of the Merger by (i) the holders of at least a majority of the outstanding shares of Company Common Stock and Company Preferred Stock (voting together as a single voting class on an as-converted to Company Common Stock basis), (ii) the holders of a majority of the outstanding shares of Company Preferred Stock, which must include a majority of the outstanding Company Series A-1 Preferred Stock (voting together as a single class on an as-converted basis) and (iii) the holders of at least a majority of the outstanding shares of Company Common Stock (the “Company Stockholder Approval”) and (2) the election of stockholders holding at least a majority of the then-outstanding shares of the Company Preferred Stock, including a majority of the then-outstanding shares of Company Series A-1 Preferred Stock, to automatically convert the Company Preferred Stock into Company Common Stock effective as of immediately prior to the Closing in accordance with the Certificate of Incorporation (the “Conversion Election”).
NOW, THEREFORE, in consideration of the representations, warranties, covenants, agreements and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
(a) Merger. Upon the terms and subject to the conditions set forth herein, at the Effective Time, Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease and the Company shall become a wholly owned subsidiary of Acquirer (sometimes referred to herein as the “Surviving Corporation”).
(b) Effects of the Merger. The Merger shall have the effects set forth herein and in the applicable provisions of the DGCL.
(c) Closing. Upon the terms and subject to the conditions set forth herein, the closing of the Transactions (the “Closing”) shall take place remotely by electronic exchange of documents and
signatures at a date and time to be agreed by Acquirer and the Company, which date shall, unless otherwise agreed by Acquirer and the Company, be no later than the third Business Day following the date on which all of the conditions set forth in Section 1.2 hereof have been satisfied or waived (other than those conditions that, by their terms, are intended to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions). The date on which the Closing occurs is sometimes referred to herein as the “Closing Date.”
(d) Effective Time. A certificate of merger satisfying the applicable requirements of the DGCL, in substantially the form attached hereto as Exhibit H (the “Certificate of Merger”), shall be duly executed by the Company and, concurrently with or as soon as practicable following the Closing, delivered to the Secretary of State of the State of Delaware for filing. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as Acquirer and the Company agree and specify in the Certificate of Merger (the “Effective Time”).
(e) Certificate of Incorporation and Bylaws; Directors and Officers. Unless otherwise determined by Acquirer and the Company prior to the Effective Time:
(i) the certificate of incorporation of the Company shall be amended and restated as of the Effective Time to read as set forth in the Certificate of Merger, until thereafter amended as provided by the DGCL;
(ii) the Company shall take all actions necessary to cause the bylaws of the Company to be amended and restated as of the Effective Time to be identical (other than as to name) to the bylaws of Merger Sub as in effect immediately prior to the Effective Time; and
(iii) the directors and officers of Merger Sub immediately prior to the Effective Time shall be the only directors and officers of the Surviving Corporation immediately after the Effective Time until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.
1.2 Closing Deliveries; Conditions.
(a) Acquirer Deliveries. Acquirer shall deliver to the Company, at or prior to the Closing, a certificate, dated as of the Closing Date and executed on behalf of Acquirer by a duly authorized officer, to the effect that each of the conditions set forth in Section 1.2(d)(i) have been satisfied.
(b) Company Deliveries. The Company shall deliver to Acquirer, at or prior to the Closing:
(i) a certificate, dated as of the Closing Date and executed on behalf of the Company by its Chief Executive Officer, to the effect that each of the conditions set forth in Section 1.2(e)(i) and (v) have been satisfied;
(ii) a certificate, dated as of the Closing Date and executed on behalf of the Company by its Secretary, certifying (A) the certificate of incorporation of the Company (the “Certificate of Incorporation”) in effect as of the Closing, (B) the bylaws of the Company (the “Bylaws”) in effect as of the Closing, (C) the resolutions of the Board (I) declaring this Agreement and the Transactions, upon the terms and subject to the conditions set forth herein,
advisable, fair to and in the best interests of the Company and the Company Stockholders, (II) approving this Agreement in accordance with the DGCL or the CCC, as applicable and (III) directing that the adoption of this Agreement be submitted to the Company Stockholders for consideration and recommending that all of the Company Stockholders adopt this Agreement and approve the Merger and (D) the resolutions of the Company Stockholders adopting this Agreement and approving the Merger and the Conversion Election;
(iii) written acknowledgments pursuant to which any Person that is entitled to any Transaction Expenses acknowledges (A) the total amount of Transaction Expenses that (I) has been incurred and paid to such Person prior to the Closing and (II) has been incurred and remains payable to such Person as of the Closing (and/or the formula by which any additional Transaction Expenses that have not been quantified as of the Closing will be calculated) and (B) that, upon payment of such remaining payable amount at the Closing (or when otherwise due), such Person shall be paid in full and shall not be owed any other amount by any of Acquirer, the Company and/or their respective Affiliates;
(iv) a Written Consent executed by each Consenting Stockholder and evidencing obtainment of holders of outstanding Company Capital Stock representing at least 95% of all shares of Company Capital Stock outstanding as of immediately prior to the Closing and at least 95% of the voting power of all shares of Company Capital Stock outstanding as of immediately prior to the Closing (collectively, the “Requisite Stockholder Approval”);
(v) (A) a Stockholder Agreement, executed by each Consenting Stockholder and (B) an Investor Representation Agreement, executed by each Consenting Stockholder who is an Accredited Investor;
(vi) (A) an Offer Letter and release of claims, effective as of the Closing, executed by each of the Key Employees, (B) either an Offer Letter and release of claims, effective as of the Closing, or written confirmation of continued employment with the Surviving Corporation and release of claims, executed or delivered by at least 90% of the employees of the Company who have received offers of continued employment with Acquirer or the Surviving Corporation and (C) the CEO Offer Letter Addendum, executed by the Company’s Chief Executive Officer;
(vii) a Non-Competition Agreement, each effective as of the Closing, executed by each of the Restricted Key Employees;
(viii) a Vesting Agreement, effective as of the Closing, executed by each of the Revest Employees;
(ix) a Benefits Waiver executed by the Company and each Specified Employee;
(x) a resignation letter reasonably satisfactory to Acquirer executed by each director and officer of the Company in office immediately prior to the Closing, in each case, effective as of, and contingent upon, the Effective Time;
(xi) a separation agreement or similar document, including a general release of claims against the Company, its successors (including Acquirer) and their respective Affiliates, in a form reasonably satisfactory to Acquirer, executed by each of those Company employees who, as designated by Acquirer (A) have not received an offer of continued employment with
Acquirer or the Surviving Corporation prior to the Closing Date or (B) have declined an offer of continued employment with Acquirer or the Surviving Corporation prior to the Closing Date, in each case to be effective no later than immediately prior to the Closing (collectively, the “Designated Employees”), it being understood that, for the avoidance of doubt, any severance or similar expenses in connection with clauses (A) and (B) of this paragraph shall not be treated as Transaction Expenses or Specified Employee Liabilities or reduce the calculation of Company Cash hereunder (except to the extent such amounts were stipulated in employment or severance agreements to which the Company was a party as of December 28, 2020 or with respect to clause (B), the employee in question received an offer of continued employment providing for equal or greater base salary and target bonus, in the aggregate);
(xii) unless otherwise requested by Acquirer in writing no less than three Business Days prior to the Closing Date, (A) a true, correct and complete copy of resolutions adopted by the Board or any applicable committee thereof, certified by the Secretary of the Company, terminating, or if sponsored by a professional employer (or similar organization), withdrawing from participation in the Company’s 401(k) plan (the “401(k) Plan”) and any other Company Employee Plan identified by Acquirer in writing no less than three Business Days prior to the Closing Date, and (B) an amendment to the 401(k) Plan in a form prescribed by Acquirer and reasonably acceptable to the Company, executed by the Company, that is sufficient to assure compliance with all applicable requirements of the Code and regulations thereunder so that the Tax-qualified status of the 401(k) Plan shall be maintained at the time of its termination, with such amendment and termination to be effective as of the date immediately preceding the Closing Date and contingent upon the Closing;
(xiii) (A) a certificate from the Secretary of State of the States of Delaware and California and each of the other state or other jurisdiction in which the Company is qualified to do business as a foreign corporation, dated within five Business Days prior to the Closing Date, certifying that the Company is in good standing and that all applicable franchise and similar Taxes and fees of the Company through and including the Closing Date have been paid;
(xiv) evidence reasonably satisfactory to Acquirer of the termination or waiver of any rights of first refusal, rights to any liquidation preference, redemption rights, conversion rights (other than pursuant to the Conversion Election) and rights of notice of any Company Securityholder with respect to any of the Transactions, effective as of, and contingent upon the Closing;
(xv) the Spreadsheet completed in a form reasonably satisfactory to Acquirer and a certificate executed by the Chief Executive Officer of the Company, dated as of the Closing Date, certifying on behalf of the Company that the Spreadsheet is true, correct and complete;
(xvi) the Company Closing Financial Certificate;
(xvii) FIRPTA documentation, consisting of (A) a notice to the IRS, in accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2), in substantially the form attached hereto as Exhibit I-1, dated as of the Closing Date and executed by the Company, together with written authorization for Acquirer to deliver such notice form to the IRS on behalf of the Company after the Closing, and (B) a FIRPTA notification letter, in substantially the form attached hereto as Exhibit I-2, dated as of the Closing Date and executed by the Company;
(xviii) the Certificate of Merger, executed by the Company;
(xix) evidence reasonably satisfactory to Acquirer of (A) the Company’s receipt of all consents, waivers and approvals described in Schedule E-1 and (B) the amendment (in a form and manner reviewed by and reasonably acceptable to Acquirer) or termination, as applicable, of each of the Contracts listed on Schedule E-2, as described therein;
(xx) (A) confirmatory assignments of Intellectual Property Rights in a form and manner reviewed by and reasonably acceptable to Acquirer from each of the individuals listed on Schedule F-1 and (B) evidence reasonably satisfactory to Acquirer that the Company has secured exclusive ownership of all Intellectual Property developed, reduced to practice or conceived of by the individuals listed on Schedule F-2 in connection with any services performed for the Company;
(xxi) payoff letters or similar instruments in form and substance reasonably satisfactory to Acquirer with respect to all Company Debt for borrowed money, which letters provide for the release of all Encumbrances relating to such Company Debt following satisfaction of the terms contained in such payoff letters (including the payment in full and discharge of all principal and accrued but unpaid interest and any premiums or other fees payable in connection with such Company Debt);
(xxii) evidence reasonably satisfactory to Acquirer that all Encumbrances on assets of the Company shall have been released prior to, or shall be released simultaneously with, the Closing, including documentation in form and substance reasonably satisfactory to Acquirer executed by each Person holding a security interest in any asset of the Company as of the Closing Date terminating any and all such security interests and authorizing Acquirer to file or record on behalf of such Person a UCC-3 termination statement or other instruments of release or discharge; and
(xxiii) prior to the solicitation of the Company Stockholder vote described under Section 4.8, a parachute payment waiver, in substantially the form attached hereto as Exhibit J (the “Parachute Payment Waiver”), executed by each Person required to execute such a waiver pursuant to Section 4.8.
Receipt by Acquirer of any of the agreements, instruments, certificates or documents delivered pursuant to this Section 1.2(b) shall not be deemed to be an agreement by Acquirer or Merger Sub that the information or statements contained therein are true, correct or complete, and shall not diminish Acquirer’s or Merger Sub’s remedies hereunder if any of the foregoing agreements, instruments, certificates or documents are not true, correct or complete.
(c) Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each party hereto to consummate the Transactions shall be subject to the satisfaction or waiver in writing at or prior to the Closing of each of the following conditions:
(i) Company Stockholder Approval. The Company Stockholder Approval shall have been duly and validly obtained.
(ii) Illegality. No Order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger shall be in effect, and no action shall have been taken by any Governmental Entity seeking any of the foregoing, and no Applicable Law or Order shall have been enacted, entered, enforced or deemed applicable to the Merger that makes the consummation of the Merger illegal.
(iii) Governmental Approvals. Acquirer, Merger Sub and the Company shall have timely obtained from each Governmental Entity all approvals, waivers and consents, if any, necessary for consummation of, or in connection with, the Merger.
(d) Additional Conditions to Obligations of the Company. The obligations of the Company to consummate the Transactions shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions (it being understood and agreed that each such condition is solely for the benefit of the Company and may be waived by the Company in writing in its sole discretion without notice or Liability to any Person):
(i) Representations, Warranties and Covenants. The representations and warranties made by Acquirer herein shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the Closing Date as though such representations and warranties were made on and as of such dates (except for representations and warranties that address matters only as to a specified date or dates, which representations and warranties shall be true and correct with respect to such specified date or dates). Acquirer shall have performed and complied in all material respects with all covenants, agreements and obligations herein required to be performed and complied with by Acquirer at or prior to the Closing.
(ii) Receipt of Closing Deliveries. The Company shall have received each of the agreements, instruments, certificates and other documents set forth in Section 1.2(a).
(e) Additional Conditions to the Obligations of Acquirer. The obligations of Acquirer and Merger Sub to consummate the Transactions shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions (it being understood and agreed that each such condition is solely for the benefit of Acquirer and Merger Sub and may be waived by Acquirer (on behalf of itself and/or Merger Sub) in writing in its sole discretion without notice or Liability to any Person):
(i) Representations, Warranties and Covenants. The representations and warranties made by the Company herein shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the Closing Date as though such representations and warranties were made on and as of such date (except for representations and warranties that address matters only as to a specified date or dates, which representations and warranties shall be true and correct with respect to such specified date or dates). The Company shall have performed and complied in all material respects with all covenants, agreements and obligations herein required to be performed and complied with by the Company at or prior to the Closing.
(ii) Receipt of Closing Deliveries. Acquirer shall have received each of the agreements, instruments, certificates and other documents set forth in Section 1.2(b).
(iii) Injunctions or Restraints on Conduct of Business. No Order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition limiting or restricting Acquirer’s ownership, conduct or operation of the Business following the Closing shall be in effect, and no Legal Proceeding seeking any of the foregoing, or any other injunction, restraint or material damages in connection with Transactions or prohibiting or limiting the consummation of the Transactions, shall be pending or threatened.
(iv) No Legal Proceedings. No Governmental Entity or other Person shall have commenced or threatened to commence any Legal Proceeding challenging or seeking the recovery of a material amount of damages in connection with the Transactions or seeking to prohibit or limit the exercise by Acquirer of any material right pertaining to ownership of Equity Interests of the Final Surviving Entity.
(v) No Material Adverse Effect. There shall not have occurred a Material Adverse Effect with respect to the Company that is continuing.
1.3 Effect on Company Securities.
(a) Treatment of Company Capital Stock; Company Options and Company Warrants. Upon the terms and subject to the conditions set forth herein, at the Effective Time, by virtue of the Merger and without any action on the part of any party hereto, Company Stockholder or any other Person:
(i) Treatment of Company Capital Stock.
(A) Each share of Company Capital Stock, including any Unvested Company Shares, held by a Converting Holder immediately prior to the Effective Time (other than Dissenting Shares and shares that are owned by the Company as treasury stock) shall be cancelled and automatically converted into the right to receive, subject to and in accordance with Section 1.3(a)(i)(B), Section 1.4, the terms of a Vesting Agreement to which such Converting Holder is a party and the execution and delivery to Acquirer of a Stockholder Agreement and, if an Accredited Investor, an Investor Representation Agreement, a number of shares of Acquirer Common Stock equal to the Per Share Consideration; provided, however, if a Converting Holder is not an Accredited Investor, (1) such Converting Holder shall instead receive cash equal to the Per Share Consideration multiplied by the Acquirer Stock Price and (2) all other terms of this Agreement that would have otherwise applied to such Acquirer Common Stock shall apply mutatis mutandis to such cash, including, but not limited to, Section 1.4(b) (Holdback Amount) and Article V (Holdback Fund and Indemnification); provided, further, that unless otherwise agreed in writing by Acquirer, if a Converting Holder has not confirmed accreditation within 15 Business Days following the Closing pursuant to a duly executed and completed Investor Representation Agreement, such Converting Holder shall be deemed to not be an Accredited Investor and shall only be entitled to receive cash as set forth above. No fractional shares of Acquirer Common Stock will be issued and no cash in lieu of fractional shares of Acquirer Common Stock shall be paid in connection with the Merger. The number of shares of Acquirer Common Stock each Company Stockholder is entitled to receive pursuant to this Section 1.3(a)(i) for such shares of Company Capital Stock shall be rounded down to the nearest whole share and computed after aggregating all shares of Company Capital Stock held by such Company Stockholder.
(B) The issuance of shares of Acquirer Common Stock pursuant to this Section 1.3(a)(i) in exchange for Unvested Company Shares issued and outstanding immediately prior to the Effective Time shall be subject to the same restrictions and vesting arrangements that were applicable to such Unvested Company Shares immediately prior to or at the Effective Time (and no vesting acceleration shall occur by reason of the Merger or any subsequent event, such as termination of employment), except and to the extent as may be specifically set forth in any Vesting Agreement or
Benefits Waiver. All outstanding rights to repurchase Unvested Company Shares that the Company may hold or similar restrictions in the Company’s favor immediately prior to the Effective Time shall be assigned to Acquirer in the Merger and shall thereafter be exercisable by Acquirer upon the same terms and subject to the same conditions that were in effect immediately prior to the Effective Time (as such may be amended pursuant the terms of an Vesting Agreement or Benefits Waiver, if applicable).
(ii) Treatment of Company Options. Upon the terms and subject to the conditions set forth herein, at the Effective Time, by virtue of the Merger and without any action on the part of any party hereto, Company Optionholder or any other Person:
(A) Each Company Option that is unexpired, unexercised and outstanding immediately prior to the Effective Time shall, on the terms and subject to the conditions set forth in this Agreement, be assumed by Acquirer, in accordance with the terms of the applicable Company Option Plan and/or stock option agreement by which the applicable Company Option was evidenced (including the vesting schedule for each such Company Option, to the extent applicable), except that from and after the Effective Time: (A) Acquirer shall be substituted for the Company and the Board, or such committee of the Board delegated authorization for, administering such Company Option Plan, (B) each assumed option may be exercised solely for shares of Acquirer Common Stock (or cash, if so provided under the terms of such Company Option or required or necessary for compliance reasons under Applicable Law), (C) the number of shares of Acquirer Common Stock subject to each option assumed by Acquirer shall be equal to the number of shares of Company Common Stock subject to each corresponding Company Option immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole share and (D) the per share exercise price under each such option assumed by Acquirer shall be adjusted by dividing the per share exercise price under each such option by the Exchange Ratio and rounding up to the nearest cent. Notwithstanding the above, and to the extent permitted by Applicable Law if applicable under the terms of the Company Options, the holder thereof shall waive the ability to early exercise the corresponding assumed options.
(B) The Company shall, prior to the Closing, take or cause to be taken all actions, and shall obtain all consents, as may be required to effect the treatment of Company Options pursuant to this Section 1.3(a)(ii).
(iii) Treatment of Company Warrants. Prior to the Effective Time, the Company shall deliver to the holders of Company Warrants notices consistent with the terms and conditions of the applicable Company Warrant. No Company Warrant, whether vested or unvested, shall be assumed by Acquirer in the Merger. At the Effective Time, each Company Warrant will, by virtue of the Merger, and without any action on the part of any party hereto, Company Warrantholder or any other Person, be cancelled and extinguished at the Effective Time without any present or future right to receive any portion of the Total Merger Consideration.
(iv) Treatment of Company Capital Stock Owned by the Company. At the Effective Time, all shares of Company Capital Stock that are owned by the Company as treasury stock immediately prior to the Effective Time shall be cancelled and extinguished without any conversion thereof or payment of any cash or other property or consideration therefor and shall cease to exist.
(b) Treatment of Merger Sub Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquirer, Merger Sub or any other Person, each share of capital stock of Merger Sub that is issued and outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation (and the shares of the Surviving Corporation into which the shares of Merger Sub capital stock are so converted shall be the only shares of the Surviving Corporation’s capital stock that are issued and outstanding immediately after the Effective Time). From and after the Effective Time, each certificate evidencing ownership of a number of shares of Merger Sub capital stock will evidence ownership of such number of shares of common stock of the Surviving Corporation.
(c) Appraisal Rights. Notwithstanding anything to the contrary contained herein, any Dissenting Shares shall not be converted into the right to receive the applicable portion of the Total Merger Consideration, but shall instead be converted into the right to receive such consideration as may be determined to be due with respect to any such Dissenting Shares pursuant to the DGCL or the CCC, as applicable. Each holder of Dissenting Shares who, pursuant to the DGCL or the CCC, as applicable, becomes entitled to payment thereunder for such shares shall receive payment therefor in accordance with the DGCL or the CCC, as applicable (but only after the value therefor shall have been agreed upon or finally determined pursuant to such provisions). If, after the Effective Time, any Dissenting Shares shall lose their status as Dissenting Shares, then any such shares shall immediately be deemed to have converted at the Effective Time into the right to receive the applicable portion of the Total Merger Consideration in respect of such shares as if such shares never had been Dissenting Shares, and Acquirer shall issue and deliver to the holder thereof, at (or as promptly as reasonably practicable after) the applicable time or times specified in Section 1.4(a), following the satisfaction of the applicable conditions set forth in Section 1.4(a), the applicable portion of the Total Merger Consideration as if such shares never had been Dissenting Shares. The Company shall provide to Acquirer (i) prompt notice of any demands for appraisal or purchase received by the Company, withdrawals of such demands and any other instruments related to such demands served pursuant to the DGCL or the CCC, as applicable and received by the Company and (ii) the right to direct all negotiations and proceedings with respect to such demands under the DGCL or the CCC, as applicable. The Company shall not, except with the prior written consent of Acquirer, or as otherwise required under the DGCL or the CCC, as applicable, voluntarily make any payment or offer to make any payment with respect to, or settle or offer to settle, any claim or demand in respect of any Dissenting Shares. Subject to Section 5.2, the payout of consideration under this Agreement to the Converting Holders (other than in respect of Dissenting Shares, which shall be treated as provided in this Section 1.3(c) and under the DGCL or the CCC, as applicable) shall not be affected by the exercise or potential exercise of appraisal rights or dissenters’ rights under the DGCL by any other Company Stockholder.
(d) Rights Not Transferable. The rights of the Company Securityholders under this Agreement as of immediately prior to the Effective Time are personal to each such Company Securityholder and shall not be transferable for any reason, other than by operation of law, will or the laws of descent and distribution without action taken by or on behalf of such Company Securityholder. Any attempted transfer of such right by any holder thereof (other than as permitted by the immediately preceding sentence) shall be null and void.
(e) No Interest. Notwithstanding anything to the contrary contained herein, no interest shall accumulate on any cash payable in connection with the consummation of the Transactions.
1.4 Payment Procedures.
(a) Surrender of Certificates.
(i) As of the Effective Time, all shares of Company Capital Stock shall no
longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any such shares of Company Capital Stock (each, a “Certificate”) shall cease to have any rights with respect thereto, except the right to receive, in all cases in accordance with and subject to the terms of this Agreement (including Section 1.4(a)(iii) below), the applicable portion of the Total Merger Consideration to be issued or paid, as applicable, in consideration therefor. No later than one Business Day prior to the Closing Date, the Company shall deliver written instruction to its transfer agent, eShares, Inc., d/b/a Carta, Inc. (“Carta”), with a copy to Acquirer, directing Carta to (A) cancel all Certificates, such cancellation to be effective as of the Effective Time, and (B) deliver to Acquirer, as promptly as practicable, but in no event later than one Business Day after the Effective Time, written confirmation of the cancellation of all Certificates.
(ii) As soon as reasonably practicable after the Closing, to the extent not previously delivered, Acquirer shall mail, or cause to be mailed, a letter of transmittal in customary form together with instructions for use thereof (including any applicable attachments thereto or other documentation required thereby, including a certification as to such holder’s status as an “accredited investor” as such term is defined in Rule 501 of Regulation D of the Securities Act, the “Letter of Transmittal”), Stockholder Agreement and Investor Representation Agreement to every holder of record of Company Capital Stock that was issued and outstanding immediately prior to the Effective Time. The Letter of Transmittal shall be in such form and have such other provisions as Acquirer may reasonably specify, including an agreement to be bound by the provisions of Article V and to release, solely in his, her or its capacity as a Company Stockholder, the Company and the Surviving Corporation from any claims, rights, Liabilities and causes of action whatsoever based upon, relating to or arising out of the Certificates and/or the Transactions.
(iii) As soon as reasonably practicable after the date of delivery to Acquirer or its agent of a properly completed and duly executed Stockholder Agreement and either a Letter of Transmittal or, if an Accredited Investor, an Investor Representation Agreement, the holder of record of such Certificate shall be entitled to receive the amount of shares of Acquirer Common Stock that such holder has the right to receive pursuant to Section 1.3(a)(i) in respect of such Certificate, less a number of shares of Acquirer Common Stock equal to such Converting Holder’s Pro Rata Share of the Holdback Amount.
(iv) Upon receipt of written confirmation of the effectiveness of the Merger from the Secretary of State of the State of Delaware, Acquirer will issue to each Converting Holder the shares of Acquirer Common Stock issuable to such Converting Holder pursuant to Section 1.3(a)(i), less a number of shares of Acquirer Common Stock equal to such Converting Holder’s Pro Rata Share of the Holdback Amount, in each case other than in respect of Dissenting Shares to holders thereof. The deliveries and issuances required under this Section 1.4(a)(iv) are to be made as promptly as practicable following the submission of a properly completed and duly executed Letter of Transmittal, Stockholder Agreement and, if an Accredited Investor, an Investor Representation Agreement by such Converting Holder.
(b) Holdback Amount.
(i) Notwithstanding anything to the contrary in the other provisions of this Article I, Acquirer shall withhold from each Converting Holder’s applicable portion of the Total Merger Consideration issuable to such Converting Holder pursuant to Section 1.3(a)(i) such Converting Holder’s Pro Rata Share of the Holdback Amount; provided that with respect to any Converting Holder who has not confirmed accreditation to Acquirer at or prior to the Closing
pursuant to a duly executed and completed Investor Representation Agreement, such Converting Holder’s Pro Rata Share of the Holdback Amount shall initially be withheld by Acquirer in cash, but may subsequently be substituted with an equivalent number of shares of Acquirer Common Stock (based upon the Acquirer Stock Price) upon confirmation of his, her or its accreditation pursuant to a duly executed and completed Investor Representation Agreement. Each Converting Holder who is entitled to receive, pursuant to Section 1.3(a)(i), vested and unvested shares of Acquirer Common Stock upon the Closing shall contribute pro rata to the Holdback Amount based on such Converting Holder’s vested and unvested shares of Acquirer Common Stock; provided that any unvested shares of Acquirer Common Stock in the Holdback Fund shall vest before any unvested shares of Acquirer Common Stock not in the Holdback Fund and any recoveries under Article V shall be first be recovered against vested shares of Acquirer Common Stock. The Holdback Fund shall constitute partial security for the benefit of Acquirer (on behalf of itself or any other Indemnified Person) with respect to any Indemnifiable Damages pursuant to the indemnification obligations of the Converting Holders under Section 1.6(f) and Article V, and shall be held and distributed in accordance with Section 1.6(f) and Section 5.1. The adoption of this Agreement and the approval of the principal terms of the Merger by the Company Stockholders shall constitute, among other things, approval of the Holdback Amount, the withholding of the Holdback Amount by Acquirer and the appointment of the Stockholders’ Agent.
(ii) In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to shares of Acquirer Common Stock occurring after the Effective Time and prior to the Holdback Release Date, all references herein to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
(c) Legends. Any shares of Acquirer Common Stock to be issued pursuant to this Agreement shall bear the following legends (along with any other legends that may be required under Applicable Law):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SHARES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER AND FIRST REFUSAL RIGHTS HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY WAY DISPOSED OF EXCEPT AS SET FORTH IN A STOCKHOLDER AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND FIRST REFUSAL RIGHTS ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A MARKET STANDOFF RESTRICTION AS SET FORTH IN A CERTAIN STOCKHOLDER AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. AS A RESULT OF SUCH AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180 DAYS AFTER THE EFFECTIVE DATE OF CERTAIN PUBLIC OFFERINGS OF THE COMMON STOCK OF THE ISSUER HEREOF. SUCH RESTRICTION IS BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE ISSUER.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO INDEMNITY AND HOLDBACK OBLIGATIONS SET FORTH IN A CERTAIN AGREEMENT AND PLAN OF MERGER AND REORGANIZATION WITH THE ISSUER, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH OBLIGATIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.
(d) Transfers of Ownership. If any shares of Acquirer Common Stock issuable pursuant to Section 1.3(a)(i) are to be paid or issued, as applicable, to a Person other than the Person to which the Certificate surrendered in exchange therefor is registered, it shall be a condition of the payment and issuance thereof that such Certificate shall be properly endorsed and otherwise in proper form for transfer and that the Person requesting such exchange shall have paid to Acquirer or any agent designated by Acquirer any transfer or other Taxes required by reason of the payment of cash in any name other than that of the registered holder of such Certificate, or established to the satisfaction of Acquirer or any agent designated by Acquirer that such Tax has been paid or is not payable.
(e) No Liability. Notwithstanding anything to the contrary in this Section 1.4, no party hereto shall be liable to any Person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar Applicable Law.
(f) Unclaimed Consideration. Each holder of a Certificate who has not theretofore complied with the exchange procedures set forth in and contemplated by this Section 1.4 shall look only to Acquirer (subject to abandoned property, escheat and similar Applicable Law) for its claim, only as a general unsecured creditor thereof, to any portion of the Total Merger Consideration issuable pursuant to Section 1.3(a)(i) in respect of such Certificate. Notwithstanding anything to the contrary contained herein, if any holder of a Certificate has not complied with Section 1.4(a)(iii) prior to the earlier of the eighteen (18) month anniversary of the Effective Time and such date on which the applicable portion of the Total
Merger Consideration issuable pursuant to Section 1.3(a)(i) in respect of such Certificate would otherwise escheat to, or become the property of, any Governmental Entity, any amounts payable in respect of such Certificate shall, to the extent permitted by Applicable Law, become the property of Acquirer, free and clear of all claims or interests of any Person previously entitled thereto.
1.5 No Further Ownership Rights in the Company Capital Stock. The applicable portion of the Total Merger Consideration issued or issuable, as applicable, following the surrender for exchange of the Certificates in accordance with this Agreement shall be issued or issuable, as applicable, in full satisfaction of all rights pertaining to the shares of Company Capital Stock represented by such Certificates, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Capital Stock that were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate, document or instrument representing shares of Company Capital Stock is presented to the Surviving Corporation for any reason, such Certificate, document or instrument (and the underlying shares of Company Capital Stock) shall be cancelled and exchanged as provided in this Article I.
1.6 Company Net Working Capital Adjustment.
(a) Within 90 days after the Closing, Acquirer shall prepare the calculation of Company Net Working Capital (the “NWC Calculations”) by delivering to the Stockholders’ Agent a notice (the “Acquirer NWC Notice”) setting forth Acquirer’s calculation of Company Net Working Capital and the amount by which Company Net Working Capital as calculated by Acquirer is less than or more than Company Net Working Capital as set forth in the Company Closing Financial Certificate, in each case together with supporting documentation, information and calculations. Any matters not expressly set forth in the Acquirer NWC Notice shall be deemed to have been accepted by Acquirer, except for such other matters contained in the NWC Calculations that are affected by the ultimate resolution of the matters in dispute. Acquirer shall provide the Stockholders’ Agent and its representatives reasonable access at reasonable times and upon reasonable notice to the records, properties, personnel and (subject to the execution of customary work paper access letters if requested) auditors relating to the preparation of the Acquirer NWC Notice and shall cause its personnel to reasonably cooperate with the Stockholders’ Agent in connection with its review of the Acquirer NWC Notice.
(b) The Stockholders’ Agent may object to the calculation of Company Net Working Capital set forth in the Acquirer NWC Notice by providing written notice of such objection to Acquirer within 30 days after Acquirer’s delivery of the Acquirer NWC Notice (the “Notice of Objection”), together with supporting documentation, information and calculations. Any matters not expressly set forth in the Notice of Objection shall be deemed to have been accepted by the Stockholders’ Agent on behalf of the Converting Holders, except for such other matters contained in the NWC Calculations that are affected by the ultimate resolution of the matters in dispute.
(c) If the Stockholders’ Agent timely provides the Notice of Objection, then Acquirer and the Stockholders’ Agent shall confer in good faith for a period of up to ten Business Days following Acquirer’s timely receipt of the Notice of Objection in an attempt to resolve any disputed matter set forth in the Notice of Objection, and any resolution by them shall be in writing and shall be final and binding on the parties hereto and the Converting Holders.
(d) If, after the ten Business Day period set forth in Section 1.6(c), Acquirer and the Stockholders’ Agent cannot resolve any matter set forth in the Notice of Objection, then Acquirer and the Stockholders’ Agent shall engage a nationally recognized independent accounting firm reasonably acceptable to both Acquirer and the Stockholders’ Agent, with which neither has an existing relationship (the “Independent Accountant”) to review only the matters in the Notice of Objection that are still
disputed by Acquirer and the Stockholders’ Agent and the NWC Calculations to the extent relevant thereto. After such review and a review of the Company’s relevant books and records, the Independent Accountant shall promptly (and in any event within 60 days following its engagement) determine the resolution of such remaining disputed matters, which determination shall be final and binding on the parties hereto and the Converting Holders, and the Independent Accountant shall provide Acquirer and the Stockholders’ Agent with a calculation of Company Net Working Capital in accordance with such determination. The Independent Accountant shall make its determination as an auditor, not an arbitrator, and based solely on the written submissions of Acquirer and the Stockholders’ Agent of the appropriate amount of each of the items which remain in dispute. With respect to each disputed line item, the determination of the Independent Accountant shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Acquirer or the Stockholders’ Agent, as applicable. Notwithstanding the foregoing, the scope of the disputes to be resolved by the Independent Accountant shall be limited to fixing mathematical errors and determining whether any disputed determination of Company Net Working Capital or any component thereof was properly calculated in accordance with the terms of this Agreement. The Independent Accountant is not authorized to, and shall not, make any other determination, including (A) any determination with respect to any matter included in the Company Closing Financial Statement, Acquirer NWC Notice or Notice of Objection other than those matters that were properly submitted for resolution to the Independent Accountant or (B) any determination as to the accuracy of the representations and warranties set forth in this Agreement.
(e) In the event that Acquirer and Stockholders’ Agent submit any unresolved objections with respect to the Company Net Working Capital to the Independent Accountant for resolution as provided in Section 1.6(d), Acquirer and the Stockholders’ Agent (on behalf of the Converting Holders) shall each pay their own fees and expenses. The costs and charges of the Independent Accountant will be allocated between the parties based on the inverse of the percentage its determination (before such allocation) bears to the aggregate amount of the items in dispute as originally submitted to the Independent Accountant. By way of illustration and not limitation, assuming the items in dispute total an amount equal to $1,000 and the Independent Accountant awards $600 in favor of the Stockholders’ Agent’s position, 60% of the costs of its review would be borne by Acquirer and 40% of such costs would be borne by the Converting Holders.
(f) In the event the Company Net Working Capital as finally determined pursuant to Section 1.6(b), Section 1.6(c), Section 1.6(d) and/or Section 1.6(e), as the case may be (the “Closing Net Working Capital”) is less than the Company Net Working Capital calculated in the Company Closing Financial Certificate, the Closing Net Working Capital Shortfall will be recalculated using the Closing Net Working Capital, and the Converting Holders shall severally but not jointly, based on their respective Pro Rata Share, indemnify and hold harmless Acquirer, without any objection by the Stockholders’ Agent, for the full amount (if any) by which the Company Net Working Capital Shortfall has increased in magnitude and Acquirer shall be entitled at its discretion to either (i) cancel a number of shares of Acquirer Common Stock equal to (x) the aggregate amount of such indemnification obligation divided by (y) the Acquirer Stock Price or (ii) if such indemnification obligation amount exceeds $500,000, seek recourse directly against the Converting Holders based on their Pro Rata Share for any amount in excess of $500,000 (it being understood that such indemnification obligation may be satisfied in the discretion of any Converting Holder by cash, a forfeiture of Acquirer Common Stock with a deemed value equal to the Acquirer Stock Price or a combination thereof).
(g) In the event the Closing Net Working Capital is greater than the Company Net Working Capital calculated in the Company Closing Financial Certificate, the Closing Net Working Capital Shortfall will be recalculated using the Closing Net Working Capital, and Acquirer will distribute to the Converting Holders (according to their respective Pro Rata Shares) a number of shares of Acquirer
Common Stock equal to the quotient obtained by dividing (i) the full amount (if any) by which the Company Net Working Capital Shortfall has decreased in magnitude by (ii) the Acquirer Stock Price.
(h) Acquirer’s right to indemnification pursuant to this Section 1.6 will not be subject to any of the limitations set forth in Article V. Any payments made pursuant to this Section 1.6 shall be treated as adjustments to the Total Merger Consideration for all Tax purposes to the maximum extent permitted under Applicable Law. For clarity, the process set forth in this Section 1.6 shall be the exclusive remedy of Acquirer and the Stockholders’ Agent for disputes related to the Acquirer NWC Notice, Notice of Objection and any amounts set forth therein.
1.7 Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other Taxes and fees (including any penalties and interest) incurred in connection with this Agreement shall be paid by the applicable Company Securityholder when due, and such Company Securityholder shall, at its own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees.
1.8 Withholding Rights. Each of Acquirer, Merger Sub, the Surviving Corporation and their respective subsidiaries shall be entitled to deduct and withhold from any amounts otherwise payable pursuant to this Agreement to any Key Employee, any Continuing Employee, any holder of any shares of Company Capital Stock or Certificates or any other Person, such amounts as are required to be deducted and withheld under the Code or any provision of state, local, provincial or foreign Tax law. To the extent that amounts are so deducted and withheld and paid over to or credited by the appropriate Governmental Entity, such amounts shall be treated for all purposes of this Agreement as having been paid to such Persons in respect of which such deduction and withholding was made.
1.9 Taking of Necessary Action; Further Action. If, at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and interest in, to and under, and/or possession of, all assets, property, rights, privileges, powers and franchises of the Company, the officers and directors of the Surviving Corporation are fully authorized, in the name and on behalf of the Company or otherwise, to take all lawful action necessary or desirable to accomplish such purpose or acts, so long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to the disclosures set forth in the disclosure letter of the Company delivered to Acquirer concurrently with the execution of this Agreement (the “Company Disclosure Letter”) (each of which disclosures, in order to be effective, shall clearly indicate the Section and, if applicable, the Subsection of this Article II to which it relates (unless and only to the extent the relevance to other representations and warranties is readily apparent from the actual text of the disclosures without any reference to extrinsic documentation or any independent knowledge on the part of the reader regarding the matter disclosed), and each of which disclosures shall also be deemed to be representations and warranties made by the Company to Acquirer under this Article II), the Company represents and warrants to Acquirer as follows:
2.1 Organization, Standing, Power and Subsidiaries.
(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The Company has the corporate power to own, operate, use, distribute and lease its properties and to conduct the Business. The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction where the failure to be so qualified
or in good standing, individually or in the aggregate with any such other failures, would reasonably be expected to have a Material Adverse Effect with respect to the Company. The Company has and, since its inception has had, no subsidiaries or any Equity Interest, whether direct or indirect, in, or any loans to, any corporation, partnership, limited liability company, joint venture or other business entity. There are no outstanding and currently effective powers of attorneys executed by or on behalf of the Company.
(b) Neither the Company nor any of the Company Stockholders has ever approved or commenced any proceeding or made any election contemplating the dissolution or liquidation of the Company or the winding up or cessation of the business or affairs of the Company. There are no entities that have been merged into or that otherwise are predecessors to the Company.
(c) Schedule 2.1(c) of the Company Disclosure Letter sets forth a true, correct and complete list of: (i) the names of the members of the Board, (ii) the names of the members of each committee of the Board and (iii) the names and titles of the officers of the Company.
2.2 Capital Structure.
(a) The authorized Company Capital Stock consists solely of (i) 34,000,000 shares of Company Common Stock and (ii) 14,349,177 shares of Company Preferred Stock, 3,740,803 of which are designated as Company Series Seed Preferred Stock, 5,704,637 of which are designated as Company Series A-1 Preferred Stock, 1,785,948 of which are designated as Company Series A-2 Preferred Stock, 2,017,789 of which are designated as Company Series A-3 Preferred Stock and 1,100,000 of which are designated as Company Series A-4 Preferred Stock. As of the Agreement Date, a total of 11,627,487 shares of Company Common Stock, 3,740,803 shares of Company Series Seed Preferred Stock, 5,704,637 shares of Company Series A-1 Preferred Stock, 1,785,948 shares of Company Series A-2 Preferred Stock, 2,017,789 shares of Company Series A-3 Preferred Stock and 1,052,853 shares of Company Series A-4 Preferred Stock are issued and outstanding, and there are no other issued and outstanding shares of Company Capital Stock and no commitments or Contracts to issue any shares of Company Capital Stock other than pursuant to the exercise of Company Options under the Company Option Plans that are outstanding or the exercise of Company Warrants that are outstanding. The Company does not hold any treasury shares. All shares of the Company Capital Stock are represented by electronic certificates and there exist no physical certificates for Company Capital Stock still in effect. Schedule 2.2(a) of the Company Disclosure Letter sets forth as of the Agreement Date (i) a true, correct and complete list of the Company Stockholders and the number and type of such shares so owned by such Company Stockholder, and any beneficial holders thereof, if applicable, (ii) the number of shares of Company Common Stock that would be owned by such Company Stockholder assuming conversion of all shares of Company Preferred Stock so owned by such Person after giving effect to all anti-dilution and similar adjustments and the Conversion Election and (iii) the number of such shares of Company Common Stock that are Unvested Company Shares, including as applicable the number and type of such Unvested Company Shares, the per share purchase price paid for such Unvested Company Shares, the vesting schedule in effect for such Unvested Company Shares (and the terms of any acceleration thereof), the per share repurchase price payable for such Unvested Company Shares, the length of the repurchase period following the termination of service of the holder of such Unvested Company Shares and whether a valid election was made under Section 83 of the Code with respect to such Unvested Company Shares. All issued and outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and are free of any Encumbrances, outstanding subscriptions, preemptive rights or “put” or “call” rights created by statute, the Certificate of Incorporation, the Bylaws or any Contract to which the Company is a party or by which the Company or any of its assets are bound. The Company has not ever declared or paid any dividends on any shares of Company Capital Stock. There is no Liability for dividends accrued and unpaid by the Company. The Company is not under any obligation to register under the Securities Act or any other Applicable Law any shares of Company Capital Stock, any Equity
Interests or any other securities of the Company, whether currently outstanding or that may subsequently be issued. Each share of Company Preferred Stock is convertible into shares of Company Common Stock on a one-for-one basis, and immediately prior to the Closing, all shares of Company Preferred Stock will automatically convert into shares of Company Common Stock pursuant to the Conversion Election. All issued and outstanding shares of Company Capital Stock were issued in compliance with Applicable Law and all requirements set forth in the Certificate of Incorporation, the Bylaws and any applicable Contracts to which the Company is a party or by which the Company or any of its assets are bound. Except as set forth on Schedule 2.2(a) of the Company Disclosure Letter, all holders of Company Capital Stock as of immediately prior to the Effective Time qualify as an “accredited investor” as such term is defined in Rule 501 of Regulation D of the Securities Act.
(b) The Company has reserved 9,412,342 shares of Company Common Stock for issuance pursuant to awards granted under the Company Option Plans, of which 6,422,337 shares are subject to outstanding and unexercised Company Options, and 1,024,533 shares remain available for issuance thereunder as of the Agreement Date. Schedule 2.2(b) of the Company Disclosure Letter sets forth as of the Agreement Date a true, correct and complete list of all Company Optionholders, and each Company Option, whether or not granted under the Company Option Plan, including the number of shares of Company Capital Stock subject to each Company Option, the number of such shares that are vested or unvested, the date of grant, the vesting commencement date, the vesting schedule (and the terms of any acceleration thereof), the exercise price per share, the Tax status of such Company Option under Section 422 of the Code (or any applicable foreign Tax law), the expiration date, the Company Option Plan under which such Company Option was granted (if any) and the country and state of residence of such Company Optionholder. All Company Options listed on Schedule 2.2(b) of the Company Disclosure Letter that are denoted as incentive stock options under Section 422 of the Code so qualify and will continue to so qualify as of immediately prior to the consummation of the Transactions. In addition, Schedule 2.2(b) of the Company Disclosure Letter indicates which Company Optionholders are Persons that are not employees of the Company (including non-employee directors, consultants, advisory board members, vendors, service providers or other similar Persons), including a description of the relationship between each such Person and the Company. True, correct and complete copies of each Company Option Plan, all agreements and instruments relating to or issued under each Company Option Plan (including executed copies of all Contracts relating to each Company Option and the shares of Company Capital Stock purchased under such Company Option) have been made available to Acquirer, and such Company Option Plans and Contracts have not been amended, modified or supplemented since being made available to Acquirer, and there are no agreements, understandings or commitments on the part of the Company to amend, modify or supplement such Company Option Plans or Contracts in any case from those provided to Acquirer. The terms of the Company Option Plans permit the treatment of Company Options as provided herein, without notice to, or the consent or approval of, the Company Optionholders, the Company Stockholders or otherwise and without any acceleration of the exercise schedule or vesting provisions in effect for such Company Options. The exercise price of all Company Options is and has at all times been at least equal to the fair market value of the Company Common Stock on the date such Company Options were granted (within the meaning of Treasury Regulation 1.409A-1(b)(5)(vi)(B)), and none of Acquirer or the Company has incurred or will incur any Liability or obligation to withhold Taxes under Section 409A of the Code upon the vesting of any Company Options. All Company Options cover “service recipient stock” (as defined under Treasury Regulation 1.409A-1(b)(5)(iii)) with respect to the grantor thereof. All Company Options (including the exercise price or methodology for determining the exercise price and substantive terms thereof) have been appropriately authorized by the Board or an appropriate committee thereof as of the applicable date of grant. No Company Options have been retroactively granted, or the exercise price of any such Company Option determined retroactively, in any case, in contravention of any Applicable Law.
(c) Schedule 2.2(c) of the Company Disclosure Letter sets forth as of the Agreement
Date a true, correct and complete list of all Company Warrantholders, including the number of shares and type of Company Capital Stock subject to each Company Warrant, the date of grant, the exercise or vesting schedule (and the terms of any acceleration thereof), the exercise price per share and the term of each Company Warrant. True, correct and complete copies of each Company Warrant have been provided to Acquirer, and such Company Warrants have not been amended or supplemented since being provided to Acquirer, and there are no Contracts to which the Company is a party providing for the amendment or supplement of such Company Warrants. The terms of the Company Warrants permit the treatment of Company Warrants as provided herein, without notice to, or the consent or approval of, the Company Warrantholders, the Company Stockholders or otherwise and without any acceleration of the exercise schedule or vesting provisions in effect for such Company Warrants.
(d) There are no authorized, issued or outstanding Equity Interests of the Company other than shares of Company Capital Stock, Company Options and Company Warrants. Other than as set forth on Schedules 2.2(a), 2.2(b) and 2.2(c) of the Company Disclosure Letter, no Person has any Equity Interests of the Company, stock appreciation rights, stock units, share schemes, calls or rights, or is party to any Contract of any character to which the Company or a Company Securityholder is a party or by which it or its assets is bound, (i) obligating the Company or a Company Securityholder to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any Equity Interests of the Company or other rights to purchase or otherwise acquire any Equity Interests of the Company, whether vested or unvested, or (ii) obligating the Company to grant, extend, accelerate the vesting and/or repurchase rights of, change the price of, or otherwise amend or enter into any such Company Option, Company Warrant, call, right or Contract.
(e) No Company Debt (i) granting its holder the right to vote on any matters on which any Company Securityholder may vote (or that is convertible into, or exchangeable for, securities having such right) or (ii) the value of which is in any way based upon or derived from capital or voting stock of the Company, is issued or outstanding.
(f) There are no Contracts relating to voting, purchase, sale or transfer of any Company Capital Stock (i) between or among the Company, on the one hand, and any Company Securityholder, on the other hand, other than written Contracts granting the Company the right to purchase unvested shares upon termination of employment with or service to the Company, and (ii) to the knowledge of the Company (without inquiry or investigation), between or among any of the Company Securityholders. Neither the Company Option Plan nor any Contract of any character to which the Company is a party to or by which the Company or any of its assets are bound relating to any Unvested Company Shares requires or otherwise provides for any accelerated vesting of any Unvested Company Shares or the acceleration of any other benefits thereunder, in each case in connection with the Transactions or upon termination of employment or service with the Company or Acquirer, or any other event, whether before, upon or following the Effective Time or otherwise.
(g) As of the Closing, (i) the number of shares of Company Capital Stock set forth in the Spreadsheet as being owned by a Person, or subject to Company Options or Company Warrants owned by such Person, will constitute the entire interest of such Person in the issued and outstanding Company Capital Stock or any other Equity Interests of the Company, (ii) no Person not disclosed in the Spreadsheet will have a right to acquire from the Company any shares of Company Capital Stock, Company Options, Company Warrants or any other Equity Interests of the Company and (iii) the shares of Company Capital Stock, Company Options and/or Company Warrants disclosed in the Spreadsheet will be free and clear of any Encumbrances created by the Certificate of Incorporation, the Bylaws or any Contract to which the Company is a party.
(h) Schedule 2.2(h) of the Company Disclosure Letter identifies each employee of
the Company or any other Person with an offer letter or other Contract or Company Employee Plan that contemplates a grant of, or right to purchase or receive: (i) options to purchase shares of Company Common Stock or other equity awards with respect to Company Capital Stock or (ii) other securities of the Company that, in each case, have not been issued or granted, together with the number of such options, other equity awards or other securities and any promised terms thereof.
2.3 Authority; Non-contravention.
(a) Subject to obtaining the Company Stockholder Approval, the Company has all requisite corporate power and authority to enter into this Agreement and the other Company Transaction Documents and to consummate the Transactions. The execution and delivery of this Agreement and the other Company Transaction Documents and the consummation of the Transactions have been duly authorized by all necessary corporate action on the part of the Company. Each Transaction Document has been duly executed and delivered by the Company and, assuming the due execution and delivery of such Transaction Document by the other parties hereto, constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms subject only to the effect, if any, of (i) applicable bankruptcy and other similar Applicable Law affecting the rights of creditors generally and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. The Board, by resolutions duly adopted (and not thereafter modified or rescinded) by the unanimous vote of the Board, has (i) declared that this Agreement and the Transactions upon the terms and subject to the conditions set forth herein, advisable, fair to and in the best interests of the Company and the Company Stockholders, (ii) approved this Agreement in accordance with Applicable Law and (iii) directed that the adoption of this Agreement be submitted to the Company Stockholders for consideration and recommended that all of the Company Stockholders adopt this Agreement and approve the Merger. The Company Stockholder Approval is the only vote of the holders of Company Capital Stock necessary to adopt this Agreement and approve the Transactions, including the Conversion Election, under the DGCL, the CCC, the Certificate of Incorporation and the Bylaws, each as in effect at the time of such adoption and approval.
(b) The execution and delivery of this Agreement and the other Company Transaction Documents, by the Company does not, and the consummation of the Transactions will not, (i) result in the creation of any Encumbrance (other than a Permitted Encumbrance) on any of the material assets of the Company or any of the shares of Company Capital Stock or (ii) conflict with, or result in any violation of or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit under, or require any consent, approval or waiver from any Person pursuant to, (A) any provision of the Certificate of Incorporation or the Bylaws, in each case as amended to date, (B) any Material Contract of the Company or any Material Contract applicable to any of the assets of the Company or (C) any Applicable Law, except (solely in the case of clauses (B) above) for such Encumbrances, conflicts, violations, defaults, terminations, cancellations, accelerations, losses, or breaches which would not, individually or in the aggregate, reasonably be expected to be material to the Company.
(c) No consent, approval, Order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Entity is required by or with respect to the Company in connection with the execution and delivery of this Agreement or any other Company Transaction Document or the consummation of the Transactions, except for (i) the filing of the Certificate of Merger, as provided in Section 1.1(d) and (ii) such other consents, approvals, Orders, authorizations, registrations, declarations, filings and notices that, if not obtained or made, would not adversely affect, and would not reasonably be expected to adversely affect, the Company’s ability to perform or comply with the covenants, agreements or obligations of the Company herein or in any other Company Transaction Document or to consummate the Transactions in accordance with this Agreement or any other Company
Transaction Document and Applicable Law.
(d) The Company, the Board and the Company Stockholders have taken all actions such that the restrictive provisions of any “fair price,” “moratorium,” “control share acquisition,” “business combination,” “interested shareholder” or other similar anti-takeover statute or regulation, and any anti-takeover provision in the organizational or governing documents of the Company will not be applicable to any of Acquirer, the Company or the Surviving Corporation, or to the execution, delivery, or performance of this Agreement or the Stockholder Agreement, or to the Transactions, the Company Stockholder Approval or the Requisite Stockholder Approval.
2.4 Financial Statements; No Undisclosed Liabilities.
(a) The Company has made available to Acquirer its unaudited financial statements for each of the fiscal years ending December 31, 2018 and 2019 and the 11-month period ending November 30, 2020 (including, in each case, balance sheets, statements of operations and statements of cash flows) (collectively, the “Financial Statements”), which are included as Schedule 2.4(a) of the Company Disclosure Letter. The Financial Statements (i) are derived from and in accordance with the books and records of the Company, (ii) complied as to form with applicable accounting requirements with respect thereto as of their respective dates, (iii) fairly and accurately present the financial condition of the Company at the dates therein indicated and the results of operations and cash flows of the Company for the periods therein specified (subject, in the case of unaudited interim period Financial Statements, to normal recurring year-end audit adjustments, none of which individually or in the aggregate are or will be material in amount) and (iv) were prepared in accordance with GAAP, except for the absence of footnotes in the unaudited Financial Statements, applied on a consistent basis throughout the periods involved.
(b) The Company does not have any material Liabilities of any nature other than (i) those set forth or adequately provided for in the balance sheet included in the Financial Statements as of November 30, 2020 (such date, the “Company Balance Sheet Date” and such balance sheet, the “Company Balance Sheet”), (ii) those incurred in the conduct of the Company’s business since the Company Balance Sheet Date in the ordinary course of business and consistent with past practice that are of the type that ordinarily recur and do not result from any breach of Contract, warranty, infringement, tort or violation of Applicable Law, (iii) those incurred by the Company in connection with the execution of this Agreement and consummation of the Transactions (including for Transaction Expenses), (iv) that are executory performance obligations arising under Contracts to which the Company is a party or otherwise bound. For clarity, (x) the mere existence of a claim, complaint or notice from a third party involving the Company arising after the Closing Date shall not constitute a breach of this Section 2.4 on the theory that such claim or the matters underlying such claim (absent an underlying breach of another applicable representation or warranty) constituted an unknown, unasserted, indeterminate, contingent, unaccrued, unmatured, unliquidated or other debt, liability or obligation of the Company as of the Closing Date and (y) this Section 2.4 is not intended to, and shall not be deemed to, address the subject matter of other representations and warranties in Article II that are qualified by the knowledge of the Company.
(c) The Company has not applied for or accepted (i) any loan pursuant to the PPP in Section 1102 and Section 1106 of the CARES Act, respectively, or (ii) any funds pursuant to the Economic Injury Disaster Loan program or an advance on an Economic Injury Disaster Loan pursuant to Section 1110 of the CARES Act.
(d) Schedule 2.4(d) of the Company Disclosure Letter sets forth a true, correct and complete list of all Company Debt, including, for each item of Company Debt, the agreement governing the Company Debt and the interest rate, maturity date, any assets securing such Company Debt and any prepayment or other penalties payable in connection with the repayment of such Company Debt at the
Closing.
(e) Schedule 2.4(e) of the Company Disclosure Letter sets forth the names and locations of all banks and other financial institutions at which the Company maintain accounts and the names of all Persons authorized to make withdrawals therefrom.
(f) The accounts receivable of the Company as reflected on the Company Balance Sheet and as will be reflected in the Company Closing Financial Certificate arose in the ordinary course of business and consistent with past practice and represent bona fide claims against debtors for sales and other charges, and have been collected or to the knowledge of the Company, are collectible in the book amounts thereof within 60 days following the Closing, less an amount not in excess of the allowance for doubtful accounts provided for in the Company Balance Sheet or in the Company Closing Financial Certificate, as the case may be.
(g) The Company has established and maintains a system of internal accounting controls sufficient to provide reasonable assurances (i) that transactions, receipts and expenditures of the Company are being executed and made only in accordance with appropriate authorizations of management and the Board, (ii) that transactions are recorded as necessary (A) to permit preparation of financial statements in conformity with GAAP and (B) to maintain accountability for assets, (iii) regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and (iv) that the amount recorded for assets on the books and records of the Company is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. None of the Company, its independent auditors or, to the knowledge of the Company, any current or former employee, consultant or director of the Company has identified or been made aware of any fraud, whether or not material, that involves the Company’s management or other current or former employees, consultants or directors of the Company who have a role in the preparation of financial statements or the internal accounting controls utilized by the Company, or any claim or allegation regarding any of the foregoing.
(h) As of and immediately prior to the Closing, in relation to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”):
(i) The Company will be its own ultimate parent entity (as such term is defined in 16 C.F.R. § 801.1(a)(3) and is interpreted by the Premerger Notification Office of the United States Federal Trade Commission (“PNO”)) and will not be controlled (as such term is defined in 16 C.F.R. § 801.1(b) and is interpreted by the PNO) by any other person or entity (as such terms are defined in 16 C.F.R. § 801.1(a) and are interpreted by the PNO).
(ii) The annual net sales (as such term is defined in 16 C.F.R. § 801.11 and is interpreted by the PNO) of the Company will be below the $100 million (as adjusted) threshold set forth in 15 U.S. Code § 18a(a)(2)(B)(ii)(III) (currently $180.0 million).
(iii) The total assets (as such term is defined in 16 C.F.R. § 801.11 and is interpreted by the PNO) of the Company will be below the $10 million (as adjusted) threshold set forth in 15 U.S. Code § 18a(a)(2)(B)(ii)(II) (currently $18.0 million).
(iv) The Company will not be engaged in manufacturing (as such term is defined in 16 C.F.R. § 801.1(j) and is interpreted by the PNO).
(i) The Company has identified all uncertain Tax positions contained in all Tax Returns filed by the Company and has established adequate reserves and made any appropriate
disclosures in the Financial Statements in accordance with the requirements of ASC 740-10 (formerly Financial Interpretation No. 48 of FASB Statement No. 109, Accounting for Uncertain Tax Positions).
2.5 Absence of Changes. Except as set forth in Schedule 2.5 of the Company Disclosure Letter, since July 1, 2020 to the Agreement Date:
(a) the Company has conducted the Business only in the ordinary course of business and consistent with past practice;
(b) there has not occurred a Material Adverse Effect with respect to the Company;
(c) the Company has not made or entered into any Contract or letter of intent with respect to any acquisition, sale or transfer of any material asset of the Company (other than the non-exclusive license of Company Products to its customers in the ordinary course of business consistent with past practice);
(d) except as required by GAAP, there has not occurred any change in accounting methods or practices (including any change in depreciation or amortization policies or rates or revenue recognition policies) by the Company or any revaluation by the Company of any of its assets;
(e) there has not occurred any declaration, setting aside, or payment of a dividend or other distribution with respect to any securities of the Company, or any direct or indirect redemption, purchase or other acquisition by the Company of any of its securities (other than repurchases of Unvested Company Shares in accordance with Contracts governing such shares or forfeitures of unvested Company Options upon termination of service), or any change in any rights, preferences, privileges or restrictions of any of its outstanding securities;
(f) the Company has not amended or terminated any Material Contract, and there has not occurred any default by the Company, or to the knowledge of the Company, by any counterparty under any Material Contract to which the Company is a party or by which it is, or any of its assets and properties are, bound;
(g) there has not occurred any amendment or change to the Certificate of Incorporation or Bylaws;
(h) the Company has not established, entered into, adopted, terminated, or amended any employment or separation agreement (other than new agreements with non-executive employees in the ordinary course which do not provide for severance benefits), compensation or benefit plan, retirement policy, practice, arrangement, or agreement or other employee benefit plan;
(i) there has not occurred any increase in or modification outside of the ordinary course of business of the compensation or benefits payable or to become payable by the Company to any of its current or former directors, officers, employees or consultants, and there have not been any material modification of any “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code and the regulations and guidance promulgated thereunder, or any new loans or extension of existing loans to any such Persons (other than routine expense advances to employees of the Company);
(j) the Company has not committed to grant or provide (nor has granted any) increase or acceleration of funding, payment or vesting of any compensation or benefits (other than pursuant to the terms of any Contracts already in existence and made available to Acquirer);
(k) there has not occurred the execution of any employment Contracts or service Contracts or the extension of the term of any existing employment Contract or service Contract with any Person in the employ or service of the Company other than in the ordinary course of business for non-senior employees;
(l) there has not occurred any change in title, office or position, or material reduction in the responsibilities of, or change in identity with respect to the management, supervisory or other key personnel of the Company, or any termination of employment of any such employees;
(m) there has not occurred any labor dispute or claim of unfair labor practices involving the Company;
(n) the Company has not incurred, created or assumed any Encumbrance (other than a Permitted Encumbrance) on any of its assets or properties, any Liability for borrowed money or any Liability as guaranty or surety with respect to the obligations of any other Person;
(o) the Company has not paid or discharged any Encumbrance or Liability that was not shown on the Company Balance Sheet or incurred in the ordinary course of business since the Company Balance Sheet Date;
(p) the Company has not incurred any monetary liability to its directors, officers or stockholders (other than monetary liabilities to pay compensation or benefits in connection with services rendered in the ordinary course of business or to reimburse ordinary course business expenses);
(q) the Company has not made any deferral of the payment of any accounts payable other than in the ordinary course of business, or in an amount in excess of $25,000, or given any discount, accommodation or other concession other than in the ordinary course of business, in order to accelerate or induce the collection of any receivable;
(r) the Company has not made any material change in the manner in which it extends discounts, credits or warranties to customers or otherwise deals with its customers;
(s) there has been no material damage, destruction or loss, whether or not covered by insurance, affecting the assets, properties or business of the Company;
(t) the Company has not (i) sold, disposed of, assigned, transferred or licensed to any Person any rights to any Company Intellectual Property other than Standard Outbound Licenses, (ii) acquired or licensed from any Person any Intellectual Property other than Standard Inbound Licenses, or (iii) sold, disposed of, assigned, transferred, licensed or provided a copy of any Company Source Code to any Person; and
(u) there has not been any capital expenditures relating to the Company, execution of any lease to which the Company is a party or incurrence of any obligations to make any capital expenditures or execute any lease;
(v) there has not been any commencement or settlement of any Legal Proceeding; and
(w) there has not occurred any announcement of, any negotiation by or any entry into any Contract by the Company to do any of the things described in the preceding clauses (a) through (v) (other than negotiations and agreements with Acquirer and its representatives regarding the Transactions).
2.6 Litigation. There is no pending Legal Proceeding to which the Company is a party, and, no Legal Proceeding threatened in writing or, to the knowledge of the Company, orally against the Company or any of its assets or any of its directors, officers or employees (in their capacities as such or relating to their employment, services or relationship with the Company). To the knowledge of the Company, there is not any reasonable basis for any Person to assert a claim against the Company or any of its assets that would reasonably be expected to result in a material Legal Proceeding against the Company. There is no Order against the Company, or any of its assets, or, to the knowledge of the Company, any of its directors, officers or employees (in their capacities as such or relating to their employment, services or relationship with the Company). The Company does not have any Legal Proceeding pending or threatened against any other Person, and to the knowledge of the Company, there is not any reasonable basis for any such Legal Proceeding that would reasonably be expected to be material to the Company.
2.7 Restrictions on Business Activities. There is no Contract or Order binding upon the Company that restricts or prohibits, purports to restrict or prohibit, has or would reasonably be expected to have, whether before or after consummation of the Merger, the effect of prohibiting, restricting or impairing any current or presently proposed business practice of the Company, any acquisition of property by the Company or the conduct or operation of the Business or limiting the freedom of the Company to (i) engage or participate, or compete with any other Person, in any line of business, market or geographic area with respect to the Company Products or the Company Intellectual Property, or to make use of any Company Intellectual Property (in each case other than ordinary course restrictions or limitations on the use of Third Party Intellectual Property included in the applicable written license agreement therefor), including any grants by the Company of exclusive rights or licenses (but excluding non-exclusive licenses) (ii) sell, distribute or manufacture any products or services or to purchase or otherwise obtain any software, components, parts or services, (iii) solicit the services or business of any Person (other than ordinary course restrictions on the solicitation of a party’s employees or contractors), or (iv) freely set prices for any products, services or technology, including the Company Products (including any most favored pricing provisions).
2.8 Compliance with Laws; Governmental Permits.
(a) The Company has complied in all material respects with, is not in material violation of, and has not received any written or, to the knowledge of the Company, other notice of a material violation with respect to, Applicable Law.
(b) The Company holds, and has at all times held and maintained, each federal, state, county, local or foreign governmental consent, license, permission, consent, permit, grant or other authorization and approval (including having exercised relevant passporting rights) of a Governmental Entity (i) pursuant to which the Company currently operates or holds any interest in any of its assets or properties or (ii) that is required to carry on the activities required for or in connection with the carrying on of the conduct of the Business as required by all Applicable Laws in the places and in the manner in which the Business of the Company is carried on or the holding of any such interest (all of the foregoing consents, licenses, permissions, consents, permits, grants and other authorizations and approvals, collectively, the “Company Authorizations”), and all of the Company Authorizations are in full force and effect, are not limited in duration or subject to any conditions and have been complied with in all material respects. Schedule 2.8(b) of the Company Disclosure Letter identifies each Company Authorization.
(c) The Company has not received any written (or, to the knowledge of the Company, any other) notice or other written (or, to the knowledge of the Company, any other) communication from any Governmental Entity regarding (i) any actual or possible violation of any Company Authorization or (ii) any actual or possible revocation, non-renewal, withdrawal, suspension,
cancellation, termination or modification of any Company Authorization or any Company Authorization made subject to any restrictions, requirements or conditions, or which may confer a right of revocation, and to the knowledge of the Company, no such information notice or other communication is forthcoming. The Company has complied with all of the terms of the Company Authorizations and none of the Company Authorizations will be terminated, revoked or impaired, or will become terminable, in whole or in part, as a result of the consummation of the Transactions.
2.9 Title to, Condition and Sufficiency of Assets; Real Property.
(a) The Company has good and marketable title to, or valid leasehold interest in all of its tangible properties, and interests in tangible properties and assets, real and personal, reflected on the Company Balance Sheet or acquired after the Company Balance Sheet Date (except tangible properties and assets, or interests in tangible properties and assets, sold or otherwise disposed of since the Company Balance Sheet Date in the ordinary course of business and consistent with past practice), or, with respect to leased tangible properties and assets, valid leasehold interests in such tangible properties and assets that afford the Company valid leasehold possession of the tangible properties and assets that are the subject of such leases, in each case, free and clear of all Encumbrances, except Permitted Encumbrances.
(b) The tangible assets and properties owned by the Company (i) constitute all of the tangible assets and properties that are necessary for the Company to conduct, operate and continue the conduct of the Business and to sell and otherwise enjoy full rights to exploitation of its tangible assets, properties and all products and services that are provided in connection with its tangible assets and properties and (ii) constitute all of the tangible assets and properties that are used in the conduct of the Business, without (A) the need for Acquirer to acquire or license any other tangible asset or property or (B) the breach or violation of any Contract.
(c) Schedule 2.9(c) of the Company Disclosure Letter identifies each parcel of real property leased by the Company. The Company has provided to Acquirer true, correct and complete copies of all leases, subleases and other agreements under which the Company uses or occupies or has the right to use or occupy, now or in the future, any real property or facility, including all modifications, amendments and supplements thereto. The Company does not currently own any real property.
(d) For the avoidance of doubt and notwithstanding anything else, this Section 2.9 does not relate to Intellectual Property or rights thereto, which are the subject of Section 2.10.
2.10 Intellectual Property.
(a) As used herein, the following terms have the meanings indicated below:
(i) “Company Data” means all data Processed in connection with the operation of the Business or the development, training, marketing, delivery, support or use of any Company Product, including Company-Licensed Data, Company-Owned Data and Personal Data.
(ii) “Company Data Agreement” means any Contract involving Company Data to which the Company is a party or is bound by.
(iii) “Company Intellectual Property” means any and all Company-Owned Intellectual Property and any and all Third-Party Intellectual Property that is licensed to or otherwise used by the Company.
(iv) “Company Intellectual Property Agreements” means any Contract
relating to any Company Intellectual Property to which the Company is a party or is bound by.
(v) “Company-Licensed Data” means all data that is Processed by the Company which is owned, held, collected, or purported to be owned, held or collected by a third party.
(vi) “Company-Owned Data” means each element of data Processed that the Company owns, holds or controls or purports to own, hold or control.
(vii) “Company-Owned Intellectual Property” means any and all Intellectual Property that is owned or purported to be owned by the Company.
(viii) “Company Privacy Policies” means, collectively, any and all (A) of the data protection, data usage, data privacy and security policies of the Company, whether applicable internally, or published on Company Websites or otherwise made available by the Company to any Person, (B) public statements (including statements on Company Websites), binding industry self-regulatory obligations and commitments (including, without limitation, those to which the Company has publicly represented compliance) and Contracts with third parties relating to the Processing of Company Data, and (C) third-party privacy policies with which the Company has been or is contractually obligated to comply.
(ix) “Company Products” means all products or services (including any websites and mobile applications) currently or previously produced, marketed, licensed, sublicensed, sold, distributed or performed by or on behalf of the Company and all products or services currently under development by the Company or described on the Product Roadmap.
(x) “Company Registered Intellectual Property” means the United States, international and foreign: (A) issued patents and patent applications (including provisional applications), (B) registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations or applications related to trademarks, (C) registered Internet domain names and (D) registered copyrights and applications for copyright registration, in each case registered, assigned to, filed in the name of, or otherwise included in the Company-Owned Intellectual Property.
(xi) “Company Source Code” means, collectively, any software source code or any proprietary algorithm contained in any software source code, of any Company-Owned Intellectual Property or Company Products.
(xii) “Company Websites” means all web sites and mobile applications owned, operated or hosted by the Company or through which the Company conducts the Business (including those web sites operated using the domain names listed in Schedule 2.10(c) of the Company Disclosure Letter), and the underlying platforms for such web sites and mobile applications.
(xiii) “EEA” means the European Economic Area, as constituted from time to time, and shall be deemed to include Switzerland and the United Kingdom.
(xiv) “ICT Infrastructure” means the information and communications technology infrastructure and systems (including software, hardware, firmware, networks and the Company Websites) that are or have been used in the Business.
(xv) “Intellectual Property” means (A) Intellectual Property Rights and (B) Proprietary Information and Technology.
(xvi) “Intellectual Property Rights” means any and all of the following and all rights in, arising out of, or associated therewith, throughout the world: patents, utility models, and applications therefor and all reissues, divisions, re-examinations, renewals, extensions, provisionals, continuations and continuations-in-part thereof and equivalent or similar rights in inventions and discoveries anywhere in the world, including invention disclosures; common law and statutory rights associated with trade secrets, confidential and proprietary information and know-how; industrial designs and any registrations and applications therefor, trade names, logos, trade dress, trademarks and service marks, trademark and service mark registrations, trademark and service mark applications and any and all goodwill associated with and symbolized by the foregoing items; Internet domain name applications and registrations, social media accounts, Internet and World Wide Web URLs or addresses; copyrights, copyright registrations and applications therefor and all other rights corresponding thereto; database rights, mask works, mask work registrations and applications therefor and any equivalent or similar rights in semiconductor masks, layouts, architectures or topology; moral and economic rights of authors and inventors, however denominated; and any similar or equivalent rights to any of the foregoing, and all benefits, privileges, causes of action and remedies relating to any of the foregoing.
(xvii) “Open Source Materials” means software or other material that is distributed as “free software,” “open source software” or under similar licensing or distribution terms (including the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, MIT licenses, the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL) the Sun Industry Standards License (SISL) and the Apache License).
(xviii) “Proprietary Information and Technology” means any and all of the following: works of authorship, computer programs, source code and executable code, whether embodied in software, firmware or otherwise, assemblers, applets, compilers, user interfaces, application programming interfaces, protocols, architectures, documentation, annotations, comments, designs, files, records, schematics, test methodologies, test vectors, emulation and simulation tools and reports, hardware development tools, models, tooling, prototypes, breadboards and other devices, data, data structures, databases, data compilations and collections, inventions (whether or not patentable), invention disclosures, discoveries, improvements, technology, proprietary and confidential ideas and information, tools, concepts, techniques, methods, processes, formulae, patterns, algorithms and specifications, customer lists and supplier lists and any and all instantiations or embodiments of the foregoing or any Intellectual Property Rights in any form and embodied in any media.
(xix) “R&D Sponsor” means any Governmental Entity, private source, university, college, other educational institution, military, multi-national, bi-national or international organization or research center that has provided grants to the Company or any developer, inventor or other contributor to any Company-Owned Intellectual Property.
(xx) “Third-Party Intellectual Property” means any and all Intellectual Property owned or purported to be owned by a third party.
(b) Status. The Company has full title and exclusive ownership of all Company-Owned Intellectual Property free and clear of any Encumbrances (other than Permitted Encumbrances) and is duly licensed under or otherwise authorized to use, all other Intellectual Property necessary for the
conduct of the Business. The Company Intellectual Property collectively constitutes all of the Intellectual Property necessary for the Company’s conduct of, or that are used in or held for use for, the Business without: (i) the need for the Company to acquire or license any other intangible asset, intangible property or Intellectual Property Right or (ii) the breach or violation of any Contract. The Company has not transferred ownership of, or granted any exclusive rights in, any Company Intellectual Property to any third party. No third party has any ownership right, title, interest, claim in or lien on any of the Company-Owned Intellectual Property or Company-Owned Data.
(c) Company Registered Intellectual Property. Schedule 2.10(c) of the Company Disclosure Letter lists all Company Registered Intellectual Property, the registrant, the status of such registration or application, the jurisdictions in which it has been issued or registered or in which any application for such issuance and registration has been filed or the jurisdictions in which any other filing or recordation has been made and all actions that are required to be taken by the Company within 120 days following the Agreement Date in order to avoid prejudice to, impairment or abandonment of such Intellectual Property Rights (including all office actions, provisional conversions, annuity or maintenance fees or re-issuances). Each item of Company Registered Intellectual Property is valid (or in the case of applications, applied for) subsisting and, to the knowledge of the Company, enforceable. All registration, maintenance and renewal fees currently due in connection with such Company Registered Intellectual Property have been paid and all documents, recordations and certificates in connection with such Company Registered Intellectual Property currently required to be filed have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of prosecuting, maintaining and perfecting such Company Registered Intellectual Property and recording the Company’s ownership interests therein. The Company has provided to Acquirer tangible copies of all of the Company’s pending patent applications.
(d) Company Products. Schedule 2.10(d)(i) of the Company Disclosure Letter lists all Company Products, along with the release date or contemplated release date for each such Company Product. Except with respect to any Open Source Materials listed on Schedule 2.10(o) of the Company Disclosure Letter, Schedule 2.10(d)(ii) of the Company Disclosure Letter lists all Third-Party Intellectual Property incorporated into or distributed with each such Company Product, along with the applicable licensor of such Third-Party Intellectual Property and the applicable Company Intellectual Property Agreement under which the Company is licensed or otherwise authorized to use such Third-Party Intellectual Property.
(e) No Assistance. At no time during the conception of or reduction to practice of any of the Company-Owned Intellectual Property was the Company or any developer, inventor or other contributor to such Company-Owned Intellectual Property (i) operating under any grants from any R&D Sponsor or (ii) performing (directly or indirectly) research sponsored by any R&D Sponsor. Without limiting the foregoing, no developer, inventor or other contributor to the Company-Owned Intellectual Property was employed by or has performed services for any R&D Sponsor during the period of time during which such developer, inventor or other contributor was also performing services for the Company or during the twelve-month period immediately prior to his or her employment or engagement with the Company. No R&D Sponsor has any claim of right or license to, ownership of or other Encumbrance (other than a Permitted Encumbrance) on any Company-Owned Intellectual Property.
(f) Founders. All rights in, to and under all Intellectual Property created by the Company’s founders for or on behalf or in contemplation of the Company (i) prior to the inception of the Company or (ii) prior to their commencement of employment with the Company, in each case, have been duly and validly assigned to the Company without any conflict or breach of any such founder’s obligations to any third party, and the Company has no reason to believe that any such Person is unwilling to provide Acquirer or the Company with such cooperation as may reasonably be required to complete
and prosecute all appropriate United States and foreign patent and copyright filings related thereto.
(g) Invention Assignment and Confidentiality Agreement. The Company has secured from all (i) current and former consultants, advisors, employees and independent contractors who independently or jointly contributed to or participated in the conception, reduction to practice, creation or development of any Intellectual Property for the Company and (ii) named inventors of patents and patent applications owned or purported to be owned by the Company (any Person described in clause (i) or (ii), an “Author”), unencumbered and unrestricted exclusive ownership of, all of the Authors’ right, title and interest in and to such Intellectual Property, and the Company has obtained the waiver of all non-assignable rights. No Author has retained any rights, licenses, claims or interest whatsoever with respect to any Intellectual Property developed by the Author for the Company. Without limiting the foregoing, the Company has obtained written and enforceable proprietary information and invention disclosure and Intellectual Property assignments from all current and former Authors assigning all of each Author’s right and title to any Intellectual Property developed in the course of such Author’s employment or engagement with the Company to the Company and, in the case of patents and patent applications, such assignments have been recorded with the relevant authorities in the applicable jurisdiction or jurisdictions. The Company has provided to Acquirer copies of all forms of such disclosure and assignment documents currently and historically used by the Company and, in the case of patents and patent applications, the Company has provided to Acquirer copies of all such assignments. No Author is subject to any employment agreement or invention assignment or nondisclosure agreement or other obligation with any third party that could adversely affect the Company’s rights in Company-Owned Intellectual Property.
(h) No Violation. No current or former employee, consultant, advisor or independent contractor of the Company: (i) is, to the knowledge of the Company, in violation of any term or covenant of any Contract relating to employment, invention disclosure, invention assignment, non-disclosure or non-competition or any other Contract with any other party by virtue of such employee’s, consultant’s, advisor’s or independent contractor’s being employed by, or performing services for, the Company or using trade secrets or proprietary information of others without permission or (ii) has developed any technology, software or other copyrightable, patentable or otherwise proprietary work for the Company that is subject to any agreement under which such employee, consultant, advisor or independent contractor has assigned or otherwise granted to any third party any rights (including Intellectual Property Rights) in or to such technology, software or other copyrightable, patentable or otherwise proprietary work. Neither the execution nor delivery of this Agreement will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any Contract of the type described in clause (i).
(i) Confidential Information. The Company has taken all commercially reasonable and all legally required steps to protect and preserve the confidentiality of all confidential or non-public information of the Company (including trade secrets, Company Source Code and Company Data) or provided by any third party to the Company (“Confidential Information”). All current and former employees and contractors of the Company and any third party having access to Confidential Information have executed and delivered to the Company a written legally binding agreement regarding the protection of such Confidential Information. There has been no breach of confidentiality obligations or unauthorized disclosure on the part of the Company or, to the knowledge of the Company, by any third party with respect to Confidential Information.
(j) Non-Infringement. To the knowledge of the Company, there is no unauthorized use, unauthorized disclosure, infringement, misappropriation or other violation of any Company-Owned Intellectual Property by any third party. The Company has not sent a notice to any third party alleging infringement, misappropriation or other violation of any Company-Owned Intellectual Property. The Company has not brought any Legal Proceeding for infringement, misappropriation or other violation of
any Company-Owned Intellectual Property. The Company does not have any Liability for infringement, misappropriation or other violation of any Third-Party Intellectual Property. None of (i) the Company Products, (ii) the Company-Owned Intellectual Property nor (iii) the operation of the Business, including (A) the design, development, manufacturing, reproduction, marketing, licensing, sale, offer for sale, importation, distribution, provision and/or use of any Company Product and/or Company-Owned Intellectual Property and (B) the Company’s use of any product, device, process or service used in the Business as previously conducted, as currently conducted and as currently proposed to be conducted (with respect to any Company Products or as otherwise specifically described in the Product Roadmap) by the Company, has, does or will infringe (directly or indirectly, including via contribution or inducement), misappropriate or otherwise violate any Third-Party Intellectual Property, breach any terms of service, click-through agreement or any other agreement or rules, policies or guidelines applicable to use of such Third-Party Intellectual Property, nor constitute unfair competition or unfair trade practices under the Applicable Law of any jurisdiction in which the Company conducts the Business or in which Company Products are manufactured, marketed, distributed, licensed or sold and, to the knowledge of the Company, there is no basis for any such claims. The Company has not been involved in any Legal Proceeding or received any written or, to the knowledge of the Company, other communications (including any third-party reports by users) alleging that the Company has infringed, misappropriated, or otherwise violated or, by conducting the Business, would infringe, misappropriate, or otherwise violate any Intellectual Property of any other Person or entity. No Company-Owned Intellectual Property, Company Product, or to the knowledge of the Company, Third-Party Intellectual Property that is licensed to the Company and incorporated into or used in the development of any Company Product, is subject to any Legal Proceeding, Order, settlement agreement or similar right that restricts in any manner the use, transfer or licensing thereof by the Company, or that may affect the validity, use or enforceability of any Company Intellectual Property. The Company has not received any opinion of counsel that any Company Product or Company-Owned Intellectual Property or the operation of the Business, as previously or currently conducted, or as currently proposed to be conducted, infringes, misappropriates or otherwise violates any Third-Party Intellectual Property.
(k) Licenses; Agreements.
(i) The Company has not granted any options, rights of first refusal or negotiation or other similar rights, licenses or agreements of any kind relating to any Company-Owned Intellectual Property outside of non-exclusive licenses substantially on the standard forms of the Company (copies of which have been provided to Acquirer), and the Company is not bound by or a party to any option, right of first refusal or negotiation or other similar right of any kind with respect to any of the Company-Owned Intellectual Property.
(ii) The Company is not obligated to pay any royalties, revenue share or other similar payments to third parties with respect to the marketing, sale, distribution, manufacture, license or use of any Company Products or Company-Owned Intellectual Property.
(l) Other Intellectual Property Agreements. With respect to the Company Intellectual Property Agreements:
(i) each such agreement is valid and subsisting and has, where required, been duly recorded or registered with the relevant intellectual property authority;
(ii) The Company is not (and will not be as a result of the execution and delivery or effectiveness of this Agreement or the performance of the Company’s obligations under this Agreement) in breach of any Company Intellectual Property Agreement and the consummation of the Transactions will not result in the modification, cancellation, termination,
suspension of, or acceleration of any payments, rights, obligations or remedies with respect to any Company Intellectual Property Agreements, or give any non-Company party to any Company Intellectual Property Agreement the right to do any of the foregoing;
(iii) to the knowledge of the Company, no counterparty to any Company Intellectual Property Agreement is in breach thereof;
(iv) at and after the Closing, the Surviving Corporation (as a wholly owned subsidiary of Acquirer) will be permitted to exercise all of the Company’s rights under the Company Intellectual Property Agreements to the same extent the Company would have been able to had the Transactions not occurred and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments that the Company would otherwise be required to pay;
(v) there are no disputes or Legal Proceedings (pending or, to the knowledge of the Company, threatened) regarding the scope of any Company Intellectual Property Agreements, or performance under any Company Intellectual Property Agreements including with respect to any payments to be made or received by the Company thereunder;
(vi) no Company Intellectual Property Agreement requires the Company to include any Third-Party Intellectual Property in any Company Product or obtain any Person’s approval of any Company Product at any stage of development, licensing, distribution or sale of that Company Product;
(vii) none of the Company Intellectual Property Agreements grants any third party exclusive rights to or under any Company Intellectual Property;
(viii) none of the Company Intellectual Property Agreements grants any third party the right to sublicense any Company-Owned Intellectual Property; and
(ix) the Company has obtained valid, written, perpetual (or renewable in perpetuity at the Company’s option), non-terminable (other than for cause) licenses (sufficient for the conduct of the Business) to all Third-Party Intellectual Property that is incorporated into or distributed with any of the Company Products.
(m) Non-Contravention. Neither the execution and performance of this Agreement nor the consummation of the Transactions and the assignment to Acquirer and/or the Surviving Corporation by operation of law or otherwise of any Material Contract to which the Company is a party or by which any of its assets are bound, will result in: (i) Acquirer or any of its Affiliates (other than the Surviving Corporation) granting to any third party any right to or with respect to any Intellectual Property Rights owned by, or licensed to, Acquirer or any of its Affiliates (other than the Surviving Corporation), (ii) Acquirer or any of its Affiliates (other than the Surviving Corporation), being bound by or subject to, any exclusivity obligations, non-compete or other restriction on the operation or scope of their respective businesses, (iii) Acquirer or the Surviving Corporation being obligated to pay any royalties or other material amounts to any third party in excess of those payable by any of them, respectively, in the absence of this Agreement or the Transactions or (iv) any termination of, or other material impact to, any Company Intellectual Property.
(n) Company Source Code. The Company has not disclosed, delivered or licensed to any Person or agreed or obligated itself to disclose, deliver or license to any Person, or permitted the disclosure or delivery to any escrow agent or other Person of, nor has there been any unauthorized or
inadvertent disclosure of, any Company Source Code, other than disclosures to (i) employees involved in the development of Company Products or (ii) subject to a written confidentiality agreement. No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time, or both) will, or would reasonably be expected to, result in the disclosure, delivery or license by the Company of any Company Source Code, other than disclosures to Authors involved in the development of Company Products subject to a written confidentiality agreement. Without limiting the foregoing, neither the execution nor performance of this Agreement nor the consummation of any of the Transactions will result in a release from escrow or other delivery to a third party of any Company Source Code.
(o) Open Source Software. Schedule 2.10(o)(i) of the Company Disclosure Letter identifies all Open Source Materials used in the development, operation, improvement, distribution, support or maintenance of any Company Products, describes whether such Open Source Materials were modified and/or distributed by the Company, and identifies the licenses under which such Open Source Materials were used. The Company is in material compliance with the terms and conditions of all licenses for the Open Source Materials. Except as set forth on Schedule 2.10(o)(ii) of the Company Disclosure Letter, the Company has not (i) incorporated Open Source Materials into, or combined Open Source Materials with, the Company-Owned Intellectual Property or Company Products, (ii) distributed Open Source Materials in conjunction with any Company-Owned Intellectual Property or Company Products or (iii) used Open Source Materials, in such a way that, with respect to clauses (i), (ii) or (iii), creates obligations for the Company with respect to any Company-Owned Intellectual Property or grant to any third party any rights or immunities under any Company-Owned Intellectual Property (including using any Open Source Materials that require, as a condition of use, modification and/or distribution of such Open Source Materials that other software incorporated into, derived from or distributed with such Open Source Materials be (A) disclosed or distributed in source code form, (B) be licensed for the purpose of making derivative works or (C) be redistributable at no charge).
(p) Information Technology.
(i) Status. The ICT Infrastructure that is currently used in the Business: (A) constitutes all the information and communications technology and other systems infrastructure reasonably necessary to carry on the Business, including having sufficient capacity and maintenance and support requirements to satisfy the requirements of the Business as currently conducted and for the 180 days following the Agreement Date with regard to information and communications technology, data processing and communications; and (B) operates in good working order and functions in accordance with all applicable documentation and specifications without any substandard performance or defect in any part of the ICT Infrastructure.
(ii) Plans. The Company has implemented and maintains reasonable security, disaster recovery and business continuity plans consistent with industry practices of companies offering similar services and Processing similarly sensitive Company Data, and acts in compliance therewith and has tested such plans on a periodic basis, and the Company has reasonably determined that such plans have proven effective upon testing.
(iii) Processing. The Company has valid and subsisting contractual rights and lawful bases to Process or to have Processed all Company-Licensed Data howsoever obtained or collected by or for the Company in the manner that it is Processed by or for the Company. The Company has all rights, lawful bases, permissions, licenses or authorizations required under Applicable Laws (including Privacy Laws) and relevant Contracts (including Company Data Agreements), to retain, produce copies, prepare derivative works, disclose, combine with other data, and grant third parties rights, as applicable, to each of the Company-Licensed Data as necessary for the operation of the Business as presently conducted. The Company is and has been
in compliance with all Contracts pursuant to which the Company Processes or has Processed Company-Licensed Data, and the consummation of the Transactions will not conflict with, or result in any violation or breach of, or default under, any such Contract. Schedule 2.10(p)(iii) of the Company Disclosure Letter identifies each Contract governing any Company-Licensed Data to which the Company is a party or is bound by, except for Standard Licenses with provisions relating to Company-Licensed Data that are substantially the same as those provisions relating to Company-Licensed Data in the standard forms of the Company (copies of which have been provided to Acquirer).
(iv) Company Data. The Company is the owner of all right, title and interest in and to each element of Company-Owned Data. The Company has the right to Process all Company-Owned Data without obtaining any permission or authorization of any Person. Other than as set forth on Schedule 2.10(p)(iv) of the Company Disclosure Letter, the Company has not entered into any Contract governing any Company-Owned Data or to which the Company is a party or bound by, except for Standard Licenses with provisions relating to Company-Owned Data that are substantially the same as those provisions relating to Company-Owned Data in the standard forms of the Company (copies of which have been provided to Acquirer).
(q) No Defects. The Company Products, Company Data, and the Company’s Proprietary Information and Technology are free from material defects, inaccuracies, data integrity defects and bugs, and substantially conform to the applicable specifications, documentation, and samples therefor. The software included in the Company Products or the Company’s Proprietary Information and Technology does not contain (a) any clock, timer, counter, or other limiting or disabling code, design, routine, or any viruses, Trojan horses, or other disabling or disruptive codes or commands that would cause such software to be erased, made inoperable, or otherwise rendered incapable of performing in accordance with its performance specifications and descriptions or otherwise limit or restrict the Company’s or any Person’s ability to use such software, the Company Product or the Company Proprietary Information and Technology, including after a specific or random number of years or copies, or (b) any back doors or other undocumented access mechanism allowing unauthorized access to, and viewing, manipulation, modification, or other changes to, such software.
(r) Standards Bodies. (i) The Company has not and has never been a member of, a contributor to, or affiliated with, any industry standards organization, body, working group, or similar organization, and (ii) neither the Company nor any Company-Owned Intellectual Property is subject to any licensing, assignment, contribution, disclosure or other requirement or restriction of any industry standards organization, body, working group, or similar organization. The Company has provided Acquirer with accurate and complete copies of all governing documents and other Contracts (including charter, bylaws, and participation guidelines) relating to the Company’s membership in, contribution to, or affiliation with any industry standards organization, body, working group, or similar organization (the “Standards Bodies Agreements”).
(s) Warranties; Company Products. No Company Product is subject to any guaranty, warranty, right of return, right of credit, or other indemnity other those contained in contracts that do not deviate from the Company’s standard form of customer contract for the Company Products (copies of which have been provided to Acquirer). There have been no product liability claims relating to the Company, any Company Products or any services related thereto.
2.11 Data Privacy and Security.
(a) The Company’s data privacy and security practices and processing of Personal Data comply, and at all times have complied with all of the Company Privacy Commitments, Privacy
Laws and Company Data Agreements. The Company has at all times, to the extent applicable to the Company: (A) had a valid legal basis (including providing adequate notice and obtaining any necessary consents from individuals) required for the Processing of Personal Data as conducted by or for the Company, (B) refrained from selling or sharing Personal Data with third parties for the third party’s benefit except as permitted under Applicable Law and by any Person with the applicable rights in such Personal Data, and (C) abided by any privacy rights and choices (including privacy by default obligations under Applicable Law and data-subject opt-out preferences) of individuals relating to Personal Data (such obligations along with all statements and obligations contained in Company Privacy Policies, collectively, “Company Privacy Commitments”). The Company has not granted any options, rights of first refusal or negotiation or other similar rights of any kind relating to any Company Data, and the Company is not bound by or a party to any option, rights of first refusal or negotiation or other similar rights, license or agreement of any kind with respect to any of the Company Data. Neither the execution, delivery and performance of this Agreement, nor the continued use by the Company of all of the Company Data and other information relating to the Company’s end users, employees, vendors or clients, or any other category of individuals in a manner consistent with the Company’s past practice, will cause, constitute or result in a breach or violation of any Privacy Laws or Company Privacy Commitments, any Company Data Agreements or any standard terms of service entered into by the Company with individuals the Personal Data of whom is Processed by each of the Company and its Processors. Copies of all current and prior Company Privacy Policies have been made available to Acquirer and such copies are true, correct and complete.
(b) The Company has established and maintains appropriate and reasonable technical, physical and organizational measures and security systems and technologies in compliance with all data security and other applicable requirements under Privacy Laws, Company Data Agreements, and Company Privacy Commitments that are designed to protect Company Data against: (i) accidental or unlawful Processing or disclosure; (ii) breaches of confidentiality; (iii) unavailability of Company Data; or (iv) other events which affect the integrity of Company Data, in each case, in a manner appropriate to the risks represented by the Processing of such data by the Company, its data processors and any other third party with whom Company has shared such Company Data (such processors and foregoing third parties, collectively, “Processors”). The Company and Processors have taken commercially reasonable steps to ensure the compliance of their respective employees and contractors who have access to Company Data, to train such employees on all applicable aspects of any Privacy Law and Company Privacy Commitments and to ensure that all employees with the authority and/or ability to access such data are under written obligations of confidentiality with respect to such data. The Company has processes in place to identify Personal Data in the materials it offers to its users on its websites and takes appropriate and reasonable steps to ensure it is able legally to use such Personal Data as part of its commercial offering.
(c) The Company has not received or experienced and, to the knowledge of the Company, there is no circumstance (including any circumstance arising as a result of an audit or inspection carried out by any Governmental Entity) that would reasonably be expected to give rise to, any Legal Proceeding, Order, notice, communication, warrant, regulatory opinion, audit result or allegation from a Governmental Entity or any other Person (including an end user): (A) alleging or confirming non-compliance with a relevant requirement of Privacy Laws, Company Data Agreement or Company Privacy Commitments, (B) requiring or requesting the Company to amend, rectify, cease Processing, de-combine, permanently anonymize, block or delete any Company Data, (C) permitting or mandating relevant Governmental Entities to investigate, requisition information from, or enter the premises of, the Company or (D) claiming compensation from the Company. There are no unsatisfied requests from individuals or other third parties to the Company seeking to exercise any data protection or privacy rights (such as rights to access, rectify, or delete Personal Data, to restrict or object to processing of Personal Data, or relating
to data portability). The Company has not been involved in any Legal Proceedings involving non-compliance or alleged non-compliance with Privacy Laws or Company Privacy Commitments.
(d) Schedule 2.11(d) of the Company Disclosure Letter contains the complete list of notifications and registrations made by the Company under Privacy Laws with relevant Governmental Entities in connection with the Company’s Processing of Personal Data. All such notifications and registrations are valid, accurate, complete and fully paid up and, to the knowledge of the Company, the consummation of the Transactions will not invalidate such notification or registration or require such notification or registration to be amended. Other than the notifications and registrations set forth on Schedule 2.11(d) of the Company Disclosure Letter, no other registrations or notifications are required in connection with the Processing of Personal Data by Company. The Company does not Process the Personal Data of any natural Person under the age of 13 or is otherwise considered a child under Applicable Law, and has complied with all Privacy Laws (including providing adequate notice and obtaining any necessary parental or other individual consent) for the Processing of Personal Data of any natural person under the age of 18.
(e) Where the Company uses a Processor to Process Personal Data, the Processor has provided guarantees, warranties or covenants in relation to Processing of Personal Data, confidentiality, integrity, availability, security measures and agreed to compliance with those obligations that are sufficient for the Company’s compliance with Privacy Laws and Company Privacy Commitments (including for the evaluation of the Processor, including its technical and organizational measures), and there is in existence a written Contract between the Company and each such Processor that complies with the requirements of all Privacy Laws and Company Privacy Commitments. The Company has made available to Acquirer true, correct and complete copies of all such Contracts and, to the knowledge of the Company, such Processors have not breached any such Contracts pertaining to Personal Data Processed by such Persons on behalf of Company.
(f) The Company has not transferred or permitted the transfer of Personal Data originating in the EEA outside the EEA, except where such transfers have complied with the requirements of Privacy Laws and Company Privacy Commitments.
(g) The Company has complied with Privacy Laws in relation to conducting direct marketing, including electronic marketing, telemarketing, organic growth marketing, and text message marketing.
(h) The Company maintains complete, accurate and up to date records of (i) all Processing activities of Personal Data and their lawful bases and (ii) all data protection impact assessments, in each case as required by the applicable Privacy Laws.
(i) No Breach. No security incident, violation of any data security policy, breach, or unauthorized access or disclosure in relation to Company Data or Confidential Information (including Personal Data in the Company’s possession, custody or control) has occurred or is threatened, and there has been no unauthorized or illegal Processing of any of the foregoing. Neither the Company nor any Person acting on the Company’s behalf or direction has: (A) paid any perpetrator of any data breach incident, ransomware or cyber-attack or (B) paid any third party with actual or alleged information about a data breach incident, ransomware or cyber-attack, pursuant to a request for payment from or on behalf of such perpetrator or other third Person. With respect to the ICT Infrastructure, no data or security incident, including malware, ransomware, virus, compromise of credentials, denial-of-service attack, compromise of data integrity, confidentiality or availability, or unauthorized intrusion of any kind has occurred or is threatened. No circumstance has arisen in which: (x) Applicable Laws (including Privacy Laws) would require the Company to notify a Governmental Entity or an applicable individual of a data
breach or security incident, or operational incident or (y) applicable guidance or codes or practice promulgated under Applicable Laws (including Privacy Laws) would recommend the Company to notify a Governmental Entity or an applicable individual of a data breach or security incident or operational incident.
2.12 Taxes.
(a) The Company has properly completed and timely filed all Tax Returns required to be filed by it prior to the Closing Date (after giving effect to any extensions of time in which to make such filings), has timely paid all Taxes required to be paid by it (whether or not shown on any Tax Return), and has no Liability for Taxes in excess of the amounts so paid. All Tax Returns were complete and accurate and have been prepared in compliance with Applicable Law. There is no claim for Taxes that has resulted in an Encumbrance against any of the assets of the Company other than statutory liens for current Taxes that are not yet due and payable.
(b) The Company has delivered to Acquirer true, correct and complete copies of all Tax Returns, examination reports and statements of deficiencies, adjustments and proposed deficiencies and adjustments in respect of the Company, including, where applicable, any supplemental Tax Return filed by the Company, in each case, for which the applicable statute of limitations has not yet expired.
(c) The Company Balance Sheet reflects all Liabilities for unpaid Taxes of the Company for periods (or portions of periods) through the Company Balance Sheet Date. The Company does not have any Liability for unpaid Taxes accruing after the Company Balance Sheet Date except for Taxes arising in the ordinary course of business and consistent with past practice. The Company does not have any Liability for Taxes (whether outstanding, accrued for, contingent or otherwise) that are not included in the calculation of Company Net Working Capital.
(d) There is (i) no past, pending or threatened audit of, or Tax controversy associated with, any Tax Return of the Company that has been or is being conducted by a Tax Authority, (ii) no other procedure, proceeding or contest of any refund or deficiency in respect of Taxes pending or on appeal with any Governmental Entity, (iii) no extension of any statute of limitations on the assessment of any Taxes granted by the Company currently in effect and (iv) no agreement to any extension of time for filing any Tax Return that has not been filed. No written claim has ever been made by any Governmental Entity in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction.
(e) The Company has collected and remitted all sales, use, value added, ad valorem, personal property and similar Taxes (“Sales Taxes”) with respect to sales made or services provided and, for all sales or provision of services that are exempt from Sales Taxes and that were made without charging or remitting Sales Taxes, the Company and has received and retained any required Tax exemption certificates or other documentation qualifying such sale or provision of services as exempt. The Company is not subject to income Tax, sales Tax, use Tax, gross receipts or any other type of Tax in any U.S. state where it does not file Tax Returns applicable to such type of Tax.
(f) The Company has not been or will not be required to include any adjustment in Taxable income for any Tax period (or portion thereof) pursuant to Section 481 or 263A of the Code or any comparable provision under state, local or foreign Tax laws as a result of transactions, events or accounting methods employed prior to the Merger.
(g) The Company is not a party to or bound by any Tax sharing, Tax indemnity or Tax allocation agreement, and the Company does not have any Liability or potential Liability to another
party under any such agreement (excluding customary provisions in any commercial agreement, the primary purpose of which is not related to Taxes). The Company is not a party to or bound by any advance pricing agreement and the Company does not have any Liability to a Governmental Entity under any such agreement.
(h) The Company has disclosed on its Tax Returns any Tax reporting position taken in any Tax Return that could reasonably be expected to result in the imposition of penalties under Section 6662 of the Code or any comparable provisions of state, local or foreign Applicable Law.
(i) The Company has not (i) been involved in any scheme, arrangement, transaction or series of transactions in which the main purpose of, or one of the main purposes of, was the avoidance, deferral or reduction of Taxes that would otherwise be payable or (ii) consummated or participated in, and is not currently participating in, any transaction that was or is a “Tax shelter” transaction as defined in Sections 6662 or 6111 of the Code or the Treasury Regulations promulgated thereunder. The Company has not participated in, and is not currently participating in, a “Listed Transaction” or a “Reportable Transaction” within the meaning of Section 6707A(c) of the Code or Treasury Regulation Section 1.6011-4(b), or any transaction requiring disclosure under a corresponding or similar provision of state, local, or foreign law.
(j) The Company is not nor has ever been a member of a consolidated, combined, unitary or aggregate group for Tax purposes (including, as the case may be, a tax consolidated group or fiscal unity for purposes of any corporate income tax or value added tax) of which the Company was not the ultimate parent corporation.
(k) There are no Tax amounts that would be required to be clawed back, recaptured, added back, reimbursed or otherwise forfeited by the Company as a consequence of being a party to any transaction that benefited from a deferral of Tax by virtue of any special rule or regime providing for the deferral of Tax (including, without limitation, any transaction benefiting from a special Tax regime applicable to qualifying corporate reorganizations).
(l) The Company does not have any Liability for the Taxes of any other Person (other than the Company) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor (including, without limitation, any successor Tax liability derived from an acquisition of an ongoing concern), by operation of Applicable Law, by Contract or otherwise.
(m) The Company will not be required to include any item of income in, or exclude any item of deduction from, Taxable income for any Taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a Taxable period ending on or prior to the Closing Date, (ii) “closing agreement” described in Section 7121 of the Code (or any corresponding or similar provision of state, local, or foreign Tax law) executed on or prior to the Closing Date, (iii) installment sale or open transaction disposition made on or prior to the Closing Date or (iv) prepaid amount received on or prior to the Closing Date.
(n) The Company does not own and has never owned directly or indirectly an interest in a corporation, association, joint venture, partnership, limited liability company or other “business entity” within the meaning of Treasury Regulation Section 301.7701-2(a).
(o) The Company has not received any private letter ruling from the IRS (or any comparable Tax ruling, binding or not on the Company, from any other Governmental Entity).
(p) The Company is not a party to any joint venture, partnership or other Contract or arrangement that could be treated as a partnership for U.S. federal income Tax purposes.
(q) The Company is not subject to Tax in any jurisdiction other than its country of incorporation, organization or formation by virtue of having employees or a permanent establishment or any other place of business in such jurisdiction.
(r) The Company has in its possession official foreign government receipts for any Taxes paid by it to any foreign Tax Authorities for which receipts have been provided or are customarily provided.
(s) The Company has provided to Acquirer all documentation relating to any applicable Tax holidays. The Company is in compliance with the requirements for any such applicable Tax holidays or incentives or special Tax regimes and to the knowledge of the Company, none of the Tax holidays or incentives will be jeopardized by the Transactions.
(t) The Company is not, nor has ever been a “United States real property holding corporation” within the meaning of Section 897 of the Code, and the Company has filed with the IRS all statements, if any, that are required under Treasury Regulation Section 1.897-2(h).
(u) The Company has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for Tax-free treatment under Section 355 of the Code (i) in the two years prior to the Agreement Date or (ii) in a distribution that could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the Merger.
(v) The Company has (i) complied with all Applicable Law relating to the payment, reporting and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471, 1472 and 3406 of the Code or similar provisions under any foreign law), (ii) withheld (within the time and in the manner prescribed by Applicable Law) from employee wages or consulting compensation and paid over to the proper Governmental Entities (or is properly holding for such timely payment) all amounts required to be so withheld and paid over under all Applicable Law, including federal and state income Taxes, Federal Insurance Contribution Act, Medicare, Federal Unemployment Tax Act, relevant state income and employment Tax withholding laws, and foreign Tax laws (as applicable) and (iii) timely filed all withholding Tax Returns, for all periods through and including the Closing Date. The Company is eligible for any payroll tax credit or deferral that it has claimed pursuant to the CARES Act. Schedule 2.12(v) of the Company Disclosure Letter sets forth any such tax credit or deferral that the Company has claimed.
(w) The Company does not own any interest in any “controlled foreign corporation” (as defined in Section 957 of the Code) or “passive foreign investment company” (as defined in Section 1297 of the Code), or other entity the income of which is required to be included in the income of the Company.
(x) The Company is not a party to a “gain recognition agreement” within the meaning of the Treasury Regulations promulgated under Section 367 of the Code.
(y) The Company has delivered to Acquirer true, correct and complete copies of all election statements under Section 83(b) of the Code, together with evidence of timely filing of such election statements with the appropriate Internal Revenue Service Center, with respect to any Unvested Company Shares or other property issued by the Company or any ERISA Affiliate to any of their
respective employees, non-employee directors, consultants and other service providers. No payment to any Converting Holder of any portion of the Total Merger Consideration payable pursuant to Section 1.3(a)(i) will result in compensation or other income to any Converting Holder with respect to which Acquirer or the Company would be required to deduct or withhold any Taxes.
(z) Schedule 2.12(z) of the Company Disclosure Letter lists all “nonqualified deferred compensation plans” (within the meaning of Section 409A of the Code) to which the Company is a party and which are not exempt from Section 409A of the Code. Each such nonqualified deferred compensation plan complies with the requirements of paragraphs (2), (3) and (4) of Section 409A(a) by its terms and has been operated in accordance with such requirements. No event has occurred that would be treated by Section 409A(b) as a transfer of property for purposes of Section 83 of the Code. The Company is under no obligation to gross up any Taxes or reimburse any Tax-related payments to any Person under Section 409A of the Code or otherwise.
(aa) The Company is in compliance in all material respects with all applicable transfer pricing laws and regulations, including the execution and maintenance of contemporaneous documentation substantiating the transfer pricing practices and methodology of the Company. The prices for any property or services (or for the use of any property) provided by or to the Company are arm’s length prices for purposes of all applicable transfer pricing laws, including the Treasury Regulations promulgated under Section 482 of the Code.
(bb) No independent contractor was or will be considered as an employee of the Company by an applicable Tax Authority.
(cc) Except as set forth on Schedule 2.12(cc) of the Company Disclosure Letter, there is no agreement, plan, arrangement or other Contract covering any current or former employee or other service provider of the Company or any ERISA Affiliate to which the Company is a party or by which the Company or its assets are bound that, considered individually or considered collectively with any other agreement, plan, arrangement or other Contract will, or would reasonably be expect to, as a result of the Transactions (whether alone or upon the occurrence of any additional or subsequent events) give rise directly or indirectly to the payment of any amount that would reasonably be characterized as a “parachute payment” within the meaning of Section 280G of the Code (or any corresponding or similar provision of state, local or foreign Tax law). The Company does not have (nor has ever had) any obligation to report, withhold, gross up, indemnify or otherwise provide any payment for any excise Taxes, including those incurred pursuant to Section 409A or Section 4999 of the Code or due to the failure of any payment to be deductible under of Section 280G of the Code.
(dd) No securities of the Company or any Company Securityholder is readily tradable on an established securities market or otherwise (within the meaning of Section 280G of the Code and the regulations promulgated thereunder) such that the Company is ineligible to seek stockholder approval in a manner that complies with Section 280G(b)(5) of the Code.
2.13 Employee Benefit Plans and Employee Matters.
(a) Schedule 2.13(a) of the Company Disclosure Letter lists, with respect to the Company and any trade or business (whether or not incorporated) that is treated as a single employer with the Company (an “ERISA Affiliate”) within the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) each loan to an employee, (iii) other than the Company Option Plan (or any agreement for any Company Option granted thereunder), all stock option, stock purchase, phantom stock, stock appreciation right, restricted stock unit, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee relocation, cafeteria benefit (Section 125 of the Code), dependent care (Section 129 of the Code), life insurance or accident insurance plans, programs or arrangements, (iv) all bonus, pension, profit sharing, savings, severance, retirement, deferred compensation or incentive plans (including cash incentive plans other than recurring annual bonus incentives provided in offer letters to employees that will not accelerate or be payable in connection with the transaction), programs or arrangements, (v) all other fringe or employee benefit plans, programs or arrangements and (vi) all employment, individual consulting, retention, change of control or executive compensation or severance agreements, in each case, written or otherwise, formal or informal for each employee with annual compensation over $150,000 or which would otherwise be accelerated or payable in connection with the transaction, as to which, in the case of any item listed in (i), (ii), (iii), (iv), (v) or (vi), there are any unsatisfied obligations of the Company that remain for the benefit of, or relating to, any present or former employee, consultant or non-employee director of the Company (all of the foregoing described in clauses (i) through (vi), collectively, the “Company Employee Plans”).
(b) The Company does not sponsor or maintain any self-funded employee benefit plan, including any plan to which a stop-loss policy applies. The Company has provided to Acquirer a true, correct and complete copy of each of the Company Employee Plans and related plan documents (including trust documents, insurance policies or Contracts, employee booklets, summary plan descriptions, prospectuses, registration statements and other authorizing documents, actuarial reports, financial statements, and any material employee communications relating thereto) and has with respect to each Company Employee Plan that is subject to ERISA reporting requirements, provided to Acquirer true, correct and complete copies of the Form 5500 reports filed for the last three plan years. Any Company Employee Plan intended to be qualified under Section 401(a) of the Code has either obtained from the IRS a favorable determination letter as to its qualified status under the Code, including all amendments to the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or has applied (or has time remaining in which to apply) to the IRS for such determination letter prior to the expiration of the requisite period under applicable. Treasury Regulations or IRS pronouncements in which to apply for such determination letter and to make any amendments necessary to obtain a favorable determination or has been established under a standardized prototype plan for which an IRS opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer. Nothing has occurred since the issuance of each such letter that would reasonably be expected to cause the loss of the Tax-qualified status of any Company Employee Plan subject to Section 401(a) of the Code. Each trust established in connection with any Company Employee Plan that is intended to be exempt from federal income taxation under Section 501(a) of the Code is so exempt, and no fact or event has occurred that would reasonably be expected to adversely affect the exempt status of any such trust. All individuals who, pursuant to the terms of any Company Employee Plan, are entitled to participate in any Company Employee Plan, are currently participating in such Company Employee Plan or have been offered an opportunity to do so and have declined in writing.
(c) None of the Company Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person other than as required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or any similar state law and the Company has complied with the requirements of such COBRA and any Applicable Law. Each Company Employee Plan has been maintained and administered in accordance with its terms and in compliance in all material respects with the requirements prescribed by any and all statutes, rules and regulations (including ERISA and the Code), and the Company and each ERISA Affiliate has performed all obligations required to be performed by it under, is not in default under or in violation of, and has no knowledge of any default or violation by any other party to, any of the Company Employee Plans. All contributions required to be made by the Company or any ERISA Affiliate to any Company Employee Plan have been made on or before their due dates (and no further contributions will be due thereunder as of the Closing Date, other than contributions accrued in the ordinary course of business and consistent with past practice after the
Company Balance Sheet Date as a result of the operations of the Company after the Company Balance Sheet Date). Each Company Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without Liability to Acquirer (other than ordinary and reasonable administrative expenses typically incurred in a termination event). With respect to each Company Employee Plan, the Company, and each ERISA Affiliate has at all times timely made deposits of any employee contributions, prepared in good faith and timely filed all requisite governmental reports (which were true, correct and complete as of the date filed), including any required audit reports, and have properly and timely filed and distributed or posted all notices and reports to employees required to be filed, distributed or posted with respect to each such Company Employee Plan. No suit, administrative proceeding, action, litigation or claim has been brought, or to the knowledge of the Company, is threatened, against or with respect to any such Company Employee Plan, including any audit or inquiry by any Governmental Entity. With respect to each Company Employee Plan, (i) no breaches of fiduciary duty or other failures to act or comply in connection with the administration or investment of assets, including any “prohibited transaction” (within the meaning of Section 406 of ERISA and Section 4975 of the Code) have occurred with respect to any Company Employee Plan, (ii) no lien has been imposed under Applicable Law and none of the Company or any ERISA Affiliate is subject to any Liability or penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any Company Employee Plans and (iii) the Company has not made any filing in respect of such Company Employee Plan under the any voluntary correction program. No Company Employee Plan is maintained through a human resources and benefits outsourcing entity or professional employer organization.
(d) There has been no amendment to, written interpretation or announcement (whether or not written) by the Company or any ERISA Affiliate relating to, or change in participation or coverage under, any Company Employee Plan that would materially increase the expense of maintaining such Company Employee Plan above the level of expense incurred with respect to such Company Employee Plan for the most recent full fiscal year included in the Financial Statements.
(e) No Company Employee Plan is sponsored, maintained or contributed to under the law or applicable custom or rule of any jurisdiction outside of the United States and the Company does not engage or employ, and has not at any time engaged or employed, any individual who provides all or substantially all of his or her services to the Company outside of the United States.
(f) No Company Employee Plan is, and neither the Company nor any of its respective ERISA Affiliates maintains, sponsors or contributes to, or has at any time maintained, sponsored or contributed to, or has any liability or obligation (fixed or contingent) with respect to (i) any pension plan (within the meaning of Section 3(2) of ERISA) that is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code, (ii) any “multiemployer plan” as such term is defined in Section 3(37) of ERISA, (iii) any “multiple employer welfare arrangement” as such term is defined in Section 3(40) of ERISA or (iv) any “multiple employer plan” as such term is defined in Section 413(c) of the Code.
(g) The Company is and has been in compliance in all material respects with all Applicable Law respecting employment, discrimination or harassment in employment, terms and conditions of employment, employee benefits, worker classification (including the proper classification of workers as independent contractors and consultants and the proper classification of employees as exempt or non-exempt), wages, social security contributions, state and federal withholdings, working hours and overtime, meal and rest periods, occupational safety and health and employment practices, immigration and work authorization laws, and with respect to each Company Employee Plan. The Company is not liable for any arrears of wages, compensation, Taxes, penalties or other sums for failure to comply with any of the foregoing. The Company has paid in full to all current and former employees, independent contractors and consultants all payments, wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such employees, independent contractors and consultants. The Company is not liable for any payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for any current or former employees (other than routine payments to be made in the normal course of business and consistently with past practice). There are no pending claims against the Company under any workers compensation plan or policy or for long term disability, except for obligations that are not material in amount and there are no independent contractors who may successfully claim to be employees or otherwise be considered employees of the Company. Except as set forth on Schedule 2.13(j) of the Company Disclosure Letter, the Company does not have any obligations under COBRA with respect to any former employees or qualifying beneficiaries thereunder. The Company does not have any other obligations with respect to any former employees or qualifying beneficiaries thereunder, except for obligations that are not material in amount. There are no controversies pending or, to the knowledge of the Company, threatened, between the Company and any of its current or former employees, which controversies have or would reasonably be expected to result in a Legal Proceeding. No amounts are owed by the Company due to salary reviews or increases or delays in salary reviews or increases.
(h) The Company has provided to Acquirer true, correct and complete copies of each of the following: (i) all forms of offer letters, (ii) all forms of employment agreements and severance agreements, (iii) all forms of agreements with current and former consultants and/or advisory board members, (iv) all forms of confidentiality, non-competition or inventions agreements between current and former employees/consultants and the Company (and a true, correct and complete list of employees, consultants and/or others not subject thereto), (v) the most current management organization chart(s), (vi) all forms of bonus plans and any form award agreement thereunder, (vii) a schedule of bonus commitments made to employees of the Company and (viii) any agreements that deviate in any material respect from the forms provided pursuant to clause (i)–(vi). With respect to any individuals providing employment or consulting services to the Company primarily outside of the United States, the Company has made and executed employment contracts in full compliance with the legal and regulatory requirements and in accordance with the purpose of the type of contract used in each case, including the use of any fixed-term or temporary employment contracts.
(i) The Company is not nor at any time has been a party to or bound by any collective bargaining agreement, works council arrangement or other labor union Contract, no collective bargaining agreement is being negotiated by the Company and the Company is not negotiating with or presently required to bargain with any labor organization. There is no pending demand for recognition or any other request or demand from a labor organization for representative status with respect to any Person employed by the Company. To the knowledge of the Company, there are no activities or proceedings of any labor union or to organize its employees. There is no labor dispute, strike or work stoppage against the Company pending or, to the knowledge of the Company, threatened that may interfere with the conduct of the Business. The Company has not, nor, to the knowledge of the Company, has any of its Representatives committed any unfair labor practice in connection with the conduct of the Business, and there is no charge or complaint against the Company by the National Labor Relations Board or any comparable Governmental Entity pending or, to the knowledge of the Company, threatened. No employee of the Company has been dismissed, furloughed or transitioned to a reduced work schedule in the 12 months immediately preceding the Agreement Date.
(j) To the knowledge of the Company, no employee of the Company is in violation of any term of any employment agreement, non-competition agreement or any restrictive covenant to a former employer relating to the right of any such employee to be employed by the Company because of the nature of the Business or to the use of trade secrets or proprietary information of others. To the knowledge of the Company, no consultant or contractor of the Company is in violation of any term of any non-competition agreement or any restrictive covenant to a former employer relating to the right of any
such consultant or contractor to be providing services to the Company because of the nature of the Business or to the use of trade secrets or proprietary information of others. Except as set forth on Schedule 2.13(j) of the Company Disclosure Letter, no employee of the Company has given notice to the Company and, to the knowledge of the Company, no employee of the Company intends to terminate his or her employment with the Company. Except as set forth on Schedule 2.13(j) of the Company Disclosure Letter, the employment of each of the employees of the Company is “at will” (except for non-United States employees of the Company located in a jurisdiction that does not recognize the “at will” employment concept) and the Company does not have any obligation to provide any particular form or period of notice prior to terminating the employment of any of its employees. None of the Company, or to the knowledge of the Company, any other Person has, (i) entered into any Contract that obligates or purports to obligate Acquirer to make an offer of employment to any present or former employee or consultant of the Company and/or (ii) promised or otherwise provided any assurances (contingent or otherwise) to any present or former employee or consultant of the Company of any terms or conditions of employment with Acquirer following the Effective Time.
(k) Schedule 2.13(k)(i) of the Company Disclosure Letter sets forth a true, correct and complete list of all officers, directors and employees of the Company, showing each such individual’s name, hire date, position, visa status, leave status, work location, type of employment (whether permanent or fixed-term), classification as exempt or non-exempt, gross annual remuneration, target bonuses, commissions and all other applicable forms of fixed or variable remuneration, bonuses, commissions and all other applicable forms of fixed or variable remuneration paid in respect of the most recently completed fiscal year, and fringe benefits and social security costs for the current fiscal year and the most recently completed fiscal year and whether the employee was recruited from a previous employer. Schedule 2.13(k)(ii) of the Company Disclosure Letter sets forth a true, correct and complete list of all of its consultants, advisory board members and independent contractors and, for each, (A) such individual’s compensation, (B) such individual’s initial date of engagement and each subsequent engagement (if applicable), (C) whether such engagement has been terminated by written notice by either party thereto and (D) the notice or termination provisions applicable to the services provided by such individual.
(l) There are no performance improvements or disciplinary actions contemplated or pending against any of the Company’s employees.
(m) The Company is and has been in compliance in all material respects with the Worker Adjustment Retraining Notification Act of 1988, as amended, or any similar state or local law (the “WARN Act”). In the past two years, (i) the Company has not effectuated a “plant closing” (as defined by the Warn Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a “mass layoff” (as defined by the WARN Act) affecting any site of employment or facility of the Company and (iii) the Company has not been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation.
(n) Except as disclosed in Schedule 2.2(f) or Schedule 2.13(n) of the Company Disclosure Letter, there are no offer letters, employment agreements, consultancy agreements or other similar agreements or arrangements entered into by the Company pursuant to which the execution, delivery and performance of this Agreement, or the consummation of the Transactions, or any termination of employment or service and any other event in connection therewith or subsequent thereto will, individually or together or with the occurrence of some other event (whether contingent or otherwise), (i) result in any material payment or benefit (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due or payable, or required to be provided, to any current or former employee, director, independent contractor or consultant, (ii) materially increase the amount or value of any benefit or compensation otherwise payable or required to be provided to any current or
former employee, director, independent contractor or consultant, (iii) result in the acceleration of the time of payment, vesting or funding of any such benefit or compensation, (iv) increase the amount of compensation due to any Person by the Company, (v) result in the forgiveness in whole or in part of any outstanding loans made by the Company to any Person or (vi) limit the Company’s ability to terminate any Company Employee Plan. No amount paid or payable by the Company in connection with the Transactions, whether alone or in combination with another event, will be an “excess parachute payment” within the meaning of Section 280G of the Code or Section 4999 of the Code or will not be deductible by the Company by reason of Section 280G of the Code.
(o) No Misconduct Claim has been made, or is currently pending or threatened against any service provider of the Company with respect to conduct relating to the Company’s workplace, no service provider of the Company has engaged in any act that would reasonably be expected to give rise to a Misconduct Claim relating to the Company’s workplace, and no service provider has been terminated from any prior employment or service for any Misconduct Claim.
(p) The Company maintains accurate and complete Form I-9s with respect to each of its former and current employees in accordance with Applicable Law concerning immigration and employment eligibility verification obligations. All employees of the Company are legally permitted to be employed by the Company in the jurisdiction in which such employee is employed in their current job capacities for the maximum period allowed under Applicable Law.
2.14 Interested-Party Transactions. None of the officers or directors of the Company or, to the knowledge of the Company, any of the other employees of the Company or any Company Stockholder, or any of the immediate family members of any of the foregoing, (i) has any direct or indirect ownership, participation, royalty or other interest in, or is an officer, director, employee of or consultant or contractor for any firm, partnership, entity or corporation that competes with, or does business with, or has any contractual arrangement with, the Company (except with respect to any interest in less than 5% of the stock of any corporation whose stock is publicly traded), (ii) is a party to, or to the knowledge of the Company, otherwise directly or indirectly interested in, any Contract to which the Company is a party or by which the Company or any of its assets are bound, except for normal compensation for services as an officer, director or employee thereof or (iii) to the knowledge of the Company, has any interest in any property, real or personal, tangible or intangible (including any Intellectual Property) that is used in, or that relates to, the Business, except for the rights of Company Stockholders under Applicable Law. For clarity, no disclosure will be required under this Section 2.14 as to the portfolio companies of any venture capital, private equity or angel investor in Company.
2.15 Insurance. The Company maintains the policies of insurance and bonds set forth in Schedule 2.15 of the Company Disclosure Letter, including all legally required workers’ compensation insurance and errors and omissions, casualty, fire, cybersecurity, and general liability insurance. Schedule 2.15 of the Company Disclosure Letter sets forth the name of the insurer under each such policy and bond, the type of policy or bond, the coverage amount and any applicable deductible, as well as all material claims made under such policies and bonds since inception. The Company has provided to Acquirer true, correct and complete copies of all such policies of insurance and bonds issued at the request or for the benefit of the Company. There is no claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been timely paid and the Company is otherwise in compliance with the terms of such policies and bonds. All such policies and bonds remain in full force and effect, and the Company has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies.
2.16 Books and Records. To the knowledge of the Company, the Company has provided to
Acquirer true, correct and complete copies of each document that has been requested by Acquirer in connection with their legal and accounting review of the Company (other than any such document that does not exist or is not in the Company’s possession or subject to its control). Without limiting the foregoing, the Company has provided to Acquirer true, correct and complete copies of (i) all documents identified on the Company Disclosure Letter, (ii) the Certificate of Incorporation and the Bylaws, each as currently in effect, (iii) the complete minute books containing records of all proceedings, consents, actions and meetings of the Board, committees of the Board and the Company Stockholders, (iv) the stock ledger, journal and other records reflecting all stock issuances and transfers and all stock option and warrant grants and agreements of the Company and (v) all currently effective permits, orders and consents issued by any regulatory agency with respect to the Company, or any securities of the Company, and all applications for such permits, orders and consents. The minute book of the Company provided to Acquirer contains a true, correct and complete summary of all meetings of directors and of the Company Stockholders or actions by written consent since the time of incorporation of the Company through the Agreement Date. The books, records and accounts of the Company (A) are true, correct and complete in all material respects, (B) have been maintained in accordance with reasonable business practices on a basis consistent with prior years, (C) are stated in reasonable detail and accurately and fairly reflect all of the transactions and dispositions of the assets and properties of the Company and (D) accurately and fairly reflect the basis for the Financial Statements.
2.17 Material Contracts.
(a) Schedules 2.17(a)(i) through (xxvi) of the Company Disclosure Letter set forth a list of each of the following Contracts to which the Company is a party that are in effect on the Agreement Date (collectively, the “Material Contracts”):
(i) any Contract with a (A) Significant Customer or (B) Significant Supplier;
(ii) other than any Contract for or relating to the employment or service of any director, officer, employee or consultant, any Contract providing for payments by or to the Company (or under which the Company has made or received such payments) in the period since January 1, 2019 in an aggregate amount of $25,000 or more annually;
(iii) any dealer, distributor, referral or similar agreement, or any Contract providing for the grant of rights to reproduce, license, distribute, market, refer or sell the Company Products to any other Person or relating to the advertising or promotion of the Business;
(iv) (A) any joint venture Contract, (B) any Contract that involves a sharing of revenues, profits, cash flows, expenses or losses with other Persons and (C) any Contract that involves the payment by the Company of royalties to any other Person;
(v) any agreement or Contract providing for the payment of compensation or benefits (including any accelerated vesting) upon any termination of employment or service, or in connection with the transactions contemplated by this Agreement, with any current or former employees under which the Company has any ongoing liability (other than customary confidentiality provisions);
(vi) any Contract for or relating to the employment or service of any director, officer, or beneficial owner of more than 5% of the total shares of Company Common Stock or any other type of Contract with any of the Company’s officers or beneficial owners of more than
5% of the total shares of Company Common Stock, as the case may be, other than standard employment agreements or offer letters, proprietary information and invention assignment agreements on the standard forms of the Company or the Subsidiaries or other confidentiality agreements entered into by service providers, employees or consultants in the ordinary course of business;
(vii) any Contract (A) pursuant to which any other party is granted exclusive rights or “most favored party” rights of any type or scope with respect to any of the Company Products, Company Intellectual Property or Company-Owned Data or which would otherwise restrict the Company from freely setting prices for the Company Products, (B) containing any non-competition covenants or other similar restrictions relating to the Company Products, Company Intellectual Property or Company-Owned Data, (C) that limits or would limit the freedom of the Company or any of its successors or assigns or their respective Affiliates to (I) engage or participate, or compete with any other Person, in any line of business, market or geographic area with respect to the Company Products or the Company Intellectual Property, or to make use of any Company Intellectual Property, including any grants by the Company of exclusive rights or licenses (II) sell, distribute or manufacture any products or services or to purchase or otherwise obtain any software, components, parts or services or (III) solicit the services or business of any Person, (D) containing any “take or pay,” minimum commitments or similar provisions or (E) that is set forth on Schedule 2.13(j) of the Company Disclosure Letter;
(viii) any standstill or similar agreement containing provisions prohibiting a third party from purchasing Equity Interests of the Company or the assets of the Company or otherwise seeking to influence or exercise control over the Company;
(ix) any Company Intellectual Property Agreement (i) where the Company grants any license, covenant not to sue or other rights under any Intellectual Property Rights to any Person, (provided that for the purposes of this Section 2.17(a)(ix)(i), the Company is not required to disclose Standard Outbound Licenses); (ii) where the Company obtains or receives any license, covenant not to sue or other rights under any Intellectual Property Rights from any Person (provided that for the purposes of this Section 2.17(a)(ix)(ii), the Company is not required to disclose Standard Inbound Licenses); and (iii) that is not otherwise covered under the foregoing clauses (i) and (ii);
(x) any license, sublicense or other Contract pursuant to which the Company has agreed to any restriction on the right of the Company to use or enforce any Company-Owned Intellectual Property or pursuant to which the Company agrees to encumber (other than Permitted Encumbrances), transfer or sell rights in or with respect to any Company-Owned Intellectual Property;
(xi) any Standards Bodies Agreement;
(xii) any Contract providing for the development of any software, technology or Intellectual Property, independently or jointly, either by or for the Company (other than employee invention assignment agreements with employees and contractors of the Company substantially on the Company’s standard form of agreement, copies of which have been provided to Acquirer);
(xiii) any confidentiality, secrecy or non-disclosure Contract other than any such Contract entered into by the Company in the ordinary course of business and consistent with past practice;
(xiv) any Contract to license or authorize any third party to manufacture or reproduce any of the Company Products or Company Intellectual Property;
(xv) any Contract containing any indemnification, warranty, support, maintenance or service obligation or cost on the part of the Company (other than customer agreements on the Company’s standard form of agreement, copies of which have been provided to Acquirer);
(xvi) any settlement agreement with respect to any Legal Proceeding;
(xvii) any Contract with a customer, reseller, channel partner, distributor, supplier, vendor or licensor involving payments exceeding $25,000 per annum pursuant to which rights of the counter-party thereto are triggered or become exercisable in connection with or as a result of the execution of this Agreement or the consummation of the Transactions, either alone or in combination with any other event;
(xviii) any Contract or plan (including the Company Option Plan and any other stock option, merger and/or stock bonus plan) relating to the sale, issuance, grant, exercise, award, purchase, repurchase or redemption of any shares of Company Capital Stock or any other securities of the Company, in each case, any options, warrants, convertible notes or other rights to purchase or otherwise acquire any such shares of stock, other securities or options, warrants or other rights therefor, except for the repurchase rights disclosed on Schedule 2.2(a) or Schedule 2.2(b) of the Company Disclosure Letter and the Company’s standard form of option grant and exercise agreements (copies of which have been provided to Acquirer);
(xix) other than the Company Option Plan (or any agreement for a Company Option granted thereunder), any Contract with any labor union or any collective bargaining agreement or similar contract with its employees;
(xx) any trust indenture, mortgage, promissory note, loan agreement or other Contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with GAAP;
(xxi) any Contract of guarantee, surety, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the Liabilities or indebtedness of any other Person, other than Standard Licenses;
(xxii) any Contract for capital expenditures in excess of $25,000 in the aggregate;
(xxiii) any Contract pursuant to which the Company is a lessor or lessee of any real property or any machinery, equipment, motor vehicles, office furniture, fixtures or other tangible personal property involving expenditures in excess of $25,000 per annum;
(xxiv) any Contract pursuant to which the Company has acquired a business or entity, or assets of a business or entity, whether by way of merger, consolidation, purchase of stock, purchase of assets, license or otherwise, or any Contract pursuant to which it has any Equity Interest or other material ownership interest in any other Person;
(xxv) any Contract relating to the Processing of Personal Data or Company
Data (provided that for purposes of this Section 2.17(a)(xxv), the Company shall not be required to disclose Standard Licenses with provisions relating to the Processing of Personal Data or Company Data that are substantially the same as the provisions relating to the Processing of Personal Data or Company Data contained in the unmodified standard forms of the Company (copies of which have been provided to Acquirer)); and
(xxvi) any Contract with any Governmental Entity, any Company Authorization, or any Contract with a government prime contractor, or higher-tier government subcontractor, including any indefinite delivery/indefinite quantity contract, firm-fixed-price contract, schedule contract, blanket purchase agreement, or task or delivery order (each a “Government Contract”).
(b) All Material Contracts are in written form. The Company has performed all of the obligations required to be performed by it and is entitled to all benefits under, and is not alleged in writing, or to the knowledge of the Company, orally, to be in default in respect of, any Material Contract. Each of the Material Contracts is in full force and effect, subject only to the effect, if any, of applicable bankruptcy and other similar Applicable Law affecting the rights of creditors generally and rules of law governing specific performance, injunctive relief and other equitable remedies. There exists no default or event of default or event, occurrence, condition or act, with respect to the Company or, to the knowledge of the Company, with respect to any other contracting party, that, with the giving of notice, the lapse of time or the happening of any other event or condition, would reasonably be expected to (i) become a default or event of default under any Material Contract or (ii) give any third party (A) the right to declare a default or exercise any remedy under any Material Contract, (B) the right to a rebate, chargeback, refund, credit, penalty or change in delivery schedule under any Material Contract, (C) the right to accelerate the maturity or performance of any obligation of the Company under any Material Contract, or (D) the right to cancel, terminate or modify any Material Contract. The Company has not received any written notice (or to the knowledge of the Company, oral) or other written (or to the knowledge of the Company, oral) communication regarding any actual or possible violation or breach of, default under, or intention to cancel or modify any Material Contract (including under a force majeure or similar provision, including as a result of the COVID-19 Pandemic). The Company does not have any Liability for renegotiation of Government Contracts. True, correct and complete copies of all Material Contracts have been made available to Acquirer prior to the Agreement Date.
2.18 Transaction Fees. Other than College Heights Partners, no broker, finder, financial advisor, investment banker or similar Person is entitled to any brokerage, finder’s or other fee or commission in connection with the origin, negotiation or execution of this Agreement or in connection with the Transactions.
2.19 Anti-Corruption Law. None of the Company or any of its directors, employees, agents or representatives (in each case, acting in their capacities as such) has, since the inception of the Company, directly or indirectly through its representatives or any Person authorized to act on its behalf (including any distributor, agent, sales intermediary or other third party), (i) violated any Anti-Corruption Law or (ii) offered, given, promised to give or authorized the giving of money or anything of value, to any Government Official or to any other Person: (A) for the purpose of (I) corruptly or improperly influencing any act or decision of any Government Official in their official capacity, (II) inducing any Government Official to do or omit to do any act in violation of their lawful duties, (III) securing any improper advantage or (IV) inducing any Government Official to use his or her respective influence with a Governmental Entity to affect any act or decision of such Governmental Entity in order to, in each case of clauses (I) through (IV), assist the Company in obtaining or retaining business for or with, or directing business to, any Person or (B) in a manner that would constitute or have the purpose or effect of public or commercial bribery, acceptance of, or acquiescence in, extortion, kickbacks or other unlawful or improper
means of obtaining business or any improper advantage.
2.20 Environmental, Health and Safety Matters. The Company is in compliance with all Environmental, Health and Safety Requirements in connection with the ownership, use, maintenance or operation of its business or assets or properties. There are no pending, or to the knowledge of the Company, any threatened allegations by any Person that the properties or assets of the Company are not, or that its business has not been conducted, in compliance with all Environmental, Health and Safety Requirements. The Company has not retained or assumed any Liability of any other Person under any Environmental, Health and Safety Requirements. To the knowledge of the Company, there are no past or present facts, circumstances or conditions that would reasonably be expected to give rise to any Liability of the Company with respect to Environmental, Health and Safety Requirements.
2.21 Export Control Laws. The Company has conducted its export transactions in accordance in all respects with applicable provisions of United States export and re-export controls, including the Export Administration Act and Regulations, the Foreign Assets Control Regulations, the International Traffic in Arms Regulations and other controls administered by the United States Department of Commerce and/or the United States Department of State and all other applicable import/export controls in other countries in which the Company conducts business. Without limiting the foregoing: (i) the Company has obtained all export and import licenses, license exceptions and other consents, notices, waivers, approvals, orders, authorizations, registrations, declarations and filings with any Governmental Entity required for (A) the export, import and re-export of products, services, software and technologies and (B) releases of technologies and software to foreign nationals located in the United States and abroad (collectively, “Export Approvals”), (ii) the Company is in compliance with the terms of all applicable Export Approvals, (iii) there are no pending or, to the knowledge of the Company, threatened claims against the Company with respect to such Export Approvals, (iv) there are no actions, conditions or circumstances pertaining to the Company’s export transactions that would reasonably be expected to give rise to any future claims and (v) no Export Approvals for the transfer of export licenses to Acquirer, any of its Affiliates or the Surviving Corporation are required, except for such Export Approvals that can be obtained expeditiously and without material cost.
2.22 Customers. The Company does not have any outstanding material disputes concerning any Company Products with any customer, reseller, channel partner or distributor who, for the year ended December 31, 2019 or the eleven months ended November 30, 2020, was one of the 20 largest sources of revenues for the Company, based on amounts paid or payable to the Company with respect to such periods (each, a “Significant Customer”), and, to the knowledge of the Company, there is no material dissatisfaction on the part of any Significant Customer with respect to any Company Products. Each Significant Customer is listed on Schedule 2.22 of the Company Disclosure Letter. The Company has not received any written notice from any Significant Customer that such Significant Customer shall not continue as a customer of the Company (or the Surviving Corporation or Acquirer), after the Closing or that such Significant Customer intends to terminate or materially modify existing Contracts with the Company (or the Surviving Corporation or Acquirer).
2.23 Suppliers. The Company does not have any outstanding material disputes concerning products and/or services provided by any supplier, vendor or licensor who, for the year ended December 31, 2019 or the eleven months ended November 30, 2020, was one of the 10 largest suppliers of products and/or services to the Company, based on amounts paid or payable with respect to such periods (each, a “Significant Supplier”), there is no material dissatisfaction on the part of the Company with respect to any Significant Supplier and, to the knowledge of the Company, there is no material dissatisfaction on the part of any Significant Supplier with respect to the Company. Each Significant Supplier is listed on Schedule 2.23 of the Company Disclosure Letter. The Company has not received any written notice from any Significant Supplier that such supplier shall not continue as a supplier to the Company (or the
Surviving Corporation or Acquirer), after the Closing or that such Significant Supplier intends to terminate or materially modify existing Contracts with the Company (or the Surviving Corporation or Acquirer). The Company has access, on commercially reasonable terms, to all products and services reasonably necessary to carry on the Business as presently conducted on the Agreement Date and, to the knowledge of the Company, there is no reason why the Company will not continue to have such access on commercially reasonable terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIRER AND MERGER SUB
Acquirer and Merger Sub represent and warrant to the Company as follows:
3.1 Organization and Standing. Each of Acquirer and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. None of Acquirer or Merger Sub is in violation of any of the provisions of its articles or certificate of incorporation, as applicable, or bylaws or equivalent organizational or governing documents.
3.2 Authority; Non-contravention.
(a) Each of Acquirer and the Merger Sub has all requisite corporate power and authority to enter into this Agreement and to consummate the Transactions. The execution and delivery of this Agreement and the consummation of the Transactions have been duly authorized by all necessary corporate action on the part of Acquirer and Merger Sub. This Agreement has been duly executed and delivered by each of Acquirer and Merger Sub and, assuming the due execution and delivery of this Agreement by the other parties hereto, constitutes the valid and binding obligation of Acquirer and Merger Sub enforceable against Acquirer and Merger Sub, respectively, in accordance with its terms, subject only to the effect, if any, of (i) applicable bankruptcy and other similar Applicable Law affecting the rights of creditors generally and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.
(b) The execution and delivery of this Agreement by Acquirer and Merger Sub do not, and the consummation of the Transactions will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or loss of a benefit under, or require any consent, approval or waiver from any Person pursuant to, (i) any provision of the articles or certificate of incorporation, as applicable, or bylaws or other equivalent organizational or governing documents of Acquirer and Merger Sub, in each case as amended to date, (ii) Applicable Law, or (iii) any material Contract to which Acquirer or Merger Sub is a party or by which any of their respective assets are subject, except where such conflict, violation, default, termination, cancellation or acceleration, individually or in the aggregate, would not be material to Acquirer’s or Merger Sub’s ability to consummate the Merger or to perform their respective obligations under this Agreement.
(c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity or any other Person is required by or with respect to Acquirer or Merger Sub in connection with the execution and delivery of this Agreement or the consummation of the Transactions except for (i) such consents, waivers, approvals, Orders, authorizations, registrations, declarations and filings as may be required under applicable securities laws and state “blue sky” laws, (ii) the filing of the Certificates of Merger with the Secretary of State of the State of Delaware and (iii) those that, if not obtained or made, would not reasonably be expected to adversely affect the ability of Acquirer or Merger Sub to consummate the Transactions or to perform their respective obligations under this Agreement.
3.3 Capitalization.
(a) As of the Agreement Date, the authorized capital of Acquirer consists of the following: (i) 264,659,000 shares of Acquirer Common Stock, 39,298,503 shares of which are issued and outstanding and (ii) 168,985,413 shares of Acquirer Preferred Stock, (A) 10,962,327 of which are designated as Acquirer Series Seed Preferred Stock, all of which are issued and outstanding, (B) 12,855,123 of which are designated as Acquirer Series A Preferred Stock, all of which are issued and outstanding, (C) 20,288,700 of which are designated as Acquirer Series B Preferred Stock, all of which are issued and outstanding, (D) 40,338,867 of which are designated as Acquirer Series C Preferred Stock, all of which are issued and outstanding, (E) 29,078,931 of which are designated as Acquirer Series D Preferred Stock, all of which are issued and outstanding, (F) 31,405,183 of which are designated as Acquirer Series E Preferred Stock, all of which are issued and outstanding, (G) 24,056,282 of which are designated as Acquirer Series F Preferred Stock, 22,128,982 shares of which are issued and outstanding. Each share of Acquirer Preferred Stock is convertible into one (1) share of Acquirer Common Stock. The last price at which Acquirer issued and sold shares of the Acquirer Series F Preferred Stock was $12.0614.
(b) As of the Agreement Date, Acquirer has reserved 54,511,184 shares of Acquirer Common Stock for issuance pursuant to awards granted under the Acquirer Option Plan, of which 38,151,829 shares are subject to outstanding and unexercised Acquirer Options, and 4,665,317 shares remain available for issuance thereunder.
(c) All of the outstanding shares of Acquirer Common Stock and Acquirer Preferred Stock are duly authorized, validly issued, fully paid and nonassessable. All issued and outstanding shares of Acquirer Common Stock, Acquirer Preferred Stock and all Acquirer Options were issued in material compliance with all applicable federal and state securities laws.
3.4 Issuance of Shares. The shares of Acquirer Common Stock issuable in the Merger, when issued by Acquirer in accordance with this Agreement, assuming the accuracy of the representations and warranties made by the Company and the Company Securityholders herein or in the Stockholder Agreement, Investor Representation Agreement and/or Letter of Transmittal, will be duly authorized and issued, fully paid, non-assessable, issued in compliance with Applicable Law, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement, the Investor Representation Agreement, the Letter of Transmittal, the Vesting Agreements, any stock restriction agreement entered into between Acquirer and any Company Stockholder, the certificate of incorporation of Acquirer, the bylaws of Acquirer and under Applicable Law.
3.5 Acquirer Financial Statements. Acquirer has made available to the Company its audited financial statements for the fiscal years ending January 31, 2019 and January 31, 2020 (collectively, the “Acquirer Financial Statements”). The Acquirer Financial Statements (a) are derived from and in accordance with the books and records of Acquirer, (b) complied as to form with applicable accounting requirements with respect thereto as of their date, (c) fairly and accurately present the financial condition of Acquirer at the dates therein indicated and the results of operations and cash flows of Acquirer for the periods therein specified and (d) were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved.
3.6 No Material Adverse Effect. Since July 1, 2020 until the Agreement Date, there has not occurred a Material Adverse Effect with respect to Acquirer.
3.7 No Prior Merger Sub Operations. Merger Sub is a direct, wholly owned subsidiary of Acquirer. Merger Sub was formed solely for the purpose of effecting the Merger and has not engaged in
any business activities or conducted any operations other than in connection with the Transactions.
3.8 Litigation. Except as set forth in Section 3.8 of the disclosure letter of Acquirer delivered to Acquirer concurrently with the execution of this Agreement, there is no Legal Proceeding of any nature pending or threatened in writing or, to the knowledge of Acquirer, orally, against Acquirer or any of its subsidiaries, its properties or assets (tangible or intangible) or any of its officers or directors (in their capacities as such), (a) that would reasonably be expected to be material to Acquirer or (b) that in any manner challenges or would otherwise reasonably be expected to prevent, enjoin, alter or materially delay the Merger or any of the other Transactions.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Maintenance of Business. Between the Agreement Date and the Closing Date the Company shall:
(a) continue to conduct the Business in the ordinary course of business consistent with past practice and in compliance with applicable law;
(b) use its commercially reasonable efforts consistent with past practice and policies to (i) preserve intact its present business organizations, (ii) keep available the services of its present officers and key employees and (iii) preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, to the end that its goodwill and ongoing businesses shall be unimpaired at the Closing;
(c) shall not take any action without Acquirer’s prior written consent that would render any representation or warranties set forth in Section 2.5 untrue, as if such representation or warranty were made as of and with respect to the period between the Agreement Date and the Closing Date;
(d) shall not enter into any Contract that would (if entered into prior to the Agreement Date) constitute a Material Contract, other than Standard Licenses with customers in the ordinary course of business consistent with past practice;
(e) except for the issuance of Company Common Stock in connection with the exercise of Company Warrants, shall not issue, deliver, grant or sell or authorize or propose the issuance, delivery, grant or sale of, or purchase or propose the purchase of, any Company Voting Debt or any Equity Interests, or enter into or authorize or propose to enter into any Contracts of any character obligating it to issue any Equity Interests, other than: (i) the issuance of Company Common Stock upon conversion of Company Preferred Stock or exercise of vested Company Options or vested Company Warrants, in each case which are outstanding on the Agreement Date or (ii) the repurchase of any shares of Company Capital Stock from former employees, non-employee directors and consultants in accordance with Contracts providing for the repurchase of shares in connection with any termination of service;
(f) shall not (i) hire, or offer to hire, any additional officers or other employees, or any consultants or independent contractors, (ii) terminate the employment, furlough, change the title, office or position, materially reduce or change the responsibilities of, or otherwise modify the working hours of any employee or contractor of the Company, (iii) enter into, amend the terms of or extend or renew any employment or consulting agreement with any officer, employee, consultant or independent contractor, (iv) adopt, implement or otherwise establish any other temporary or permanent non-ordinary
course measures applicable to employees, consultants, independent contractors or other service providers as a result of the COVID-19 Pandemic
(g) shall not (i) adopt, terminate or amend any Company Option Plan or other employee or compensation benefit plan, including any stock issuance or stock option plan, or amend any compensation, benefit, entitlement, grant or award provided or made under any such plan, except in each case as required under Applicable Law, (ii) grant, pay or increase any change in control, special bonus or special remuneration to any current or former employee or non-employee director or consultant, (iii) modify the salaries, wage rates, bonuses or fees of its employees or consultants or (iv) grant or pay, or enter into any Contract providing for the granting of any severance, retention or termination pay, or the acceleration of vesting or other benefits, to any Person;
(h) shall not take or agree in writing or otherwise to take, any of the actions described in clauses (c) through (g) in this Section 4.1, or any action that would prevent the Company from performing or cause the Company not to perform one or more covenants, agreements or obligations required hereunder to be performed by the Company (such that the condition set forth in the second sentence of Section 1.2(e)(i) would not be satisfied).
4.2 Stockholder Approval and Stockholder Notice.
(a) The Company shall take all action necessary in accordance with this Agreement, the DGCL, the certificate of incorporation and the bylaws to obtain the Requisite Stockholder Approval. The Company’s obligation to obtain the Requisite Stockholder Approval pursuant to this Section 4.2 shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission to the Company of any Acquisition Proposal or the withholding, withdrawal, amendment or modification by the Board of its unanimous recommendation to the Company Stockholders in favor of the adoption of this Agreement. The Company shall use its reasonable best efforts to obtain Written Consents executed by each Company Stockholder and to cause each such Company Stockholder to execute a Stockholder Agreement and cause each such Company Stockholder that is an Accredited Investor to execute an Investor Representation Agreement. Upon obtaining the Company Stockholder Approval or the Requisite Stockholder Approval, as applicable, the Company shall promptly deliver copies of the executed Written Consents or other documents evidencing the obtainment of the Company Stockholder Approval and the Requisite Stockholder Approval, respectively, to Acquirer.
(b) Promptly (and in any case within two days) after the Company obtains the Company Stockholder Approval, the Company shall prepare, with the cooperation of Acquirer, and mail to each Company Stockholder other than the Consenting Stockholders, a notice (as it may be amended or supplemented from time to time, the “Stockholder Notice”) comprising (i) the notice contemplated by Section 228(e) of the DGCL of the taking of a corporate action without a meeting by less than a unanimous written consent, (ii) the notice contemplated by Section 262(d)(2) of the DGCL and Chapter 13 of the CCC, together with a copy of Section 262 of the DGCL and Chapter 13 of the CCC, and (iii) an information statement to the Company Stockholders in connection with the solicitation of their signatures to a Written Consent, Stockholder Agreement and Investor Representation Agreement. The Stockholder Notice shall include (x) a statement to the effect that the Board had unanimously recommended that the Company Stockholders vote in favor of the adoption of this Agreement and (y) such other information as Acquirer and the Company may agree is required or advisable under the DGCL and CCC to be included therein. Prior to its mailing, the Stockholder Notice shall have been approved by Acquirer, and, following its mailing, no amendment or supplement to the Stockholder Notice shall be made by the Company without the approval of Acquirer. Each of Acquirer and the Company agrees to provide promptly to the other such information concerning its business, financial statements and affairs as, in the reasonable judgment of Acquirer or its counsel, may be required or advisable to be included under the DGCL or the
CCC in the Stockholder Notice or in any amendment or supplement thereto, and Acquirer and the Company agree to cause their respective Representatives to cooperate in the preparation of the Stockholder Notice and any amendment or supplement thereto.
4.3 No Solicitation.
(a) During the period from the Agreement Date and continuing until the earlier of the termination of this Agreement and the Effective Time, the Company shall not, and shall not authorize or permit any of its Representatives to, directly or indirectly, (i) solicit, initiate, seek, entertain, knowingly encourage, facilitate, support or induce the making, submission or announcement of any inquiry, expression of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (ii) enter into, participate in, maintain or continue any communications (except solely to provide written notice as to the existence of these provisions) or negotiations regarding, or deliver or make available to any Person any non-public information with respect to, or take any other action regarding, any inquiry, expression of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (iii) agree to, accept, approve, endorse or recommend (or publicly propose or announce any intention or desire to agree to, accept, approve, endorse or recommend) any Acquisition Proposal, (iv) enter into any letter of intent or any other Contract contemplating or otherwise relating to, or that could reasonably be expected to lead to, any Acquisition Proposal, (v) submit any Acquisition Proposal to the vote of any Company Securityholders or (vi) enter into any other transaction or series of transactions not in the ordinary course of business and consistent with past practice, the consummation of which would impede, interfere with, prevent or delay, or would reasonably be expected to impede, interfere with, prevent or delay, the consummation of the Transactions. The Company shall, and shall cause its Representatives to, (A) immediately cease and cause to be terminated any and all existing activities, discussions or negotiations with any Persons conducted prior to or on the Agreement Date with respect to any Acquisition Proposal and (B) immediately revoke or withdraw access of any Person (other than Acquirer and its Representatives) to any data room (virtual or actual) containing any non-public information with respect to the Company in connection with an Acquisition Proposal and request from each Person (other than Acquirer and its Representatives) the prompt return or destruction of all non-public information with respect to the Company previously provided to such Person in connection with an Acquisition Proposal. If any of the Company’s Representatives (whether in his, her or its capacity as such or in any other capacity) takes any action that the Company is obligated pursuant to this Section 4.3(a) not to authorize or permit such Person to take, or to otherwise restrict, then the Company shall be deemed for all purposes of this Agreement to have breached this Section 4.3.
(b) The Company shall immediately (but in any event, within 24 hours) notify Acquirer orally and in writing after receipt by the Company (or, to the knowledge of the Company, by any of its Representatives) of (i) any Acquisition Proposal, (ii) any inquiry, expression of interest, proposal or offer that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal, (iii) any other notice that any Person is considering making an Acquisition Proposal or (iv) any request for non-public information relating to the Company or for access to any of the properties, books or records of the Company by any Person or Persons other than Acquirer and its Representatives. Such notice shall describe (A) the material terms and conditions of such Acquisition Proposal, inquiry, expression of interest, proposal, offer, notice or request and (B) the identity of the Person or Group making any such Acquisition Proposal, inquiry, expression of interest, proposal, offer, notice or request. The Company shall keep Acquirer fully informed of the status and details of, and any modification to, any such inquiry, expression of interest, proposal or offer and any correspondence or communications related thereto and shall provide to Acquirer a true, correct and complete copy of such inquiry, expression of interest, proposal or offer and any amendments, correspondence and communications related thereto, if it is in writing, or a reasonable written summary thereof, if it is not in writing. The Company shall provide Acquirer with 48 hours prior notice (or such lesser prior notice as is provided to the members of the
Board) of any meeting of the Board at which the Board is reasonably expected to discuss any Acquisition Proposal.
4.4 Reasonable Best Efforts. Each of the parties hereto agrees to use its reasonable best efforts, and to cooperate with each other party hereto, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, appropriate or desirable to consummate and make effective, in the most expeditious manner practicable, the Transactions, including the satisfaction of the respective conditions set forth in Section 1.2, and including to cooperate in the preparation of the notifications and responses to the request of enquiries related to such conditions, to execute and deliver such other instruments and do and perform such other acts and things as may be necessary or reasonably desirable for effecting completely the consummation of the Transactions.
4.5 Confidentiality; Public Disclosure.
(a) The parties hereto acknowledge that Acquirer and the Company have previously executed a non-disclosure agreement, dated as of October 6, 2020 (the “Confidentiality Agreement”), which shall continue in full force and effect in accordance with its terms. Each party hereto agrees that it and its Representatives shall hold the terms of this Agreement, and the fact of this Agreement’s existence, in strict confidence. At no time shall any party hereto disclose any of the terms of this Agreement (including the economic terms) or any non-public information about a party hereto to any other Person without the prior written consent of the party hereto about which such non-public information relates. Notwithstanding anything to the contrary in the foregoing, a party hereto shall be permitted to disclose any and all terms to its financial, tax and legal advisors (each of whom is subject to a similar obligation of confidentiality), and to any Governmental Entity or administrative agency to the extent necessary or advisable in compliance with Applicable Law.
(b) The Company shall not, and shall cause its Representatives not to, issue any press release or other public communications relating to the terms of this Agreement or the Transactions or use Acquirer’s name or refer to Acquirer directly or indirectly in connection with Acquirer’s relationship with the Company in any media interview, advertisement, news release, press release or professional or trade publication, or in any print media, whether or not in response to an inquiry, without the prior written approval of Acquirer, unless required by Applicable Law (in which event a satisfactory opinion of counsel to that effect shall be first delivered to Acquirer prior to any such disclosure) and except as reasonably necessary for the Company to obtain the Company Stockholder Approval and the Requisite Stockholder Approval and the other consents and approvals of the Company Stockholders and other third parties contemplated by this Agreement. Notwithstanding anything to the contrary contained herein or in the Confidentiality Agreement, Acquirer may make such public communications regarding this Agreement or the Transactions as Acquirer may determine is reasonably appropriate.
4.6 Expenses; Company Debt. Except as otherwise set forth herein, all costs and expenses incurred in connection with this Agreement and the Transactions (including Transaction Expenses) shall be paid by the party incurring such expense; provided that at the Closing, Acquirer shall (a) pay or cause to be paid all Transaction Expenses that are incurred but unpaid as of the Closing and set forth in the Company Closing Financial Certificate and (b) repay or cause to be repaid all Company Debt for borrowed money outstanding as of the Closing and set forth in the Company Closing Financial Certificate. Notwithstanding the foregoing, if and to the extent the Company has sufficient cash resources on hand prior to the Closing, the Company shall pay or cause to be paid off as much of such Transaction Expenses and Company Debt as reasonably practicable prior to the Closing.
4.7 Tax Matters.
(a) Cooperation. After the Closing, each of Acquirer, the Stockholders’ Agent and the Company shall (and the Stockholders’ Agent shall cause the Company Securityholders to) cooperate fully, as and, to the extent reasonably requested by any of the others, in connection with the filing of Tax Returns of the Company and any Legal Proceeding with respect to Taxes of the Company. Such cooperation shall include the retention and (upon request therefor) the provision of records and information reasonably relevant to any such Legal Proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Acquirer, the Company, and the Stockholders’ Agent agree to retain all books and records with respect to Tax matters pertinent to the Company relating to any Taxable period beginning before the Closing Date until expiration of the statute of limitations of the respective taxable periods, and to abide by all applicable record retention laws, regulations and agreements entered into with any Tax Authority.
(b) Preparation of Tax Returns. Acquirer shall prepare and timely file, or cause to be prepared and timely filed (taking into account all extensions obtained), all Tax Returns of the Company for all Pre-Closing Tax Periods that are due after the Closing Date (“Pre-Closing Tax Returns”). All such Pre-Closing Tax Returns shall be prepared in accordance with existing procedures, practices and accounting methods of the Company, unless otherwise required by Applicable Law. To the extent any such Pre-Closing Tax Return that is an income Tax Return shows amounts for which the Acquirer could seek indemnification under Article V, the Acquirer shall provide such Pre-Closing Tax Return that is an income Tax Return to the Stockholders’ Agent for review at least ten (10) Business Days prior to the due date for such Tax Return (taking into account all extensions obtained) and shall consider in good faith comments timely provided thereto by the Stockholders’ Agent; provided that any failure of Acquirer to provide such income Pre-Closing Tax Returns to the Stockholders’ Agent pursuant to this Section 4.7(b) shall not impact Acquirer’s rights for indemnification under Article V unless, and if so only to the extent, the Converting Holders are actually prejudiced thereby.
(c) Tax Treatment of the Merger.
(i) The parties hereto intend, by executing this Agreement, to adopt a “plan of reorganization” within the meaning of Section 354(a)(1) of the Code, and to cause the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code; it being understood and agreed that notwithstanding this Section 4.7(c) or any other provision of this Agreement, neither Acquirer nor the Merger Sub makes any representations or warranties to the Company or to any Company Securityholder regarding the qualification of the Merger as a “reorganization,” or any of the Tax consequences to the Company or any Company Securityholder of this Agreement, the Merger or the other Transactions or the other agreements contemplated by this Agreement.
(ii) The parties hereto intend to treat the Merger for all Tax purposes in a manner consistent with the treatment described in this Section 4.7(c), unless otherwise required by a change in Applicable Law after the Agreement Date or a Tax Authority subsequent to an audit defended in good faith. Further, the parties hereto shall prepare all Tax Returns, books, records, and filings in a manner consistent with this Section 4.7(c), including the filing of the statements required by Treasury Regulation Sections 1.368-3 (as required by Applicable Law), unless otherwise required by a change in Applicable Law after the Agreement Date or a Tax Authority subsequent to an audit defended in good faith.
4.8 280G Stockholder Approval. Prior to the Closing, the Company shall obtain and deliver to Acquirer a Parachute Payment Waiver from each “disqualified individual” (within the meaning of Section 280G of the Code). Promptly following the delivery of the Parachute Payment Waivers to Acquirer (but in no event less than three Business Days prior to the Closing), the Company shall submit
to the Company Stockholders for approval (in a manner reasonably satisfactory to Acquirer), by such number of holders of Company Stockholders as is required by the terms of Section 280G(b)(5)(B) of the Code, any payments and/or benefits that may separately or in the aggregate, constitute “parachute payments” pursuant to Section 280G of the Code (“Section 280G Payments”) (which determination shall be made by the Company and shall be subject to review and approval by Acquirer, such approval not to be unreasonably withheld, conditioned or delayed), such that such payments and benefits shall not be deemed to be Section 280G Payments, and prior to the Closing, the Company shall deliver to Acquirer notification and documentation reasonably satisfactory to Acquirer (and which documentation shall be subject to Acquirer’s advanced review and approval, such approval not to be unreasonably withheld, conditioned or delayed) that (i) a vote of the holders of Company Capital Stock was solicited in conformance with Section 280G of the Code and the regulations promulgated thereunder and the requisite stockholder approval was obtained with respect to any payments and/or benefits that were subject to the stockholder vote (the “280G Stockholder Approval”) or (ii) that the 280G Stockholder Approval was not obtained and as a consequence, that such payments and/or benefits shall not be made or provided to the extent they would cause any amounts to constitute Section 280G Payments, pursuant to the Parachute Payment Waivers that were executed by the affected individuals prior to the solicitation of the vote of the holders of Company Capital Stock pursuant to this Section 4.8.
4.9 Employee Matters.
(a) To the extent that any of the Continuing Employees participate in any “employee benefit plan,” as defined in Section 3(3) of ERISA maintained by the Surviving Corporation, Acquirer or any of its subsidiaries (collectively, the “Post-Closing Plans”), then to the extent permitted by and subject to the terms of the applicable Post-Closing Plan and applicable Law, the Surviving Corporation, Acquirer or any of its subsidiaries, as applicable, shall use reasonable best efforts to: (x) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to Continuing Employees under any Post-Closing Plan that is a welfare benefit plan in which such Continuing Employees may be eligible to participate after the Effective Time (to the extent such conditions, limitations and waiting period were waived or satisfied under the corresponding Company Employee Plans); and (y) provide each Continuing Employee with credit for any co-payments and deductibles paid during the plan year in which the Effective Time occurs in satisfying any applicable deductible or out-of-pocket requirements under any Post-Closing Plans that are welfare plans in which such Continuing Employee is eligible to participate after the Effective Time.
(b) Section 4.9(a) shall not (i) operate to duplicate any benefit provided to any employee or service provider, (ii) require Acquirer or any of its subsidiaries to continue in effect any specific Company Employee Plans or Post-Closing Plans, (iii) require Acquirer or any of its subsidiaries or any Post-Closing Plan or trust related thereto to pay for any benefits that relate to any time period prior to the Continuing Employees’ participation in the Post-Closing Plans, or (iv) prohibit the termination of any employee or service provider following the Effective Time. Nothing contained herein, either express or implied (x) shall be construed to establish, amend or modify any benefit plan, program, agreement or arrangement or (y) shall alter or limit the ability of Acquirer, the Company or any of their respective affiliates or subsidiaries to amend, modify or terminate.
4.10 Director and Officer Indemnification.
(a) If the Merger is consummated, then until the sixth anniversary of the Closing Date, Acquirer will cause the Surviving Corporation to fulfill and honor in all respects the obligations of the Company to its present and former directors and officers determined as of immediately prior to the Effective Time (the “Company Indemnified Parties”) pursuant to indemnification agreements with the Company in effect on the Agreement Date and pursuant to the Certificate of Incorporation or the Bylaws,
in each case, in effect on the Agreement Date (the “Company Indemnification Provisions”), with respect to claims relating to or arising out of acts or omissions occurring at or prior to the Effective Time that are asserted after the Effective Time; provided that Acquirer’s and the Surviving Corporation’s obligations under this Section 4.10(a) shall not apply to any for indemnification made by an Indemnified Person pursuant to Article V against a Company Indemnified Party in his/her capacity as a Converting Holder. Any claims for indemnification made under this Section 4.10 on or prior to the sixth anniversary of the Closing shall survive until the final resolution thereof. Notwithstanding anything to the contrary contained in the Company Indemnification Provisions, no Company Indemnified Party shall be entitled to coverage under any Acquirer director and officer insurance policy or errors and omission policy unless such Company Indemnified Party is separately eligible for coverage under such policy pursuant to Acquirer’s policies and procedures and the terms of such insurance policy.
(b) Prior to the Effective Time, the Company shall purchase tail insurance coverage (the “Tail Insurance Coverage”) for the Company Indemnified Parties in a form reasonably satisfactory to the Company and Acquirer, which shall provide the Company Indemnified Parties with coverage for six years following the Closing Date in an amount not less than the existing coverage and that shall have other terms not materially less favorable to the insured persons than the directors’ and officers’ liability insurance coverage maintained by the Company as of the Agreement Date. Acquirer shall cause the Surviving Corporation to maintain the Tail Insurance Coverage in full force and effect and continue to honor the obligations thereunder until the sixth anniversary of the Closing Date.
(c) This Section 4.10 (i) shall survive the consummation of the Merger, (ii) is intended to benefit each Company Indemnified Party and their respective heirs, (iii) is in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Person may have against Acquirer or the Surviving Corporation first arising after the earlier of the Closing Date and the termination of this Agreement by contract or otherwise, and (iv) shall be binding on all successors and assigns of Acquirer and the Surviving Corporation, as applicable, and shall be enforceable by the Company Indemnified Parties. The obligations of Acquirer, the Surviving Corporation, and their successors under this Section 4.10 shall not be terminated, amended, or otherwise modified in such a manner as to adversely affect any Company Indemnified Party (or his or her heirs, personal representatives, successors, or assigns) without the prior written consent of such Company Indemnified Party (or his or her heirs, personal representatives, successors, or assigns, as applicable).
4.11 Retention Pool. Acquirer will establish a retention pool providing for the grant of options to purchase up to 2,072,727 shares of Acquirer Common Stock, pursuant to which Key Employees and certain Continuing Employees will be granted such options to purchase Acquirer Common Stock as soon as reasonably practicable following the Closing, and, in any event, no later than ten (10) Business Days following the Closing; provided that such options shall only be granted to individuals who have executed Benefits Waivers to the extent such individuals are required to execute Benefits Waivers under this Agreement. Any options under the retention pool shall be allocated to employees of the Company as determined by Acquirer, after consultation with the Company. For the avoidance of doubt, the exercise price per share of an option granted from the retention pool will be no less than the price per share of Acquirer’s Common Stock on the date of grant of the option. The award options will be structured as follows: (a) options comprising 40% of the retention pool will vest only over a period of four years from the Closing contingent on continued employment through each vesting date, according to a vesting schedule included in the applicable option award agreement consistent with Acquirer grants to other newly-hired employees, and (b) options comprising the remainder of such pool will vest only based on (i) the completion of performance milestones set forth on Schedule G and (ii) employment at the time the such milestones are achieved.
4.12 Generic Benefits Waivers. Unless otherwise agreed by Acquirer in writing (including via-email) prior to the Closing, to the extent any of the disclosures in Schedules 2.2(f), 2.13(a), 2.13(e), 2.13(n) or 2.17(a) of the Company Disclosure Letter relate to Liabilities of the Company (contingent or otherwise) that are of a nature that would be waived upon execution of a Benefits Waiver or a Generic Benefits Waiver (in the substantially the form attached on Exhibit K, the “Generic Benefits Waiver”) (such Liabilities that would be waived, the “Waiver Liabilities”) and such Waiver Liabilities have not been waived prior to the execution of this Agreement, the Company shall use its reasonable best efforts to cause each counterparty to a Contract or arrangement giving rise to such Waiver Liability (other than the Company’s Chief Executive Officer) to sign a Benefits Waiver or Generic Benefits Waiver prior to Closing in order to fully and permanently waive those Waiver Liabilities. If and to the extent such Waiver Liabilities are not waived pursuant to the execution of a Benefits Waiver prior to the Closing, such Waiver Liabilities (inclusive at their maximum potential or contingent payout and inclusive of any payroll Tax obligations thereupon) shall be treated as Transaction Expenses under this Agreement.
ARTICLE V
HOLDBACK FUND AND INDEMNIFICATION
5.1 Holdback Fund.
(a) At the Effective Time, Acquirer shall withhold the Holdback Amount from the Total Merger Consideration issuable pursuant to Section 1.3(a) (the aggregate amount of shares of Acquirer Common Stock so held by Acquirer from time to time, together with any non-taxable stock dividends declared and paid in respect of such shares, the “Holdback Fund”). The Holdback Fund shall constitute partial security for the benefit of Acquirer (on behalf of itself or any other Indemnified Person) with respect to any Indemnifiable Damages pursuant to the indemnification obligations of the Converting Holders under this Article V. Subject to Section 5.4, Acquirer shall hold the Holdback Fund until 11:59 p.m. Pacific Time on the date (the “Holdback Release Date”) that is 18 months after the Closing Date. Except to the extent there is a cancellation of shares of Acquirer Common Stock held in the Holdback Fund in connection with the settlement of Indemnifiable Damages and subject to the terms of any applicable Vesting Agreement, shares of Acquirer Common Stock held in the Holdback Fund shall be treated by Acquirer as issued and outstanding stock of Acquirer, and the Converting Holders shall be entitled to exercise voting rights and to receive dividends with respect to such shares (other than stock dividends, which shall be withheld by Acquirer and included as part of the Holdback Fund and added thereto). The Converting Holders shall not receive interest or other earnings on the shares of Acquirer Common Stock held in the Holdback Fund (other than as set forth in the immediately preceding sentence). Neither the Holdback Fund (including any portion thereof) nor any beneficial interest therein may be pledged, subjected to any Encumbrance, sold, assigned or transferred by any Converting Holder or be taken or reached by any legal or equitable process in satisfaction of any debt or other Liability of any Converting Holder, in each case prior to the distribution of the Holdback Fund to any Converting Holder in accordance with Section 5.1(b), except that each Converting Holder shall be entitled to assign such Converting Holder’s rights to such Converting Holder’s Pro Rata Share of the Holdback Fund by will, by the laws of intestacy or by other operation of law.
(b) Subject to the terms of any applicable Vesting Agreement, within five Business Days following the Holdback Release Date, Acquirer (or its agent) will distribute to each Converting Holder such Converting Holder’s Pro Rata Share of the Holdback Fund less that portion of the Holdback Fund that is determined, in the reasonable judgment of Acquirer, to be necessary to satisfy all unsatisfied or disputed claims for indemnification specified in any Claim Certificate delivered to the Stockholders’ Agent on or prior to the Holdback Release Date in accordance with this Article V, which portion shall remain in the Holdback Fund until such claims for Indemnifiable Damages have been resolved or satisfied (with the portion reserved for a particular claim released to Acquirer and/or the Converting
Holders, as applicable, following the resolution each such claim (except to the extent that the amount of unsatisfied or disputed claims exceeds the amount of the Holdback Fund, meaning the same shares contained therein are subject to multiple claims)).
5.2 Indemnification.
(a) Subject to the limitations set forth in this Article V, from and after the Closing, each Converting Holder shall severally but not jointly indemnify, defend and hold harmless Acquirer, Merger Sub and the Surviving Corporation and their respective, officers, directors, agents and employees and each Person, if any, who controls or may control Acquirer within the meaning of the Securities Act (each, an “Indemnified Person”) from and against, and shall compensate and reimburse each Indemnified Person for, any and all losses, liabilities, damages, fees, settlements, Taxes, interest, costs and expenses, including penalties and costs of investigation, defense and enforcement and reasonable fees and expenses of counsel, experts and other professionals, directly or indirectly, whether or not due to a Third-Party Claim (collectively, “Indemnifiable Damages”), related to or arising out of:
(i) any failure of any representation or warranty made by the Company herein (as modified in the Company Disclosure Letter) to be true and correct as of the Closing Date as though such representation or warranty were made as of the Closing Date (except in the case of representations and warranties that by their terms speak only as of a specific date or dates, which representations and warranties shall be true and correct as of such date or dates);
(ii) any failure of any certification, representation or warranty made by the Company in any certificate (other than the Spreadsheet and the Company Closing Financial Certificate) delivered to Acquirer pursuant to this Agreement to be true and correct as of the date such certificate is delivered to Acquirer;
(iii) any breach of, or default in connection with, any of the covenants, agreements or obligations made by the Company herein that contemplate performance prior to the Closing;
(iv) any inaccuracies in the Spreadsheet or the Company Closing Financial Certificate (including any unpaid Transaction Expenses, outstanding Company Debt or Closing Net Working Capital Shortfall not reflected therein or taken into account in the calculation of the Total Merger Consideration);
(v) any payments or issuances made with respect to Dissenting Shares, and any interest, costs, expenses and fees incurred by any Indemnified Person in connection with the exercise of any dissenters’ or appraisal rights, to the extent that such amounts, in the aggregate, exceed the value of the consideration that otherwise would have been payable and issuable (based on the Acquirer Stock Price) pursuant to Section 1.3(a)(i) upon the exchange of such Dissenting Shares;
(vi) any claims by any then-current or former holder of any Equity Interests of the Company in their capacity as such relating to or arising out of (I) the Transactions or this Agreement, including the allocation of the Total Merger Consideration or any portion thereof, or (II) such Person’s status as a holder of Equity Interests of the Company at any time at or prior to the Closing, whether for breach of fiduciary duty or otherwise;
(vii) the matter set forth in Schedule H; and
(viii) any fraud (which for all purposes of this Article V shall include the element of scienter) by the Company, or on behalf of the Company by the Company’s officers, directors, employee, securityholders or agents, under the Merger Agreement (“Company Fraud”).
(b) From and after the Closing, each Converting Holder shall severally but not jointly indemnify and hold harmless the Indemnified Persons from and against any and all Indemnifiable Damages relating to or arising out of (i) any failure of any representation or warranty made by such Converting Holder in a Transaction Document to which such Converting Holder is a party to be true and correct as of the date of such Transaction Document and as of the Closing Date as though such representation or warranty were made as of the Closing Date (except in the case of representations and warranties that by their terms speak only as of a specific date or dates, which representations and warranties shall be true and correct as of such date or dates), (ii) any breach of, or default in connection with, any of the covenants, agreements or obligations made by such Converting Holder in a Transaction Document to which such Converting Holder is a party, (iii) Taxes of such Converting Holder (including capital gains Taxes arising as a result of the Transactions) or any of his, her or its Affiliates (excluding the Company) for any Tax period and (iv) any fraud committed by such Converting Holder in its, his or her personal capacity (“Converting Holder Fraud” and collectively with Company Fraud, “Fraud”). The Indemnified Person(s) shall have the option of seeking satisfaction for any indemnification obligations of such Converting Holder pursuant to this Section 5.2(b) (collectively, the “Converting Holder Claims”) out of such Converting Holder’s Pro Rata Share of the Holdback Fund.
(c) Materiality standards or qualifications, qualifications or requirements that a matter be or not be “reasonably expected” or “reasonably likely” to occur and qualifications by reference to the defined term “Material Adverse Effect” in any representation, warranty, covenant, agreement or obligation shall be taken into account in determining whether an inaccuracy in such representation or warranty, or a breach of such covenant, agreement or obligation, exists, but shall not be taken into account in determining the amount of any Indemnifiable Damages with respect to such inaccuracy or breach.
5.3 Indemnifiable Damage Threshold; Other Limitations.
(a) Notwithstanding anything to the contrary contained herein, no Indemnified Person may make a claim in respect of any claim for Indemnifiable Damages relating to or arising out of the matters listed in clauses (i) or (ii) of Section 5.2(a) (other than claims relating to or arising out of (i) Fraud or (ii) any failure of any of the Fundamental Representations to be true and correct as aforesaid) unless and until a Claim Certificate (together with any other delivered Claim Certificates) describing Indemnifiable Damages in an aggregate amount greater than $650,000 (the “Basket”) has been delivered, in which case the Indemnified Person may make claims for indemnification, compensation and reimbursement and may receive shares of Acquirer Common Stock from the Holdback Fund for all Indemnifiable Damages (including the amount of the Basket). The Basket shall not apply to any other Indemnifiable Damages or claims therefor.
(b) If the Merger is consummated, recovery from the Holdback Fund shall constitute the sole and exclusive remedy for the indemnity obligations of each Converting Holder under this Agreement for Indemnifiable Damages (and not specific performance or other equitable remedies) relating to or arising out of the matters listed in clauses (i), (ii) and (vii) of Section 5.2(a), except (i) in the case of Fraud and (ii) any failure of any of the Fundamental Representations to be true and correct as aforesaid.
(c) In the case of any claims for Indemnifiable Damages relating to or arising out of (i) the failure of any of the Fundamental Representations to be true and correct as aforesaid, or (ii) the matters listed in clauses (iii) through (vi) and (viii) of Section 5.2(a) (collectively, “Special Claims”), after Indemnified Persons have first exhausted or made claims upon all shares of Acquirer Common Stock held in the Holdback Fund (after taking into account all other claims for indemnification, compensation and reimbursement from the Holdback Fund made by Indemnified Persons), or following the Holdback Release Date, each Converting Holder shall have Liability for such Converting Holder’s Pro Rata Share of the amount of any Indemnifiable Damages resulting therefrom. Notwithstanding anything to the contrary contained herein, (i) the total Liability of a Converting Holder for Special Claims (when combined with Liability for all other indemnification matters set forth in Section 5.2(a)) shall be limited to the aggregate amount of the Total Merger Consideration issued or issuable to such Converting Holder with respect to Company Capital Stock held by such Converting Holder (inclusive of the Holdback Amount and any claims made against the Holdback Amount); provided that for purposes of calculating the maximum Liability of a Converting Holder, shares of Acquirer Common Stock that are forfeited under the terms of an applicable Vesting Agreement shall count towards satisfaction of such maximum Liability and (ii) any limitation of Liability in this Section 5.3(c) shall not apply in the case of Converting Holder Fraud committed by such Converting Holder. For the avoidance of doubt, the Indemnified Persons’ first recourse for any Indemnifiable Damages pursuant to this Article V shall be the forfeiture and cancellation of Acquirer Common Stock (valued at the Acquired Stock Price); provided, however, that if a Converting Holder has transferred, sold or otherwise disposed of the Acquirer Common Stock held by such Converting Holder such that the forfeiture of Acquirer Common Stock shall be insufficient recovery with respect to such Converting Holder’s Pro Rata Share of such Indemnifiable Damages, the Indemnified Persons may seek recovery against such Converting Holder in the form of cash; provided, further, that this sentence shall not apply to any Converting Holders that are not Accredited Investors.
(d) Notwithstanding anything to the contrary contained herein, the amounts that an Indemnified Person recovers from the Holdback Fund pursuant to Special Claims or Converting Holder Claims shall not reduce the amount that an Indemnified Person may recover with respect to claims that are not Special Claims or Converting Holder Claims. By way of illustration and not limitation, assuming there are no other claims for indemnification, compensation or reimbursement, in the event that Indemnifiable Damages resulting from a Special Claim are first satisfied from the Holdback Fund and such recovery fully depletes the Holdback Fund, the maximum amount recoverable by an Indemnified Person pursuant to a subsequent claim that is not a Special Claim shall continue to be the full dollar value of the Holdback Fund (based on the Acquirer Stock Price) irrespective of the fact that the Holdback Fund was used to satisfy such Special Claim, such that the amount recoverable for such two claims would be the same regardless of the chronological order in which they were made. Similarly, by way of illustration and not limitation, in the event that Indemnifiable Damages resulting from a Converting Holder Claim are first satisfied out of such Converting Holder’s Pro Rata Share of the Holdback Fund, the maximum amount recoverable by an Indemnified Person pursuant to a subsequent claim that is not a Converting Holder Claim shall continue to be the full value of such Converting Holder’s Pro Rata Share of the applicable Indemnifiable Damages, irrespective of the fact that the Holdback Fund was used to satisfy such Converting Holder Claim, such that the amount recoverable for such two claims would be the same regardless of the chronological order in which they were made or whether recovery is made from the Holdback Fund or directly against such Converting Holder.
(e) Notwithstanding anything to the contrary contained herein, (i) no Converting Holder shall have any right of indemnification, compensation, reimbursement, contribution or right of advancement from Acquirer, the Surviving Corporation or any other Indemnified Person (based upon such Converting Holder’s position as an officer, director, employee or agent of the Company or otherwise) with respect to any Indemnifiable Damages claimed by any Indemnified Person against such
Converting Holder in its capacity as such or any right of subrogation against the Company or the Surviving Corporation with respect to any indemnification, compensation or reimbursement of an Indemnified Person by reason of any of the matters set forth in Section 5.2(a), (ii) the rights and remedies of the Indemnified Persons after the Effective Time shall not be limited by (x) any investigation by or on behalf of, or disclosure to (other than in the Company Disclosure Letter with respect to clauses (i) and (ii) of Section 5.2(a), subject to any limitations expressly set forth therein), any Indemnified Person at or prior to the Effective Time regarding any failure, breach or other event or circumstance or (y) any waiver of any condition to the Closing related thereto, (iii) if an Indemnified Person’s claim under this Article V may be properly characterized in multiple ways in accordance with this Article V such that such claim may or may not be subject to different limitations depending on such characterization, then such Indemnified Person shall have the right to characterize such claim in a manner that maximizes the recovery and time to assert such claim permitted in accordance with this Article V; provided that, for the avoidance of doubt, in no event shall any Indemnified Person be entitled to duplicative recovery for any claims for indemnity under this Agreement, (iv) no Converting Holder shall be liable for any Converting Holder Claim of another Converting Holder, (v) if and solely to the extent that an amount of Indemnifiable Damages in connection with an indemnifiable matter was already taken into account in connection with calculation of the Total Merger Consideration, the same amount of such Indemnifiable Damages in connection with such indemnifiable matter may not be recovered under this Article V.
(f) Subject to Section 7.10 and except in connection with any claim for fraud (other than Company Fraud), following the Closing, this Article V shall be the sole and exclusive monetary remedy of the Indemnified Persons against the Converting Holders for any claims arising under this Agreement, which means (a) that the survival periods and liability limits set forth in this Article V shall control notwithstanding any statutory or common law provisions or principles to the contrary and (b) all applicable statutes of limitations or other claims periods with respect to claims for Indemnifiable Damages shall be shortened or lengthened, as applicable, to the applicable claims periods and survival periods set forth herein.
(g) The amount of any Indemnifiable Damages recoverable by any Indemnified Person under this Article V shall be calculated net of any insurance proceeds actually received by, and/or any indemnification or contribution payments actually paid by any third party to, such Indemnified Person in respect of such Indemnifiable Damages in, each case net of all costs of recovery, including without limitation reasonably anticipated increases in insurance premiums; provided in no event shall any Indemnified Person be required to seek or obtain any such insurance proceeds or third party indemnification or contribution. If an Indemnified Person receives any amounts under applicable insurance policies or third party indemnification or contribution payments subsequent to its receipt of an indemnification payment by the Converting Holders (including from the Holdback Fund), then such Indemnified Person will, without duplication, promptly reimburse the Converting Holders (including via the Holdback Fund) for any payment made by such Converting Holders up to the amount received by the Indemnified Person; provided, that the aggregate amount of reimbursement payments to the Converting Holders will not in any event exceed the aggregate indemnification payment received by the Indemnified Person from the Converting Holders.
(h) Any claim for Indemnifiable Damages will be calculated: without regard to any punitive, exemplary, special, incidental, or consequential damages unless (i) any such punitive, exemplary, special, incidental, or consequential damages are actually awarded to a third party by a Governmental Entity or (ii) in the case of special or consequential damages only, any such special or consequential damages are reasonably foreseeable.
(i) Notwithstanding anything to the contrary in this Agreement, no Indemnified Person shall be entitled to make any claim for recovery for any Indemnifiable Damages to the extent
related to or arising from the amount of or ability of any Indemnified Person to utilize any net operating loss carryforward or other Tax attribute of the Company in any Tax period (or portion thereof) beginning after the Closing Date. Notwithstanding any other provision of this Agreement, the Converting Holders shall not have any liability or indemnification obligation for any Taxes of the Company (or Surviving Corporation) resulting from (i) any election made under Section 338 of the Code with respect to the Merger, or (ii) any transactions occurring on the Closing Date after the Closing outside the ordinary course of business (other than any transactions explicitly contemplated by this Agreement or any Company Transaction Document).
(j) Except for the representations and warranties contained in Article II, Acquirer and Merger Sub acknowledge and agree that none of the Company or its representatives nor any other Person makes, and Acquirer and Merger Sub are not relying on, any other express, implied or statutory representation or warranty with respect to the Company or otherwise, including with respect to any projections, forecasts, estimates and budgets for the Company. Except for the representations and warranties contained in Article III, the Company acknowledges and agrees that none of Acquirer, Merger Sub or any of their respective representatives nor any other Person makes, and the Company is not relying on, any other express, implied or statutory representation or warranty with respect to Acquirer or Merger Sub or otherwise, including with respect to any projections, forecasts, estimates and budgets for Acquirer.
5.4 Period for Claims. The period (each, as applicable, a “Claims Period”) during which claims may be made (i) for Indemnifiable Damages relating to or arising out of the matters listed in clauses (i) and (ii) of Section 5.2(a) (other than in the case of Company Fraud or with respect to any of the Fundamental Representations) shall commence at the Closing and terminate at 11:59 p.m. Pacific Time on the Holdback Release Date and (ii) for Indemnifiable Damages relating to or arising out of all other matters, including Special Claims, shall commence at the Closing and terminate at 11:59 p.m. Pacific Time on the date that is (A) in the case of claims for Indemnifiable Damages relating to or arising out of (I) the failure of any of the representations and warranties made by the Company in Section 2.12 (Taxes) to be true and correct as aforesaid or (II) Pre-Closing Taxes, in each case, 60 days following the expiration of the applicable statute of limitations and (B) in all other cases, 60 days following the expiration of the applicable subject matter statute of limitations. Notwithstanding anything to the contrary contained herein, such portion of the Holdback Fund as in the reasonable judgment of Acquirer may be necessary to satisfy any unresolved or unsatisfied claims for Indemnifiable Damages specified in any Claim Certificate delivered to the Stockholders’ Agent on or prior to the Holdback Release Date shall remain in the Holdback Fund until such claims for Indemnifiable Damages have been resolved or satisfied.
5.5 Claims.
(a) From time to time during the Claims Period, Acquirer may deliver to the Stockholders’ Agent one or more certificates signed by any officer of Acquirer (each, a “Claim Certificate”):
(i) stating that an Indemnified Person has incurred, paid, reserved or accrued, or reasonably believes that it will incur, pay, reserve or accrue, Indemnifiable Damages;
(ii) stating the amount of such Indemnifiable Damages (which, in the case of Indemnifiable Damages not yet incurred, paid, reserved or accrued, may be the maximum amount reasonably believed by Acquirer to be incurred, paid, reserved, accrued or demanded by a third party); and
(iii) specifying in reasonable detail (based upon the information then
possessed by Acquirer) the individual items of such Indemnifiable Damages included in the amount so stated and the nature of the claim to which such Indemnifiable Damages are related.
(b) Such Claim Certificate (i) need only specify such information to the knowledge of such officer of Acquirer as of the date thereof, (ii) shall not limit any of the rights or remedies of any Indemnified Person with respect to the underlying facts and circumstances specifically set forth in such Claim Certificate and (iii) may be updated and amended from time to time by Acquirer by delivering any updated or amended Claim Certificate, so long as the delivery of the original Claim Certificate is made within the applicable Claims Period and such update or amendment relates to the underlying facts and circumstances specifically set forth in such original Claims Certificate; provided that all claims for Indemnifiable Damages properly set forth in a Claim Certificate or any update or amendment thereto shall remain outstanding until such claims have been resolved or satisfied, notwithstanding the expiration of such Claims Period. No delay in providing such Claim Certificate within the applicable Claims Period shall affect an Indemnified Person’s rights hereunder, unless (and then only to the extent that) the Stockholders’ Agent or the Converting Holders are materially prejudiced thereby.
5.6 Resolution of Objections to Claims.
(a) If the Stockholders’ Agent does not contest, by written notice to Acquirer, any claim or claims by Acquirer made in any Claim Certificate within the 30-day period following receipt of the Claim Certificate, then Acquirer shall cancel a number of shares of Acquirer Common Stock held in the Holdback Fund having a total value equal to the amount of any Indemnifiable Damages corresponding to such claim or claims as set forth in such Claim Certificate; provided that the per share value of any shares of Acquirer Common Stock cancelled to satisfy any claims in a Claim Certificate under this Article V shall be the Acquirer Stock Price.
(b) If the Stockholders’ Agent objects in writing to any claim or claims by Acquirer made in any Claim Certificate within the 30-day period set forth in Section 5.6(a), Acquirer and the Stockholders’ Agent shall attempt in good faith for 45 days after Acquirer’s receipt of such written objection to resolve such objection. If Acquirer and the Stockholders’ Agent shall so agree, a memorandum setting forth such agreement shall be prepared and signed by both Acquirer and the Stockholders’ Agent. Acquirer shall be entitled to conclusively rely on any such memorandum and shall cancel a number of shares of Acquirer Common Stock held in the Holdback Fund in accordance with the terms of such memorandum.
(c) If no such agreement can be reached during the 45-day period for good faith negotiation set forth in Section 5.6(b), but in any event upon the expiration of such 45-day period, either Acquirer or the Stockholders’ Agent may bring an arbitration in accordance with the terms of Section 7.11 to resolve the matter. The decision of the arbitrator as to the validity and amount of any claim in such Claim Certificate shall be non-appealable, binding and conclusive upon the parties hereto and the Converting Holders, and Acquirer shall be entitled to act in accordance with such decision and Acquirer shall cancel a number of shares of Acquirer Common Stock held in the Holdback Fund in accordance therewith.
(d) Judgment upon any determination of an arbitrator may be entered in any court having jurisdiction. For purposes of this Section 5.6(a), in any suit hereunder in which any claim or the amount thereof stated in the Claim Certificate is at issue, Acquirer shall be deemed to be the prevailing party unless the arbitrator determines in favor of the Stockholders’ Agent (on behalf of the Converting Holders) with respect to more than one-half of the amount in dispute, in which case the Converting Holders shall be deemed to be the prevailing party. The non-prevailing party to an arbitration shall pay its own fees and expenses and the fees and expenses of the prevailing party, including attorneys’ fees and
costs, reasonably incurred in connection with such suit.
(e) Any portion of the Holdback Fund held following the Holdback Release Date with respect to pending but unresolved claims for indemnification that is not awarded to Acquirer upon the resolution of such claims shall be distributed to the Converting Holders within five Business Days following resolution of such claims and in accordance with each such Converting Holder’s Pro Rata Share of such portion of the Holdback Fund.
5.7 Stockholders’ Agent.
(a) At the Closing, Fortis Advisors LLC shall be constituted and appointed as the Stockholders’ Agent. The Stockholders’ Agent shall be the exclusive agent and attorney-in-fact for and on behalf of the Converting Holders to: (i) execute, as the Stockholders’ Agent, this Agreement and any agreement or instrument entered into or delivered in connection with the Transactions, (ii) give and receive notices, instructions and communications permitted or required under this Agreement, or any other agreement, document or instrument entered into or executed in connection herewith, for and on behalf of any Converting Holder, to or from Acquirer (on behalf of itself or any other Indemnified Person) relating to this Agreement or any of the Transactions and any other matters contemplated by this Agreement or by such other agreement, document or instrument (except to the extent that this Agreement expressly contemplates that any such notice or communication shall be given or received by each Converting Holder individually), (iii) review, negotiate and agree to and authorize Acquirer to cancel a number of shares of Acquirer Common Stock held in the Holdback Fund in satisfaction of claims asserted by Acquirer (on behalf of itself or any other Indemnified Person, including by not objecting to such claims) pursuant to this Article V, (iv) object to such claims pursuant to Section 5.6, (v) consent or agree to, negotiate, enter into, or, if applicable, contest, prosecute or defend, settlements and compromises of, and demand arbitration and comply with Orders of courts and awards of arbitrators with respect to, such claims, resolve any such claims, take any actions in connection with the resolution of any dispute relating hereto or to the Transactions by arbitration, settlement or otherwise, and take or forego any or all actions permitted or required of any Converting Holder or necessary in the judgment of the Stockholders’ Agent for the accomplishment of the foregoing and all of the other terms, conditions and limitations of this Agreement, (vi) consult with legal counsel, independent public accountants and other experts selected by it, solely at the cost and expense of the Converting Holders, (vii) consent or agree to any amendment to this Agreement or to waive any terms and conditions of this Agreement providing rights or benefits to the Converting Holders (other than with respect to the payment and issuance of the Total Merger Consideration less the Holdback Amount) in accordance with the terms hereof and in the manner provided herein and (viii) take all actions necessary or appropriate in the judgment of the Stockholders’ Agent for the accomplishment of the foregoing, in each case without having to seek or obtain the consent of any Person under any circumstance. Notwithstanding the foregoing, the Stockholders’ Agent shall have no obligation to act on behalf of the Converting Holders, except as expressly provided herein and in the Stockholders’ Agent Engagement Agreement, and for purposes of clarity, there are no obligations of the Stockholders’ Agent in any ancillary agreement, schedule, exhibit or the Company Disclosure Letter. The Stockholders’ Agent shall be entitled to: (i) rely upon the Spreadsheet, (ii) rely upon any signature believed by it to be genuine, and (iii) reasonably assume that a signatory has proper authorization to sign on behalf of the applicable Converting Holder or other party. Acquirer, Merger Sub and their respective Affiliates (including after the Effective Time, the Surviving Corporation) shall be entitled to rely on the appointment of Fortis Advisors LLC as the Stockholders’ Agent and treat such Stockholders’ Agent as the duly appointed attorney-in-fact of each Converting Holder and has having the duties, power and authority provided for in this Section 5.7. The Converting Holders shall be bound by all actions taken and documents executed by the Stockholders’ Agent in connection with this Article V, and all defenses which may be available to any Converting Holder to contest, negate or disaffirm the action of the Stockholders’ Agent taken in good faith under this Agreement or the Stockholders’ Agent Engagement Agreement are
waived. Acquirer and other Indemnified Persons shall be entitled to rely exclusively on any action or decision of the Stockholders’ Agent. The powers, immunities and rights to indemnification granted to the Stockholders’ Agent Group hereunder: (i) are coupled with an interest and shall be irrevocable and survive the death, incompetence, bankruptcy or liquidation of any Converting Holder and shall be binding on any successor thereto, and (ii) shall survive the delivery of an assignment by any Converting Holder of the whole or any fraction of his, her or its interest in the Holdback Fund. The Person serving as the Stockholders’ Agent may be removed or replaced from time to time, or if such Person resigns from its position as the Stockholders’ Agent, then a successor may be appointed, by the holders of a majority in interest of the aggregate number of shares of Acquirer Common Stock then held in the Holdback Fund (or, in the event that there is no shares then held in the Holdback Fund by the Converting Holders collectively having a Pro Rata Share greater than 50%) upon not less than 30 days’ prior written notice to Acquirer. The immunities and rights to indemnification shall survive the resignation or removal of the Stockholders’ Agent or any member of the Advisory Group and the Closing and/or the termination of this Agreement. No bond shall be required of the Stockholders’ Agent.
(b) Upon the Closing, the Company will wire the Expense Fund Amount (the “Expense Fund”) to the Stockholders’ Agent, which will be used for the purposes of paying directly, or reimbursing the Stockholders’ Agent for, any Stockholders’ Agent Expenses pursuant to this Agreement, the Stockholders’ Agent Engagement Agreement and the agreements ancillary hereto. The Converting Holders will not receive any interest or earnings on the Expense Fund and irrevocably transfer and assign to the Stockholders’ Agent any ownership right that they may otherwise have had in any such interest or earnings. The Stockholders’ Agent will not be liable for any loss of principal of the Expense Fund other than as a result of its gross negligence or willful misconduct. The Stockholders’ Agent is not acting as a withholding agent or in any similar capacity in connection with the Expense Fund, and has no tax reporting or income distribution obligations. The Stockholders’ Agent will hold these funds separate from its corporate funds, will not use these funds for its operating expenses or any other corporate purposes and will not voluntarily make these funds available to its creditors in the event of bankruptcy. As soon as practicable following the completion of the Stockholders’ Agent’s responsibilities, the Stockholders’ Agent will deliver any remaining balance of the Expense Fund to Acquirer for further distribution to the Converting Holders. For tax purposes, the Expense Fund will be treated as having been received and voluntarily set aside by the Converting Holders at the time of Closing.
(c) Neither the Stockholders’ Agent nor its members, managers, directors, officers, contractors, agents and employees nor any member of the Advisory Group (collectively, the “Stockholders’ Agent Group”) shall be liable to any Converting Holder for any act done or omitted hereunder or under the Stockholders’ Agent Engagement Agreement as the Stockholders’ Agent while acting in good faith (and any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith) and without gross negligence or willful misconduct. The Converting Holders shall severally but not jointly indemnify the Stockholders’ Agent Group and defend and hold it harmless against any loss, Liability, claim, damage, fee, fine, judgment, amount paid in settlement or expense incurred without gross negligence, willful misconduct or bad faith on the part of the Stockholders’ Agent and arising out of, resulting from or in connection with the acceptance or administration of its duties hereunder and under the Stockholders’ Agent Engagement Agreement, including all reasonable out-of-pocket costs and expenses and legal fees and other legal and skilled professionals’ costs reasonably incurred by the Stockholders’ Agent (collectively, the “Stockholders’ Agent Expenses”). If not paid directly to the Stockholders’ Agent by the Converting Holders, such Stockholders’ Agent Expenses may be recovered by the Stockholders’ Agent from (i) the funds in the Expense Fund and (ii) the portion of the Holdback Fund otherwise distributable to the Converting Holders (and not distributed or distributable to an Indemnified Person or subject to a pending indemnification claim of an Indemnified Person) on or after the Holdback Release Date pursuant to the terms hereof, at the time of distribution, and such recovery will be made from the Converting Holders according to their respective Pro Rata Shares of such
Stockholders’ Agent Expenses. The Converting Holders acknowledge that the Stockholders’ Agent shall not be required to expend or risk its own funds or otherwise incur any financial liability in the exercise or performance of any of its powers, rights, duties or privileges or pursuant to this Agreement, the Stockholders’ Agent Engagement Agreement or the transactions contemplated hereby or thereby. Furthermore, the Stockholders’ Agent shall not be required to take any action unless the Stockholders’ Agent has been provided with funds, security or indemnities which, in its determination, are sufficient to protect the Stockholders’ Agent against the costs, expenses and liabilities which may be incurred by the Stockholders’ Agent in performing such actions.
(d) After the Closing, any notice or communication given or received by, and any decision, action, failure to act within a designated period of time, agreement, consent, settlement, resolution or instruction of, the Stockholders’ Agent that is within the scope of the Stockholders’ Agent’s authority under Section 5.7(a) shall constitute a notice or communication to or by, or a decision, action, failure to act within a designated period of time, agreement, consent, settlement, resolution or instruction of all the Converting Holders and shall be final, binding and conclusive upon each such Converting Holder; and each Indemnified Person shall be entitled to rely exclusively upon any such notice, communication, decision, action, failure to act within a designated period of time, agreement, consent, settlement, resolution or instruction as being a notice or communication to or by, or a decision, action, failure to act within a designated period of time, agreement, consent, settlement, resolution or instruction of, each and every such Converting Holder. Acquirer, Merger Sub, the Surviving Corporation and the Indemnified Persons are hereby relieved from any Liability to any Person for any acts done by them in accordance with such notice, communication, decision, action, failure to act within a designated period of time, agreement, consent, settlement, resolution or instruction of the Stockholders’ Agent.
(e) The Stockholders’ Agent shall have reasonable access to information about the Surviving Corporation and the reasonable assistance of the Company’s former officers and employees for purposes of performing its duties and exercising its rights hereunder; provided, however, that neither Acquirer nor the Surviving Corporation shall be obligated to provide such access or information if it determines, in its reasonable judgment, that doing so would jeopardize the protection of attorney-client privilege.
(f) Certain Converting Holders (the “Advisory Group”) have concurrently herewith entered into a letter agreement (the “Stockholders’ Agent Engagement Agreement”) with Stockholders’ Agent regarding direction to be provided by the Advisory Group to the Stockholders’ Agent. The Advisory Group shall incur no liability to the Converting Holders for any liability incurred by the members of the Advisory Group while acting in good faith and arising out of or in connection with the acceptance or administration of their duties (it being understood that any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith), even if such act or omission constitutes negligence on the part of the Advisory Group or one of its members. This indemnification and exculpation shall survive the termination of this Agreement.
5.8 Third-Party Claims. In the event Acquirer becomes aware of a claim by a third party (a “Third-Party Claim”) that Acquirer in good faith believes may result in a claim for Indemnifiable Damages by or on behalf of an Indemnified Person, Acquirer shall have the right in its sole discretion to conduct the defense of and to settle or resolve such Third-Party Claim. The costs and expenses incurred by Acquirer in connection with such defense, settlement, enforcement or resolution (including reasonable attorneys’ fees, other professionals’ and experts’ fees and court or arbitration costs) shall be included in the Indemnifiable Damages for which Acquirer shall be entitled to receive indemnification pursuant to a claim made hereunder, and such costs and expenses shall constitute Indemnifiable Damages subject to indemnification under Section 5.2 regardless of whether it is ultimately determined that such Third-Party Claim arose out of, resulted from or was in connection with a matter listed in Section 5.2 (subject to the
limitations set forth in Section 5.3); provided that any settlement of a Third-Party Claim (i) without the prior written consent of the Stockholders’ Agent (which consent shall not be unreasonably withheld, conditioned or delayed and which consent shall be deemed to have been given unless the Stockholders’ Agent shall have objected within 20 days after a written request therefor by Acquirer) (it being understood and agreed that it shall be reasonable for the Stockholders’ Agent to withhold such consent if it believes in good faith that there is not any underlying basis for indemnification with respect to such settlement) or (ii) absent an underlying breach by the Company of a representation, warranty or covenant under this Agreement shall not be determinative of the existence of a valid indemnification claim or the amount of Indemnifiable Damages. The Stockholders’ Agent shall have the right to receive copies of all pleadings, notices and communications with respect to such Third-Party Claim to the extent that receipt of such documents does not affect any privilege relating to any Indemnified Person, subject to execution by the Stockholders’ Agent of Acquirer’s (and, if required, such third party’s) standard non-disclosure agreement to the extent that such materials contain confidential or propriety information. However, Acquirer shall have the right in its sole discretion to determine and conduct the defense of any Third-Party Claim and the settlement, adjustment or compromise of such Third-Party Claim. Unless otherwise consented to in writing in advance by Acquirer in its sole discretion, the Stockholders’ Agent and its Affiliates may not participate in any Third-Party Claim or any action related to such Third-Party Claim (including any discussions or negotiations in connection with the settlement, adjustment or compromise thereof). In the event that the Stockholders’ Agent has consented to the amount of any settlement or resolution by Acquirer of any such claim (which consent shall not be unreasonably withheld, conditioned or delayed and which consent shall be deemed to have been given unless the Stockholders’ Agent shall have objected within 20 days after a written request therefor by Acquirer), or if the Stockholders’ Agent shall have been determined to have unreasonably withheld, conditioned or delayed its consent to the amount of any such settlement or resolution, neither the Stockholders’ Agent nor any Converting Holder shall have any power or authority to object under this Article V to the amount of any claim by or on behalf of any Indemnified Person against the Holdback Fund for indemnity with respect to such settlement or resolution.
5.9 Treatment of Indemnification Payments. Acquirer, the Stockholders’ Agent and the Converting Holders agree to treat (and cause their respective Affiliates to treat) any payment received by the Indemnified Persons pursuant to this Article V as adjustments to the Total Merger Consideration for all Tax purposes to the maximum extent permitted by Applicable Law.
ARTICLE VI
TERMINATION OF AGREEMENT
6.1 Termination. This Agreement may be terminated at any time prior to the Effective Time:
(a) by the mutual written consent of Acquirer and the Company;
(b) by either Acquirer or the Company, by giving written notice to the other, if the Merger shall not have been consummated by midnight Pacific Time on February 21, 2021.
6.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 6.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Acquirer, Merger Sub or the Company or their respective officers, directors, securityholders or Affiliates (including any liability in connection with any breach of representations, warranties or covenants contained herein); provided, however, that (i) the provisions of this Section 6.2 (Effect of Termination), Section 5.7 (Stockholders’ Agent), and Article VII (General Provisions) shall remain in full force and effect and survive any termination of this Agreement and (ii) nothing herein shall relieve any
party hereto from liability in connection with any willful breach of any of such party's representations, warranties or covenants contained herein.
ARTICLE VII
GENERAL PROVISIONS
7.1 Survival of Representations. Warranties and Covenants. If the Merger is consummated, the representations and warranties made by the Company herein, in the Company Disclosure Letter, and in the other certificates contemplated by this Agreement shall survive the Closing and remain in full force and effect, regardless of any investigation or disclosure made by or on behalf of any of the parties hereto, until the date that is 18 months following the Closing Date; provided that, regardless of any investigation or disclosure made by or on behalf of any of the parties hereto, (i) the representations and warranties made by the Company in Section 2.12 (Taxes) will remain operative and in full force and effect until the date that is 60 days following the expiration of the applicable statute of limitations and (ii) Fundamental Representations, other than Section 2.12 (Taxes), will remain operative and in full force and effect until the date that is 60 days following the expiration of the applicable subject matter statute of limitations, in each case of clauses (i) and (ii) for claims against the Converting Holders that seek recovery of Indemnifiable Damages relating to or arising out of an inaccuracy in such representations or warranties; provided, further, that (x) no right to indemnification pursuant to Article V in respect of any claim that is set forth in a Claim Certificate delivered to the Stockholders’ Agent on or prior to the expiration of such representations and warranties shall be affected by such expiration and (y) that such expiration shall not affect the rights of any Indemnified Person under Article V or otherwise to seek recovery of Indemnifiable Damages relating to or arising out of Fraud until the expiration of the applicable statute of limitations for such Fraud. If the Merger is consummated, the representations and warranties made by Acquirer herein and in the other certificates contemplated by this Agreement shall expire and be of no further force or effect as of the Closing (other than the representations and warranties contained in Section 3.4, will remain operative and in full force and effect until the date that is 60 days following the expiration of the applicable statute of limitations); provided, however, that the sole remedy for Converting Holders with respect to a failure of any representation or warranty made by Acquirer in Section 3.4 to be true and correct shall be specific performance. All covenants, agreements and obligations of the parties hereto shall expire and be of no further force or effect as of the Closing, except to the extent such covenants, agreements and obligations provide that they are to be performed after the Closing; provided that no right to indemnification pursuant to Article V in respect of any claim based upon any breach of a covenant, agreement or obligation shall be affected by the expiration of such covenant, agreement or obligation.
7.2 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial delivery service, or sent via facsimile or electronic mail (in each case, if provided below and with automated or personal confirmation of receipt) to the parties hereto at the following address (or at such other address for a party as shall be specified by like notice); provided that with respect to notices delivered to the Stockholders’ Agent, such notices must be delivered solely via facsimile or electronic mail:
(i) if to Acquirer or Merger Sub, to:
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with a copy (which shall not constitute notice) to:
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(ii) if to the Company, to:
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with a copy (which shall not constitute notice) to:
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(iii) If to the Stockholders’ Agent, to:
Any notice given as specified in this Section 7.2 (i) if delivered personally or sent by facsimile or electronic mail transmission shall conclusively deemed to have been given or served at the time of dispatch if sent or delivered on a Business Day or, if not sent or delivered on a Business Day, on the next following Business Day and (ii) if sent by commercial delivery service shall conclusively be deemed to have been received on the third Business Day after the post of the same.
7.3 Interpretation. When a reference is made herein to Articles, Sections, subsections, Schedules or Exhibits, such reference shall be to an Article, Section or subsection of, or a Schedule or an Exhibit to this Agreement unless otherwise indicated. The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” Where a reference is made to a Contract, instrument or Applicable Law, such reference is to such Contract, instrument or Applicable Law as amended, modified or supplemented,
including (in the case of Contracts or instruments) by waiver or consent and (in the case of Applicable Law) by succession of comparable successor Applicable Law and references to all attachments thereto and instruments incorporated therein. Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender and neutral forms of such words, (ii) words using the singular or plural number also include the plural or singular number, respectively, (iii) the terms “hereof,” “herein,” “hereto,” “hereunder” and derivative or similar words refer to this entire Agreement, (iv) references to clauses without a cross-reference to a Section or subsection are references to clauses within the same Section or, if more specific, subsection, (v) references to a series of clauses are inclusive of the endpoint clauses (e.g., “clause (x) through (y)” is inclusive of clauses (x) and (y)), (vi) references to any Person include the predecessors, successors and permitted assigns of that Person, (vii) references from or through any date shall mean, unless otherwise specified, from and including or through and including, respectively, (viii) subject to clause (ix), the phrases “provide to,” “made available” and “deliver to” and phrases of similar import mean that a true, correct and complete paper or electronic copy of the information or material referred to has been delivered to the party to whom such information or material is to be provided and (ix) the phrases “provided to Acquirer” or “made available to Acquirer” and phrases of similar import means, with respect to any information, document or other material of the Company or its Affiliates, that such information, document or material was made available for review and properly indexed by the Company and its Representatives in the virtual data room established by Acquirer in connection with this Agreement at least 48 hours prior to the execution of this Agreement or actually delivered (whether by physical or electronic delivery) to Acquirer or its Representatives at least 48 hours prior to the execution of this Agreement. The symbol “$” refers to United States Dollars. The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends and such phrase shall not mean simply “if.” All references to “days” shall be to calendar days unless otherwise indicated as a “Business Day.” Any action otherwise required to be taken on a day that is not a Business Day shall instead be required to be taken on the next succeeding Business Day, and if the last day of a time period is a non-Business Day, such period shall be deemed to end on the next succeeding Business Day. Unless indicated otherwise, all mathematical calculations contemplated by this Agreement shall be rounded to the fifth decimal place, except in respect of payments, which shall be rounded to the nearest whole United States cent.
7.4 Amendment. Subject to Applicable Law, the parties hereto may amend this Agreement by authorized action at any time prior to the Closing pursuant to an instrument in writing signed on behalf of each of the parties hereto; provided that after the Company Stockholder Approval is obtained, no amendment shall be made to this Agreement that by Applicable Law requires further approval by the Company Stockholders without such further approval. To the extent permitted by Applicable Law, Acquirer and the Stockholders’ Agent may cause this Agreement to be amended at any time after the Closing by execution of an instrument in writing signed on behalf of Acquirer and the Stockholders’ Agent.
7.5 Extension; Waiver. At any time after the Closing, Acquirer and the Stockholders’ Agent may, to the extent legally allowed, (A) extend the time for the performance of any of the obligations of the other owed to such party, (B) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto or (C) waive any breaches of any of the covenants, agreements, obligations or conditions for the benefit of such party contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing that is (I) prior to the Closing with respect to the Company and/or the Company Securityholders, signed by the Company, (II) after the Closing with respect to the Converting Holders and/or the Stockholders’ Agent, signed by the Stockholders’ Agent and (III) with respect to Acquirer and/or Merger Sub, signed by Acquirer. Without limiting the generality or effect of the preceding sentence, no failure to exercise or delay in exercising any right under this Agreement shall constitute a waiver of such right, and no waiver of any breach or default shall be deemed a waiver of any other breach or default of the same or any other
provision herein.
7.6 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto; it being understood and agreed that all parties hereto need not sign the same counterpart. The delivery by facsimile or by electronic delivery in PDF format (including any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) of this Agreement with all executed signature pages (in counterparts or otherwise) shall be sufficient to bind the parties hereto to the terms and conditions set forth herein. All of the counterparts will together constitute one and the same instrument and each counterpart will constitute an original of this Agreement.
7.7 Entire Agreement; Parties in Interest. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto, including all the exhibits attached hereto, the Schedules, including the Company Disclosure Letter, (a) constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof, except for the Confidentiality Agreement, which shall continue in full force and effect, and shall survive any termination of this Agreement, in accordance with its terms and (b) are not intended to confer, and shall not be construed as conferring, upon any Person other than the parties hereto any rights or remedies hereunder (except that Article V is intended to benefit the Indemnified Persons and Section 4.10 is intended to benefit the Company Indemnified Parties).
7.8 Assignment. Neither this Agreement nor any of the rights and obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties hereto, and any such assignment without such prior written consent shall be null and void, except that Acquirer and/or Merger Sub may assign its rights and delegate its obligations under this Agreement to any direct or indirect wholly owned subsidiary of Acquirer without the prior consent of any other party hereto; provided that notwithstanding any such assignment, Acquirer and/or Merger Sub, as applicable, shall remain liable for all of its obligations under this Agreement. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns.
7.9 Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement shall continue in full force and effect and shall be interpreted so as reasonably necessary to effect the intent of the parties hereto. The parties hereto shall use all reasonable efforts to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that shall achieve, to the greatest extent possible, the economic, business and other purposes of such void or unenforceable provision.
7.10 Remedies Cumulative; Specific Performance. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party hereto shall be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party hereto of any one remedy shall not preclude the exercise of any other remedy and nothing herein shall be deemed a waiver by any party hereto of any right to specific performance or injunctive relief. It is accordingly agreed that, subject to Section 5.3(b), the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity, and the parties hereto hereby waive the requirement of any posting of a bond in connection with the remedies
described herein. However, following the Closing, Section 5.3(f) shall control exclusively on the topic of monetary remedies available to Acquirer and the Indemnified Persons under this Agreement.
7.11 Arbitration; Submission to Jurisdiction; Consent to Service of Process.
(a) IN THE EVENT THAT A RESOLUTION IS NOT REACHED AMONG THE PARTIES HERETO WITHIN 60 DAYS AFTER WRITTEN NOTICE OF ANY DISPUTE WITH RESPECT TO THIS AGREEMENT, SUCH DISPUTE SHALL BE FINALLY SETTLED BY BINDING ARBITRATION. THE SEAT, OR LEGAL PLACE, OF ARBITRATION SHALL BE SAN FRANCISCO, CALIFORNIA. SUCH ARBITRATION SHALL BE CONDUCTED IN ENGLISH IN ACCORDANCE WITH THE COMPREHENSIVE ARBITRATION RULES AND PROCEDURES OF THE JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (CURRENTLY IN EFFECT) BY ONE ARBITRATOR APPOINTED IN ACCORDANCE WITH SUCH RULES. THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT EVIDENCES A TRANSACTION INVOLVING INTERSTATE COMMERCE. NOTWITHSTANDING THE PROVISION IN SECTION 7.12 WITH RESPECT TO APPLICABLE SUBSTANTIVE LAW, ANY ARBITRATION CONDUCTED PURSUANT TO THE TERMS OF THIS AGREEMENT SHALL BE GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C., SECS. 1-16). THE ARBITRATOR SHALL ALLOW SUCH DISCOVERY AS IS APPROPRIATE TO THE PURPOSES OF ARBITRATION IN ACCOMPLISHING A FAIR, SPEEDY AND COST-EFFECTIVE RESOLUTION OF THE DISPUTE. THE AWARD OF ARBITRATION SHALL BE FINAL AND BINDING UPON THE PARTIES HERETO. THE ARBITRATOR WILL AWARD TO THE PREVAILING PARTY ALL COSTS, FEES AND EXPENSES RELATED TO THE ARBITRATION, INCLUDING REASONABLE FEES AND EXPENSES OF ATTORNEYS, ACCOUNTANTS AND OTHER PROFESSIONALS INCURRED BY THE PREVAILING PARTY, AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF.
(b) Subject to the foregoing, the parties hereto hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of Delaware and the Federal courts of the United States of America located in the State of Delaware, the place where this Agreement was entered and is to be performed, in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to herein, and in respect of the Transactions, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or thereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a Delaware State or Federal court. The parties hereto hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 7.2 or in such other manner as may be permitted by Applicable Law, shall be valid and sufficient service thereof. With respect to any particular action, suit or proceeding, venue shall lie solely in New Castle County, Delaware. A party hereto may apply either to a court of competent jurisdiction or to an arbitrator, if one has been appointed, for prejudgment remedies and emergency relief pending final determination of a claim pursuant to this Section 7.11. The appointment of an arbitrator does not preclude a party hereto from seeking prejudgment remedies and emergency relief from a court of competent jurisdiction.
7.12 Governing Law. This Agreement, all acts and transactions pursuant hereto and all obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of Delaware without reference to such state’s principles of conflicts of law that would refer a matter to a different jurisdiction.
7.13 Rules of Construction. The parties hereto have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, hereby waive, with respect to this Agreement, each Schedule and each Exhibit attached hereto, the application of any Applicable Law or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.
7.14 WAIVER OF JURY TRIAL. EACH OF ACQUIRER, MERGER SUB AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ACQUIRER, MERGER SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATION OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
7.15 Consent to Representation; Conflict of Interest. If the Stockholders’ Agent so desires, acting on behalf of the Converting Holders and without the need for any consent or waiver by Company, Acquirer, or Merger Sub, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP (“Gunderson”) shall be permitted to represent the Converting Holders after the Closing in connection with any matter related to the transactions contemplated by this Agreement, any other agreements referenced herein or any disagreement or dispute relating thereto. Acquirer, Merger Sub, and the Company further agree that, as to all privileged communications among Gunderson and the Stockholders’ Agent and the Converting Holders and their respective Affiliates (individually and collectively, the “Seller Group”) that relate in any way to the transactions contemplated by this Agreement, the attorney-client privilege and the exception of client confidence belongs solely to the Seller Group and may be controlled only by the Seller Group and shall not pass to or be claimed by Acquirer, Merger Sub, and Company, because the interests of Acquirer and its Affiliates were directly adverse to the Company, the Converting Holders, and the Stockholders’ Agent at the time such communications were made. This right to the attorney-client privilege shall exist even if such communications may exist on the Company’s computer system or in documents in the Company’s possession. Notwithstanding the foregoing, in the event that a dispute arises between Acquirer, Merger Sub, and the Company, on the one hand, and a Person other than a party to this Agreement, on the other hand, after the Closing, the Company may assert the attorney-client privilege to prevent disclosure to such third-party of confidential communications by Gunderson to the Company; provided, however, that the Company may not waive such privilege without the prior written consent of the Stockholders’ Agent (such consent not to be unreasonably withheld, conditioned or delayed).
[SIGNATURE PAGE NEXT]
IN WITNESS WHEREOF, Acquirer, Merger Sub, the Company and the Stockholders’ Agent have caused this Agreement and Plan of Merger and Reorganization to be executed and delivered by their respective officers thereunto duly authorized, all as of the date first written above.
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SENTINEL LABS, INC.
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By:
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/s/ Tomer Weingarten
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Name:
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Tomer Weingarten
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Title:
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Chief Executive Officer
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SYRACUSE ACQUISITION SUB, INC.
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By:
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/s/ Efraim Harari
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Name:
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Efraim Harari
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Title:
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Secretary
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[Signature Page to Agreement and Plan of Merger and Reorganization]
IN WITNESS WHEREOF, Acquirer, Merger Sub, the Company and the Stockholders’ Agent have caused this Agreement and Plan of Merger and Reorganization to be executed and delivered by their respective officers thereunto duly authorized, all as of the date first written above.
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SCALYR, INC.
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By:
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/s/ Christine Heckart
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Name:
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Christine Heckart
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Title:
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Chief Executive Officer
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[Signature Page to Agreement and Plan of Merger and Reorganization]
IN WITNESS WHEREOF, Acquirer, Merger Sub, the Company and the Stockholders’ Agent have caused this Agreement and Plan of Merger and Reorganization to be executed and delivered by their respective officers thereunto duly authorized, all as of the date first written above.
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STOCKHOLDERS’ AGENT
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By:
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/s/ Ryan Simkin
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Name:
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Ryan Simkin
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Title:
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Managing Director
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[Signature Page to Agreement and Plan of Merger and Reorganization]
NINTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SENTINELONE, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
SentinelOne, 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 SentinelOne, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on January 23, 2013 under the name Sentinel Labs, Inc.
2. That the Board of Directors of the Corporation (the “Board”) duly adopted resolutions proposing to amend and restate the Eighth Amended and Restated Certificate of Incorporation of this corporation, as amended, 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 Eighth Amended and Restated Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:
ARTICLE I
The name of the corporation is SentinelOne, Inc. (the “Corporation”).
ARTICLE II
The address of the registered office of the Corporation in the State of Delaware is 251 Little Falls Drive, City of Wilmington, County of New Castle, 19808. The name of its registered agent at that address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law.
ARTICLE IV
This corporation is authorized to issue three classes of stock to be designated, respectively, “Class A Common Stock,” “Class B Common Stock” and “Preferred Stock.” The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 276,300,000 shares of Class A Common Stock, $0.0001 par value per share, (ii)
276,300,000 shares of Class B Common Stock, $0.0001 par value per share and (iii) 168,985,413 shares of Preferred Stock, $0.0001 par value per share.
Immediately upon the effectiveness of the filing of this Ninth Amended and Restated Certificate of Incorporation (this “Certificate of Incorporation”) with the Secretary of State of the State of Delaware (the “Effective Time”), each share of this Corporation’s Common Stock issued and outstanding or held as treasury stock immediately prior to the Effective Time (the “Old Common Stock”), shall, automatically and without further action by any stockholder, be reclassified as, and shall become, one share of Class B Common Stock (the “Reclassification”). Each stock certificate that immediately prior to the Effective Time represented shares of Old Common Stock shall, automatically and without the necessity of presenting the same for exchange, from and after the Effective Time, be deemed to be cancelled, shall be null and void, and shall no longer represent any interest in this Corporation’s capital stock. Prior to the Effective Time, except in connection with the Reclassification, no shares of the class of Class A Common Stock or Class B Common Stock shall be issued.
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. CLASS A COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of the Class A Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.
2. Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Class A Common Stock shall be entitled to receive, when, as and if declared by the Board, out of any assets of this Corporation legally available therefor, any dividends as may be declared from time to time by the Board with respect to the Class B Common Stock, and no dividend shall be declared or paid on shares of the Class B Common Stock unless the same dividend with the same record date and payment date shall be declared or paid on the shares of Class A Common Stock; provided, however, that dividends payable in shares of Class B Common Stock or rights to acquire Class B Common Stock may be declared and paid to the holders of the Class B Common Stock without the same dividend being declared and paid to the holders of the Class A Common Stock if and only if a dividend payable in shares of Class A Common Stock or rights to acquire Class A Common Stock (as the case may be) at the same rate and with the same record date and payment date as the dividend declared and paid to the holders of the Class B Common Stock shall be declared and paid to the holders of Class A Common Stock.
3. Liquidation Rights. Upon a Liquidation Event, the assets of this Corporation shall be distributed as provided in Section 2 of Article IV, Part C hereof.
4. Redemption. The Class A Common Stock is not redeemable at the option of the holder.
5. Voting. The holders of the Class A 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). There shall be no cumulative voting. Except as expressly provided by this Certificate of Incorporation or as provided by law, the holders of shares of Class A Common Stock shall at all times vote together with the holders of Class B Common Stock as a single class on all matters (including the election of directors) submitted to vote or for the consent of the stockholders of this Corporation. The number of authorized shares of Class A 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.
6. Subdivisions or Combinations. If this Corporation in any manner subdivides or combines the outstanding shares of Class B Common Stock, then the outstanding shares of Class A Common Stock will be subdivided or combined in the same proportion and manner.
7. Equal Status. Except as expressly set forth in Article IV hereof, Class A Common Stock shall have the same rights and powers of, rank equally to, share ratably with and be identical in all respects and as to all matters to Class B Common Stock.
B. CLASS B COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of the Class B Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.
2. Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Class B Common Stock shall be entitled to receive, when, as and if declared by the Board, out of any assets of this corporation legally available therefor, any dividends as may be declared from time to time by the Board with respect to the Class A Common Stock, and no dividend shall be declared or paid on shares of the Class A Common Stock unless the same dividend with the same record date and payment date shall be declared or paid on the shares of Class B Common Stock; provided, however, that dividends payable in shares of Class A Common Stock or rights to acquire Class A Common Stock may be declared and paid to the holders of the Class A Common Stock without the same dividend being declared and paid to the holders of the Class B Common Stock if and only if a dividend payable in shares of Class B Common Stock or rights to acquire Class B Common Stock (as the case may be) at the same rate and with the same record date and payment date as the dividend declared and paid to the holders of the Class A Common Stock shall be declared and paid to the holders of Class B Common Stock.
3. Liquidation Rights. Upon a Liquidation Event, the assets of this Corporation shall be distributed as provided in Section 2 of Article IV, Part C hereof.
4. Redemption. The Class B Common Stock is not redeemable at the option of the holder.
5. Voting. The holders of the Class B Common Stock are entitled to twenty (20) votes for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. Except as expressly provided by this Certificate of Incorporation or as provided by law, the holders of shares of Class B Common Stock shall at all times vote together with the holders of Class A Common Stock as a single class on all matters (including the election of directors) submitted to vote or for the consent of the stockholders of this Corporation. The number of authorized shares of Class B 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.
6. Conversion.
6.1 Rights to Convert. Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the Corporation. Before any holder of Class B Common Stock shall be entitled to convert any of such holder’s shares of such Class B Common Stock into shares of Class A Common Stock, such holder shall deliver an instruction, duly signed and authenticated in accordance with any procedures set forth in the Bylaws of this Corporation or any policies of this Corporation then in effect (which will be available upon request therefor made to the Secretary), at the principal corporate office of this Corporation or of any transfer agent for the Class B Common Stock, and shall give written notice to this Corporation at its principal corporate office of such holder’s election to convert the same and shall state therein the name or names in which the shares of Class A Common Stock issuable on conversion thereof are to be registered on the books of this Corporation. This Corporation shall, as soon as practicable thereafter, register on this Corporation’s books ownership of the number of shares of Class A Common Stock to which such record holder of Class B Common Stock, or to which the nominee or nominees of such record holder, shall be entitled as aforesaid. Such conversion shall be deemed to have occurred immediately prior to the close of business on the date such notice of the election to convert is received by this Corporation, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock as of such date. This Corporation shall not be required to register a conversion of a share of Class B Common Stock pursuant to this Section B.6.1 of Article IV unless it is permitted to do so by law.
6.2 Automatic Conversion. Each share of Class B Common Stock shall automatically, without further action by this Corporation or the holder thereof, be converted into one fully-paid and nonassessable share of Class A Common Stock immediately prior to the close of business on the earlier of (i) the date that is seven (7) years from the IPO Date (as defined
below); (ii) 11:59 p.m. Eastern Time on the first date after the IPO Date that the aggregate number of shares of Class B Common Stock (including shares of Class B Common Stock subject to outstanding stock options) held by the Founder and his Permitted Entities, Permitted Foundations, Permitted IRAs and Permitted Transferees is less than twenty five percent (25%) of the number of shares of Class B Common Stock (including shares of Class B Common Stock subject to outstanding stock options) held by the Founder and his Permitted Entities, Permitted Foundations, Permitted IRAs and Permitted Transferees at 11:59 p.m. Eastern Time on the IPO Date, (iii) the date that Founder is no longer providing services to this Corporation as an officer, employee, consultant or member of the Board; (iv) the date that the Founder’s employment with this Corporation is terminated for Cause; (v) the date that is twelve (12) months after the death or Disability of the Founder; or (vi) the date specified by the affirmative vote, on or after the IPO Date, of the holders of Class B Common Stock representing not less than two-thirds (2/3) of the voting power of the outstanding shares of Class B Common Stock, voting separately as a single class (each of the events referred to in (i) through (vi) are referred to herein as a “Class B Common Stock Automatic Conversion Event”). This Corporation shall provide notice of a Class B Common Stock Automatic Conversion Event pursuant to this Section B.6.2 of Article IV to record holders of such shares of Class B Common Stock as soon as practicable following the Class B Common Stock Automatic Conversion Event. Such notice shall be provided by any means then permitted by the General Corporation Law; provided, however, that no failure to give such notice nor any defect therein shall affect the validity of the Class B Common Stock Automatic Conversion Event. Upon and after the Class B Common Stock Automatic Conversion Event, the person registered on this Corporation’s books as the record holder of the shares of Class B Common Stock so converted immediately prior to the Class B Common Stock Automatic Conversion Event shall be registered on this Corporation’s books as the record holder of the shares of Class A Common Stock issued upon conversion of such shares of Class B Common Stock, without further action on the part of the record holder thereof. Immediately upon the effectiveness of the Class B Common Stock Automatic Conversion Event, the rights of the holders of the shares of Class B Common Stock converted pursuant to the Class B Common Stock Automatic Conversion Event shall cease, and the holders shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock into which such shares of Class B Common Stock were converted.
6.3 Conversion on Transfer. On or after the IPO Date, each share of Class B Common Stock shall automatically, without further action by this Corporation or the holder thereof, be converted into one fully-paid and nonassessable share of Class A Common Stock, upon the occurrence of a Transfer (as defined below), other than a Permitted Transfer (as defined below), of such share of Class B Common Stock.
6.4 Policies and Procedures. This Corporation may, from time to time, establish such policies and procedures, not in violation of applicable law or this Certificate of Incorporation or the Bylaws of this Corporation, relating to the conversion of shares of the Class B Common Stock into shares of Class A Common Stock as it may deem necessary or advisable. If this Corporation has reason to believe that a Transfer that is not a Permitted Transfer has occurred, this Corporation may request that the purported transferor furnish affidavits or other evidence to this Corporation as it reasonably deems necessary to determine whether a Transfer
that is not a Permitted Transfer has occurred, and if such transferor does not within ten (10) days after the date of such request furnish sufficient (as determined by the Board) evidence to this Corporation (in the manner provided in the request) to enable this Corporation to determine that no such Transfer has occurred, any such shares of Class B Common Stock, to the extent not previously converted,shall be automatically converted into shares of Class A Common Stock on a one-to-one basis, and such conversion shall thereupon be registered on the books and records of this Corporation. In connection with any action of stockholders taken at a meeting or by written consent, the stock ledger of this Corporation shall be presumptive evidence as to who are the stockholders entitled to vote in person or by proxy at any meeting of stockholders or in connection with any written consent and the classes of shares held by each such stockholder and the number of shares of each class held by such stockholder.
6.5 Definitions.
6.5.1 “Cause” shall have the meaning set forth in the Change in Control and Severance Agreement then in effect between the Founder and this Corporation, or, if no such agreement containing a definition of “Cause” is then in effect, shall have the meaning set forth in this Corporation’s 2021 Equity Incentive Plan.
6.5.2 “Convertible Security” shall mean any evidences of indebtedness, shares of Preferred Stock or other securities (other than shares of Class B Common Stock) convertible into or exchangeable for Class B Common Stock, either directly or indirectly.
6.5.3 “Disability” or “Disabled” shall have the meaning set forth in the Change in Control and Severance Agreement then in effect between the Founder and this Corporation, or, if no such agreement containing a definition of “Disability” is then in effect, shall have the meaning set forth in this Corporation’s 2021 Equity Incentive Plan.
6.5.4 “Family Member” shall mean with respect to any natural person who is a Qualified Stockholder, the spouse, domestic partner, parents, grandparents, lineal descendants, siblings and lineal descendants of siblings of such Qualified Stockholder. Lineal descendants shall include adopted persons, but only so long as they are adopted while a minor.
6.5.5 “Founder” shall mean Tomer Weingarten.
6.5.6 “Options” shall mean rights, options, restricted stock units or warrants to subscribe for, purchase or otherwise acquire Class B Common Stock or Convertible Securities (as defined above).
6.5.7 “Parent” of an entity shall mean any entity that directly or indirectly owns or controls a majority of the voting power of the voting securities of such entity or is otherwise entitled to elect a majority of the members of the board of directors, or entitled to appoint or act as the governing body, of such entity.
6.5.8 “Permitted Entity” shall mean with respect to a Qualified Stockholder: (i) a Permitted Trust solely for the benefit of (1) such Qualified Stockholder, (2) one or more Family Members of such Qualified Stockholder, or (3) any other Permitted Entity of such Qualified Stockholder; or (ii) any general partnership, limited partnership, limited
liability company, corporation or other entity exclusively owned by (1) such Qualified Stockholder, (2) one or more Family Members of such Qualified Stockholder, or (3) any other Permitted Entity of such Qualified Stockholder.
6.5.9 “Permitted Foundation” shall mean with respect to a Qualified Stockholder: a trust or private non-operating foundation that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), so long as such Qualified Stockholder has dispositive power and Voting Control with respect to the shares of Class B Common Stock held by such trust or organization and the Transfer to such trust does not involve any payment of cash, securities, property or other consideration (other than an interest in such trust or organization) to such Qualified Stockholder.
6.5.10 “Permitted IRA” shall mean an Individual Retirement Account, as defined in Section 408(a) of the Code, or a pension, profit sharing, stock bonus or other type of plan or trust of which a Qualified Stockholder is a participant or beneficiary and which satisfies the requirements for qualification under Section 401 of the Code; provided that in each case such Qualified Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held in such account, plan or trust.
6.5.11 “Permitted Transfer” shall mean, and be restricted to, any Transfer of a share of Class B Common Stock:
(a) by a Qualified Stockholder to (i) one or more Family Members of such Qualified Stockholder, (ii) any Permitted Entity of such Qualified Stockholder, (iii) any Permitted Foundation of such Qualified Stockholder, or (iv) any Permitted IRA of such Qualified Stockholder; or
(b) by a Permitted Entity, Permitted Foundation or Permitted IRA of a Qualified Stockholder to (i) such Qualified Stockholder or one or more Family Members of such Qualified Stockholder, or (ii) any other Permitted Entity, Permitted Foundation and Permitted IRA of such Qualified Stockholder.
6.5.12 “Permitted Transferee” shall mean a transferee of shares of Class B Common Stock received in a Permitted Transfer.
6.5.13 “Permitted Trust” shall mean a bona fide trust where each trustee is (i) a Qualified Stockholder, (ii) a Family Member of such Qualified Stockholder or (iii) a professional in the business of providing trustee services, including private professional fiduciaries, trust companies and bank trust departments.
6.5.14 “Pubco Independent Directors” means the members of the Board designated as independent directors in accordance with (i) the requirements of any national stock exchange under which this Corporation’s equity securities are listed for trading that are generally applicable to companies with common equity securities listed thereon or (ii) if this Corporation’s securities are not listed for trading on a national stock exchange, the requirements of the New York Stock Exchange generally applicable to companies with equity securities listed thereon.
6.5.15 “Qualified Stockholder” shall mean: (a) the record holder of a share of Class B Common Stock as of the date of the effectiveness of the registration statement filed under the Securities Act relating to the Qualified Public Offering (the “IPO Date”), (b) the initial record holder of any shares of Class B Common Stock that are originally issued by this Corporation after the IPO Date pursuant to the exercise or exchange or conversion of any Option or Convertible Security that, in each case, was outstanding as of the IPO Date, (c) each natural person who, prior to the IPO Date, transferred shares of capital stock of this Corporation to a Permitted Entity, Permitted Foundation or Permitted IRA that is or becomes a Qualified Stockholder, (d) each natural person who transferred shares of, or equity awards for, Class B Common Stock (including any Option exercisable or Convertible Security exchangeable for or convertible into shares of Class B Common Stock) to a Permitted Entity, Permitted Foundation or Permitted IRA that is or becomes a Qualified Stockholder and (e) a Permitted Transferee.
6.5.16 “Transfer” of a share of Class B Common Stock shall mean any direct or indirect sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law, including, without limitation, a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether there is a corresponding change in beneficial ownership), in each case after 11:50 p.m. Eastern Time on the IPO Date, or the transfer of, or entering into a binding agreement with respect to, Voting Control over such share by proxy or otherwise; provided, however, that the following shall not be considered a “Transfer”:
(a) the granting of a proxy to officers or directors of this Corporation at the request of the Board in connection with actions to be taken at an annual or special meeting of stockholders;
(b) entering into a voting trust, agreement or arrangement (with or without granting a proxy) solely with stockholders who are holders of Class B Common Stock that (A) is disclosed either in a Schedule 13D filed with the Securities and Exchange Commission or in writing to the Secretary of this Corporation, (B) either has a term not exceeding one year or is terminable by the holder of the shares subject thereto at any time and (C) does not involve any payment of cash, securities, property or other consideration to the holder of the shares subject thereto other than the mutual promise to vote shares in a designated manner;
(c) entering into a voting trust, agreement or arrangement (with or without granting a proxy) pursuant to a written agreement to which this Corporation is a party;
(d) the pledge of shares of Class B Common Stock by a stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction for so long as such stockholder continues to exercise Voting Control over such pledged shares; provided, however, that a foreclosure on such shares or other similar action by the pledgee (including the exercise of any proxy authority granted to such pledgee
pursuant to such pledge) shall constitute a Transfer unless such foreclosure or similar action qualifies as a Permitted Transfer;
(e) the fact that, as of the IPO Date or at any time after the IPO Date, the spouse of any holder of Class B Common Stock possesses or obtains an interest in such holder’s shares of Class B Common Stock arising solely by reason of the application of the community property laws of any jurisdiction, so long as no other event or circumstance shall exist or have occurred that constitutes a Transfer of such shares of Class B Common Stock; provided that any transfer of shares by any holder of shares of Class B Common Stock to such holder’s spouse, including a transfer in connection with domestic relations order or similar legal requirement, shall constitute a “Transfer” of such shares of Class B Common Stock unless otherwise exempt from the definition of Transfer;
(f) entering into a trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, with a broker or other nominee; provided, however, that a sale of such shares of Class B Common Stock pursuant to such plan shall constitute a “Transfer” at the time of such sale;
(g) any redemption, purchase or acquisition by this Corporation of a share of Class B Common Stock or any issuance or reissuance by this Corporation of a share of Class B Common Stock; or
(h) entering into a support, voting, tender or similar agreement or arrangement (in each case, with or without the grant of a proxy) in connection with a liquidation, dissolution or winding upon of this Corporation (whether voluntary or involuntary), a merger or consolidation of this Corporation with or into any other entity or any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation, a sale, lease, exclusive license or other disposition of all or substantially all of the assets of this Corporation, or a transaction or series of related transactions to which this Corporation is a party in which shares of this Corporation are transferred such that in excess of fifty percent (50%) of the this Corporation’s voting power is transferred, or in connection with consummating the actions or transactions contemplated thereby (including, without limitation, tendering or voting shares of Class B Common Stock in connection with such a transaction, the consummation of such a transaction or the sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of shares of Class B Common Stock or any legal or beneficial interest in shares of Class B Common Stock in connection with such a transaction); provided that any sale, tender, assignment, transfer, conveyance, hypothecation or other transfer or disposition of Class B Common Stock or any legal or economic interest therein pursuant to such a transaction, or any grant of a proxy over Class B Common Stock with respect to such a transaction without specific instructions as to how to vote such Class B Common Stock, in each case, will constitute a “Class B Transfer” of such Class B Common Stock unless such transaction was approved by the Board of Directors prior to the taking of such action.
A Transfer shall also be deemed to have occurred with respect to a share of Class B Common Stock beneficially held by (i) an entity that is a Permitted Entity, Permitted Foundation or Permitted IRA, if there occurs any act or circumstance that causes such entity to no longer be a Permitted Entity, Permitted Foundation or Permitted IRA or (ii) an entity that is a Qualified
Stockholder, if, in either case, there occurs a Transfer on a cumulative basis, from and after the IPO Date, of a majority of the voting power of the voting securities, or securities that otherwise entitle a party to elect a majority of the members of the board of directors or governing body, of such entity or any direct or indirect Parent of such entity, other than a Transfer to parties that are, as of the IPO Date, holders of voting securities of any such entity or Parent of such entity.
6.6 “Voting Control” shall mean, with respect to a share of Class B Common Stock, the power (whether exclusive or shared) to vote or direct the voting of such share by proxy, voting agreement or otherwise.
7. Status of Converted Stock. In the event any shares of Class B Common Stock are converted into shares of Class A Common Stock pursuant to this Section B.7 of Article IV the shares of Class B Common Stock so converted shall be retired and shall not be reissued by this Corporation.
8. Reservation. This Corporation shall at all times reserve and keep available, out of its authorized and unissued shares of Class A Common Stock, solely for the purpose of effecting conversions of shares of Class B Common Stock into Class A Common Stock, such number of duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of Class B Common Stock. If at any time the number of authorized and unissued shares of Class A Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Class B Common Stock, this Corporation shall promptly take such corporate action as may be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, obtaining the requisite stockholder approval of any necessary amendment to this Certificate of Incorporation. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable shares. This corporation shall take all such action as may be necessary to ensure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or regulation.
9. Subdivisions or Combinations. If this Corporation in any manner subdivides or combines the outstanding shares of Class A Common Stock, then the outstanding shares of Class B Common Stock will be subdivided or combined in the same proportion and manner.
10. Equal Status. Except as expressly set forth in Article IV hereof, Class B Common Stock shall have the same rights and powers of, rank equally to, share ratably with and be identical in all respects and as to all matters to Class A Common Stock.
11. Amendments and Changes. This Corporation shall not, without first obtaining the approval (by vote or written consent as provided by law) of the holders of a majority of the voting power of the outstanding shares of Class A Common Stock and Class B Common Stock (voting together as a single class) amend, alter, repeal or waive the provisions of Article IV, Part C, Section 3.2 relating to the Common Directors, Article IV, Part A, or Article IV, Part B of this Certificate of Incorporation in a manner that adversely affects the rights of the holders of the Class A Common Stock or Class B Common Stock.
12. Determinations by the Board of Directors. In case of an ambiguity in the application of any provision set forth in this Article IV, Part B or in the meaning of any term or definition set forth in this Article IV, Part B, the Board (but not a committee thereof), shall have the power to determine, in its sole discretion, the application of any such provision or any such term or definition with respect to any situation based on the facts believed in good faith by it. A determination of the Board in accordance with the preceding sentence shall be conclusive and binding on the stockholders of this Corporation. Such determination shall be evidenced in a writing adopted by the Board, and such writing shall be made available for inspection by any holder of capital stock of this Corporation at the principal executive offices of this Corporation. A determination of the Board in accordance with the preceding sentence shall be conclusive and binding on the stockholders of this Corporation. Such determination shall be evidenced in a writing adopted by the Board, and such writing shall be made available for inspection by any holder of capital stock of this Corporation at the principal executive offices of this Corporation.
C. PREFERRED STOCK
The Preferred Stock shall be divided into seven series of Preferred Stock. The first series of Preferred Stock shall consist of 10,962,327 shares designated as “Series Seed Preferred Stock,” the second series of Preferred Stock shall consist of 12,855,123 shares designated as “Series A Preferred Stock,” the third series of Preferred Stock shall consist of 20,288,700 shares designated as “Series B Preferred Stock,” the fourth series of Preferred Stock shall consist of 40,338,867 shares designated as “Series C Preferred Stock,” and the fifth series of Preferred Stock shall consist of 29,078,931 shares designated as “Series D Preferred Stock,” the sixth series of Preferred Stock shall consist of 31,405,183 shares designated as “Series E Preferred Stock” and the seventh series of Preferred Stock shall consist of 24,056,282 shares designated as “Series F Preferred Stock”. The following rights, preferences, powers, privileges and restrictions, qualifications and limitations shall apply to the Preferred Stock. Unless otherwise indicated, references to “sections” or “subsections” in this Part C of this Article IV refer to sections and subsections of Part C of this Article IV.
1. Dividends. 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 unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of Preferred Stock then outstanding shall first receive, or simultaneously receive on a pari passu basis, a dividend on each outstanding share of Preferred Stock in an amount at least equal to eight percent (8%) of the Applicable Original Issue Price (as defined below) for each such series of Preferred Stock. The foregoing dividends shall be non-cumulative and shall be payable only when as, and if declared by the Board, acting in its sole discretion, and no right shall accrue to holders of any shares by reason of the fact that dividends on such shares are not declared and paid in any prior year. Payments of any dividend with respect to shares of Preferred Stock shall be pro rata in proportion to the dividend amount per share applicable to each such share of Preferred Stock. No dividend shall be paid on Class A Common Stock or Class B Common Stock at an amount per share greater than that paid to the holders of Preferred Stock (on an as-if- converted basis). Thereafter, any dividends shall be distributed among the holders of the shares of Preferred Stock and Class A Common Stock or Class B Common Stock, pro rata based on the number of shares held by each such holder (on an as-if-converted basis).
The “Series Seed Original Issue Price” shall mean $0.2351 per share, the “Series A Original Issue Price” shall mean $0.7779 per share, the “Series B Original Issue Price” shall mean $1.1996 per share, the “Series C Original Issue Price” shall mean $1.7460 per share, the “Series D Original Issue Price” shall mean $3.2833 per share, the “Series E Original Issue Price” shall mean $4.8617 per share and the “Series F Original Issue Price” shall mean $12.0614 per share, each subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such shares of Preferred Stock. The “Applicable Original Issue Price” shall mean (a) in the case of a share of Series Seed Preferred Stock, the Series Seed Original Issue Price, (b) in the case of a share of Series A Preferred Stock, the Series A Original Issue Price, (c) in the case of a share of Series B Preferred Stock, the Series B Original Issue Price, (d) in the case of a share of Series C Preferred Stock, the Series C Original Issue Price, (e) in the case of a share of Series D Preferred Stock, the Series D Original Issue Price, (f) in the case of a share of Series E Preferred Stock, the Series E Original Issue Price and (g) in the case of a share of Series F Preferred Stock, the Series F Original Issue Price.
2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.
2.1 Preferential Payments to Holders of Preferred Stock.
2.1.1 In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event (as defined below), the holders of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock then outstanding shall, on a pari passu basis, based upon the amount per share payable to each share of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, respectively, be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders or the consideration payable in such Deemed Liquidation Event, before any payment shall be made to the holders of Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock, Class A Common Stock or Class B Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Applicable Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock, as applicable, been converted into Class B 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 to the holders of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock is hereinafter referred to as the “Series C/D/E/F Liquidation Amount”). If upon any such liquidation, dissolution or winding 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 C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, respectively, the full amount to which they shall be entitled under this Section B.2.1.1 or Article IV, the holders of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock shall, on a pari passu basis, based upon the amount per share payable to each share of Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, respectively, share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and/or Series F Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
2.1.2 In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of the full Series C/D/E/F Liquidation Amount to the holders of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, respectively, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders or the consideration payable in such Deemed Liquidation Event, before any payment shall be made to the holders of Series Seed Preferred Stock, Series A Preferred Stock, Class A Common Stock or Class B Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series B Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of the Series B Preferred Stock been converted into Class B 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 to the holders of Series B Preferred Stock is hereinafter referred to as the “Series B Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of the Series C/D/E/F Liquidation Amount to the holders of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, respectively, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred Stock the full amount to which they shall be entitled under this Section 2.1.2, the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series B Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
2.1.3 In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of the full (x) Series C/D/E/F Liquidation Amount to the holders of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, respectively, and (y) Series B Liquidation Amount to the holders of Series B Preferred Stock, the holders of shares of Series Seed Preferred Stock and Series A Preferred Stock then outstanding, on a pari passu basis, based upon the amount per share payable to each share of Series Seed Preferred Stock and Series A Preferred Stock, respectively, shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders or the consideration payable in such Deemed Liquidation Event, before any payment shall be made to the holders of Class A Common Stock or Class B Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Applicable Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable
had all shares of Series Seed Preferred Stock or Series A Preferred Stock, as applicable, been converted into Class B Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amounts payable pursuant to this sentence to the holders of Series Seed Preferred Stock and Series A Preferred Stock are hereinafter referred to as the “Series Seed Liquidation Amount” and the “Series A Liquidation Amount,” respectively). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of the full (x) Series C/D/E/F Liquidation Amount to the holders of shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, respectively, and (y) Series B Liquidation Amount to the holders of Series B Preferred Stock, theassets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series Seed Preferred Stock and Series A Preferred Stock the full amount to which they shall be entitled under this Section 2.1.3, the holders of shares of Series Seed Preferred Stock and Series A Preferred Stock, on a pari passu basis, based upon the amount per share payable to each share of Series Seed Preferred Stock and Series A Preferred Stock, respectively, shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares of Series Seed Preferred Stock and Series A Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
The term “Applicable Liquidation Amount” shall refer to the (a) Series Seed Liquidation Amount with respect to the Series Seed Preferred Stock, (b) Series A Liquidation Amount with respect to the Series A Preferred Stock, (c) Series B Liquidation Amount with respect to the Series B Preferred Stock and (d) Series C/D/E/F Liquidation Amount with respect to the Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock, respectively.
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 Preferred Stock pursuant to Section 2.1 the remaining assets of the Corporation available for distribution to its stockholders or the consideration not paid to the holders of Preferred Stock shall be distributed among the holders of shares of Class A Common Stock and Class B Common Stock, pro rata based on the number of shares of Class A Common Stock and Class B Common Stock held by each such holder.
2.3 Deemed Liquidation Events.
2.3.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least 55% of the voting power of the outstanding shares of Preferred Stock, voting together as a single class and not as a separate series, and on an as-converted basis (the “Requisite Preferred Holders”), elect otherwise by written notice sent to the Corporation at least ten (10) days prior to the effective date of any such event; provided that, the consent of the holders of the voting power of at least 66 2/3% of the then outstanding shares of Preferred Stock, voting together as a single class and not as a separate series, and on an as-converted basis (the “66 2/3% Preferred Holders”), shall
also be required to make an election under this Section 2.3.1 if, in connection with any of the following events, the stockholders of the Corporation are paid out of the proceeds of any such Deemed Liquidation Event and such proceeds are allocated to the holders of shares of Series C Preferred Stock, the holders of shares of Series D Preferred Stock, the holders of shares of Series E Preferred Stock or the holders of shares of Series F Preferred Stock with respect to amount to be paid and the priority of such payments in a manner that is other than as set forth in this Section 2 assuming such event were considered a Deemed Liquidation 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; or
(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 or intellectual property 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.
(a) 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.
(b) In the event of Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b) (each, an “Asset Transfer”), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Asset Transfer, then (i) the Corporation shall send a written notice to each holder of Preferred Stock no later than the 90th day after the Asset Transfer 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 Preferred Stock, and (ii) if the Requisite Preferred Holders so request in a written instrument delivered to the Corporation not later than 120 days after such Asset Transfer, the Corporation shall use the consideration received by the Corporation for such Asset Transfer (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”) on the 150th day after such Asset Transfer (the “Redemption Date”) to redeem all outstanding shares of Preferred Stock (i) at a price per share equal to the Applicable Liquidation Amount specified in Subsection 2.1 herein and (ii) in the same order of priority as the Applicable Liquidation Amounts would be paid pursuant to Subsection 2.1 herein. Notwithstanding the foregoing, in the event of a redemption pursuant to this Subsection 2.3.2(b), if the Available Proceeds are insufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall ratably redeem each holder’s shares of Preferred Stock, subject to the order of priority set forth in Subsection 2.1, to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under the General Corporation Law governing distributions to stockholders. Prior to the 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.
(c) Redemption Notice. The Corporation shall send written notice of a redemption pursuant to Subsection 2.3.2(b) (the “Redemption Notice”) to each holder of record of Preferred Stock not less than twenty (20) days prior to each Redemption Date. Each Redemption Notice shall state:
(i) the number of shares of Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;
(ii) the Redemption Date and the amount to be paid to each holder of Preferred Stock with respect to each share of Preferred Stock held by such holder (the “Redemption Price”);
(iii) the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and
(iv) for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Preferred Stock to be redeemed.
(d) Surrender of Certificates; Payment. On or before the Redemption Date, each holder of shares of Preferred Stock, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (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) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Preferred Stock shall promptly be issued to such holder.
(e) Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the Redemption Date the Redemption Price payable upon redemption of the shares of Preferred Stock is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Preferred Stock so called for redemption shall not have been surrendered, all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of any such certificate or certificates therefor.
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 and Contingent Consideration. In the event of a Deemed Liquidation Event, if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the Merger Agreement or other agreement governing such Deemed Liquidation Event shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, 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 satisfaction of such 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. For the purposes of this Subsection 2.3.4, consideration placed into escrow or retained as hold back to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.
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 each outstanding share of Preferred Stock shall be entitled to cast twenty (20) votes for each share of Class B Common Stock into which such share of Preferred Stock held by such holder is 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 Preferred Stock shall vote together with the holders of Class A Common Stock and Class B Common Stock as a single class.
3.2 Election of Directors. The holders of record of the shares of Series D Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Series D Director”); the holders of record of the shares of Series C Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Series C Director”); the holders of record of the shares of Series B Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “Series B Director”); the holders of record of the shares of Series Seed Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (“Series Seed Director”); and the holders of record of the shares of Class A Common Stock and Class B Common Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation (the “Common Directors”). Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the 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 Stock, Series C Preferred Stock, Series B Preferred Stock, Series Seed Preferred Stock, Class A Common Stock and Class B Common Stock, separately, or Preferred Stock, Class A Common Stock and Class B Common Stock, collectively, 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 (or in the case of the Class A Common Stock and Class B Common Stock and Preferred Stock together, voting together as a single class on an as-converted basis), 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 Stock, Series C Preferred Stock, Series B Preferred Stock, Series Seed Preferred Stock, Class A Common Stock and Class B Common Stock, separately, or Preferred Stock, Class A Common Stock and Class B Common Stock, collectively, 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. The holders of record of the shares of Class A Common Stock, Class B Common Stock and of any other class or series of voting stock (including the Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation. 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 voting power 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. The rights of the holders of the Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock and Series Seed Preferred Stock to elect a director as set forth in this Subsection 3.2 shall terminate on the first date on which there are issued and outstanding less than twenty percent (20%) of the originally issued shares of Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock or Series Seed Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series Seed Preferred Stock), as the case may be.
3.3 Preferred Stock Protective Provisions. At any time when originally issued shares of Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) are outstanding, the Corporation or any subsidiary (each such entity, including without limitation, the Corporation, shall be referred to as a “Sentinel Entity”) shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the Requisite Preferred Holders, given in writing or by vote at a meeting, consenting or voting (as the case may be):
3.3.1 authorize or issue, or obligate itself to issue, any equity security (including any other security convertible into or exercisable for any such equity security) having a preference over any series of Preferred Stock with respect to dividends, liquidation or redemption, other than the issuance of any authorized but unissued shares of Series F Preferred Stock (including any security convertible into or exercisable for such shares of Series F Preferred Stock);
3.3.2 increase the authorized number of shares of the Preferred Stock, Class A Common Stock or Class B Common Stock;
3.3.3 declare or pay any dividends on or declare or make any other distribution on account of any shares of Preferred Stock, Class A Common Stock or Class B Common Stock;
3.3.4 redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or shares of Preferred Stock, Class A Common Stock or Class B Common Stock; provided, however, that this restriction shall not apply to the repurchase of shares of, Class A Common Stock or Class B Common Stock from employees, officers, directors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements under which the Corporation has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment or service, or pursuant to a right of first refusal; and provided further that this
restriction shall not apply to the redemption of shares of Preferred Stock pursuant to Subsection 2.3.2(b);
3.3.5 amend the Corporation’s Certificate of Incorporation or bylaws;
3.3.6 voluntarily liquidate, windup or dissolve the Corporation or consummate a Deemed Liquidation Event;
3.3.7 incur indebtedness for borrowed money, or guarantee the indebtedness of any other party, in excess of $500,000, unless approved by the Board either individually or as a component of the Corporation’s operating plan;
3.3.8 increase or decrease the authorized number of members of the Board;
3.3.9 increase the size of the Corporation’s option pool reserve or create a new stock option plan or pool reserve; or
3.3.10 enter into any interested party transaction, unless approved by the Board (including a majority of the disinterested directors).
3.4 Series C/D/E/F Preferred Stock Protective Provisions. At any time when originally issued shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Series F Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the 66 2/3% Preferred Holders given in writing or by vote at a meeting, consenting or voting (as the case may be):
3.4.1 allocate, or elect to allocate, proceeds to the stockholders of the Corporation in connection with a Stock Sale (as defined below) in a manner that results in a holder of shares of Series C Preferred Stock, a holder of shares of Series D Preferred Stock, a holder of shares of Series E Preferred Stock or a holder of shares of Series F Preferred Stock receiving an amount that is less than the Applicable Liquidation Amount provided for under Section 2 above, or consummate or be party to a Stock Sale pursuant to which the stockholders of the Corporation are paid out of the proceeds of such Stock Sale and such proceeds are allocated in a manner that results in the holders of shares of Series C Preferred Stock, the holders of shares of Series D Preferred Stock, the holders of shares of Series E Preferred Stock or the holders of shares of Series F Preferred Stock receiving an amount that is less than the Applicable Liquidation Amount provided for under Section 2 above. A “Stock Sale” means a transaction or series of related transactions in which an individual, firm, corporation, partnership, association, limited liability company, trust or any other entity acquires from stockholders of the Corporation shares representing more than fifty percent (50%) of the outstanding voting power of the Corporation; or
3.4.2 waive, terminate or amend the rights provided in this Section 3.4.
3.5 Series E Preferred Stock Protective Provisions. At any time when originally issued shares of Series E Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of a majority of the voting power of the then outstanding shares of Series E Preferred Stock, exclusively and voting separately as a class (the “Majority Series E Holders”) given in writing or by vote at a meeting, consenting or voting (as the case may be), waive, terminate or amend the rights provided in Section 3.5 or Subsections 4.1.2, 4.3.4 or 4.4.1(d)(iv).
4. Optional Conversion. The holders of Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):
4.1 Right to Convert.
4.1.1 Conversion Ratio. Each share of Preferred Stock 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 Class B Common Stock as is determined by dividing the Applicable Original Issue Price by the Applicable Conversion Price (as defined below) in effect at the time of conversion.
(a) The “Series Seed Conversion Price” shall initially be equal to $0.2351.
(b) The “Series A Conversion Price” shall initially be equal to $0.7779.
(c) The “Series B Conversion Price” shall initially be equal to $1.1996.
(d) The “Series C Conversion Price” shall initially be equal to $1.7460.
(e) The “Series D Conversion Price” shall initially be equal to $3.2833.
(f) The “Series E Conversion Price” shall initially be equal to $4.8617.
(g) The “Series F Conversion Price” shall initially be equal to $12.0614.
Each such initial “Conversion Price”, and the rate at which shares of Preferred Stock may be converted into shares of Class B Common Stock, shall be subject to adjustment as
provided below. The “Applicable Conversion Price” shall mean the (i) Series Seed Conversion Price, in the case of the Series Seed Preferred Stock, (ii) Series A Conversion Price, in the case of the Series A Preferred Stock, (iii) Series B Conversion Price, in the case of the Series B Preferred Stock, (iv) Series C Conversion Price, in the case of the Series C Preferred Stock, (v) Series D Conversion Price, in the case of the Series D Preferred Stock, (vi) Series E Conversion Price, in the case of the Series E Preferred Stock and (vii) Series F Conversion Price, in the case of the Series F Preferred Stock.
4.1.2 In addition to any adjustments to the Series E Conversion Price from time to time under Sections 4.4, 4.5, 4.6, 4.7 and 4.8 below, immediately prior to the conversion of the Series E Preferred Stock pursuant to Section 4 or Section 5 or a liquidation, dissolution, winding up or Deemed Liquidation Event, the Series E Conversion Priceshall be further adjusted by dividing the Series E Conversion Price by the following formula: (1+(Y/4))(4*Z))
Y = 6.0%
Z = (A) a number of days calculated commencing from the date that a share of Series E Preferred Stock is issued and outstanding, up to a maximum number of days ending on the fifth anniversary of the issuance date for each such share of Series E Preferred Stock, divided by (B) 365.
4.1.3 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 Preferred Stock.
4.2 Fractional Shares. No fractional shares of Class B Common Stock shall be issued upon conversion of the Preferred Stock. 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 Class B 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 Preferred Stock the holder is at the time converting into Class B Common Stock and the aggregate number of shares of Class B Common Stock issuable upon such conversion.
4.3 Mechanics of Conversion.
4.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Class B Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (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 Preferred Stock (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 the Preferred Stock 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 Class B 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 (the“Conversion Time”), and the shares of Class B Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time, (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Class B Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Class B Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Class B Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.
4.3.2 Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Class B Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock, and if at any time the number of authorized but unissued shares of Class B Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Class B 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 Applicable Conversion Price below the then par value of the shares of Class B Common Stock issuable upon conversion of the Preferred Stock, 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 Applicable Conversion Price.
4.3.3 Effect of Conversion. All shares of Preferred Stock 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 Class B
Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock 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 Preferred Stock accordingly.
4.3.4 No Further Adjustment. Upon any such conversion, no adjustment to the Applicable Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Class B Common Stock delivered upon conversion. For the avoidance of doubt, this Subsection 4.3.4 shall not be deemed to apply to the Series E Conversion Price described in Subsection 4.1.2.
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 Preferred Stock 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 Class B Common Stock in a name other than that in which the shares of Preferred Stock 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 Conversion Price for Diluting Issues.
4.4.1 Special Definitions. For purposes of this Article IV, the following definitions shall apply:
(a) “Series F Original Issue Date” shall mean the date on which the first share of a Series F Preferred Stock was issued.
(b) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Class A Common Stock or Class B Common Stock, but excluding Options.
(c) “Additional Shares of Common Stock” shall mean all shares of Class A Common Stock or Class B Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series F Original Issue Date, other than (1) the following shares of Class A Common Stock or Class B Common Stock and (2) shares of Class A Common Stock or Class B Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):
(i) shares of Class A Common Stock, Class B Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock;
(ii) shares of Class A Common Stock, Class B Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Class A Common Stock or Class B Common Stock that is covered by Subsections 4.5, 4.6, 4.7 or 4.8;
(iii) shares of Class A Common Stock, Class B Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board;
(iv) shares of Class A Common Stock, Class B Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Class A Common Stock, Class B 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 including, without limitation, all shares of Common Stock issuable pursuant to Subsection 4.1.2;
(v) shares of Class A Common Stock, Class B 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 and primarily for non-equity financing purposes;
(vi) shares of Class A Common Stock, Class B Common Stock, Options or Convertible Securities issued to suppliers or third-party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board and primarily for non-equity financing purposes;
(vii) shares of Class A Common Stock, Class B Common Stock, Options or Convertible
Securities issued as consideration pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the Board and are primarily for non-equity financing purposes; or
(viii) shares of Class A Common Stock, Class B Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board and primarily for non-equity financing purposes.
4.4.2 No Adjustment of Applicable Conversion Price. No adjustment in the Applicable Conversion Price of the Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock 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 Requisite Preferred Holders agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock. No adjustment in (i) the Series D Conversion Price 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 holders of a majority of the voting power of the then outstanding shares of Series D Preferred Stock, exclusively and voting separately as a class, (ii) the Series E Conversion Price 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 Majority Series E Holders, and (iii) the Series F Conversion Price 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 holders of a majority of the voting power of the then outstanding shares of Series F Preferred Stock, exclusively and voting separately as a class, 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 F Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which 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 Class A
Common Stock or Class B 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 Applicable Conversion Price 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 Class A Common Stock or Class B 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 Applicable Conversion Price 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 Applicable Conversion Price 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 Applicable Conversion Price to an amount which exceeds the lower of (i) the Applicable Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Applicable Conversion Price that would have resulted from any issuances of 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 which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Applicable Conversion Price 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 Applicable Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series F Original Issue Date), are revised after the Series F 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 Class A Common Stock or Class B 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) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Applicable Conversion Price pursuant to the terms of Subsection 4.4.4, the Conversion Price shall be readjusted to such Applicable Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If the number of shares of Class A Common Stock or Class B 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 Applicable Conversion Price 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 Class A Common Stock or Class B 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 Applicable Conversion Price 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 (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Applicable Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
4.4.4 Adjustment of Applicable Conversion Price upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Series F 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 Applicable Conversion Price in effect immediately prior to such issue, then the Applicable Conversion Price in effect immediately prior to such issue 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:
CP2 = CP1* (A + B) ÷ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
(a) “CP2” shall mean the Applicable Conversion Price in effect immediately after such issue of Additional Shares of Common Stock
(b) “CP1” 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 Class A Common Stock and Class B Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Class A Common Stock and Class B Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including such Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor)) immediately prior to such issue;
(d) “B” shall mean the number of shares of Class A Common Stock or Class B Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); 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:
(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 Class A Common Stock or Class B 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 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 With respect to the Series D Preferred Stock, any waiver of the anti-dilution rights provided in Section 4.4.4 shall require the vote or consent of the holders of a majority of voting power of the then outstanding shares of Series D Preferred Stock, exclusively and voting separately as a class; with respect to the Series E Preferred Stock, any waiver of the anti-dilution rights provided in Section 4.4.4 shall require the vote or consent of the Majority Series E Holders; and with respect to the Series F Preferred Stock, any waiver of the anti-dilution rights provided in Section 4.4.4 shall require the vote or consent of the holders of a majority of the voting power of the then outstanding shares of Series F Preferred Stock, exclusively and voting separately as a class.
4.4.7 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 Applicable Conversion Price pursuant to the terms of Subsection 4.4.4, and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the Applicable Conversion Price 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 F Original Issue Date effect a subdivision of the outstanding Class A Common Stock or Class B Common Stock, the Applicable Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Class A Common Stock or Class B 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 Class A Common Stock or Class B Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series F Original Issue Date combine the outstanding shares of Class A Common Stock or Class B Common Stock, the Applicable Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Class A Common Stock or Class B 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 Class A Common Stock or Class B 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 F Original Issue Date shall make or issue, or fix a record date for the determination of holders of Class A Common Stock or Class B Common Stock entitled to receive, a dividend or other distribution payable on the Class A Common Stock or Class B Common Stock in additional shares of Class A Common Stock or Class B Common Stock, then and in each such event the Applicable Conversion Price 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 Applicable Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of Class A Common Stock and Class B 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 Class A Common Stock and Class B Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Class A Common Stock or Class B 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 Applicable Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Applicable Conversion Price shall be adjusted pursuant to this subsection 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 such series of Preferred Stock simultaneously receive a dividend or other distribution of shares of Class B Common Stock in a number equal to the number of shares of Class B Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Class B 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 F Original Issue Date shall make or issue, or fix a record date for the determination of holders of Class A Common Stock or Class B Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Class A Common Stock or Class B Common Stock in respect of outstanding shares of Class A Common Stock or Class B 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 such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Class A Common Stock or Class B 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 Preferred Stock had been converted into Class B 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 Class A Common Stock or Class B Common Stock (but not the Preferred Stock) 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 Preferred Stock shall thereafter be convertible in lieu of the Class B 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 Class B Common Stock issuable upon conversion of one share of Preferred Stock 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 Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Applicable Conversion Price) 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 Preferred Stock.
4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Applicable Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later
than twenty (20) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which such Preferred Stock 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 Preferred Stock (but in any event not later than twenty (20) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Applicable Conversion Price then in effect, and (ii) the number of shares of Class B Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such Preferred Stock.
4.10 Notice of Record Date. In the event:
(a) the Corporation shall take a record of the holders of its Class A Common Stock or Class B Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) 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 Class A Common Stock or Class B 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 Preferred Stock 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, Deemed Liquidation Event, 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 Class A Common Stock or Class B Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Class A Common Stock or Class B Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, Deemed Liquidation Event, liquidation or winding-up, and the amount per share and character of such exchange applicable to such series of Preferred Stock and the Class A Common Stock or Class B Common Stock. Such notice shall be sent at least ten (10 ) days prior to the record date or effective date for the event specified in such notice.
5. Mandatory Conversion.
5.1 Trigger Events. Upon (a) the closing of an underwritten initial public offering pursuant to an effective registration statement on Form S-1 under the Securities Act of 1933, as amended, resulting in the sale of shares of Class A Common Stock or Class B
Common Stock with gross proceeds to the Corporation of at least $50,000,000 (a “Qualified Public Offering”), (b) the Corporation’s initial listing of its Class A Common Stock or Class B Common Stock on Nasdaq, the New York Stock Exchange or another national securities exchange approved by the Board, by means of a registration statement on Form S-1 filed by the Corporation with the Securities and Exchange Commission that registers shares of existing capital stock of the Corporation for resale (a “Direct Listing”), or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Preferred Holders (the time of such closing of such Qualified Public Offering or Direct Listing, or the date and time or time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Class B Common Stock, at the then effective conversion rate applicable to such series of Preferred Stock and (ii) such shares may not be reissued by the Corporation; provided, however, that the outstanding shares of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock shall not be automatically converted into shares of Class B Common Stock in any mandatory conversion pursuant to clause (c) of this Subsection 5.1 in connection with a Deemed Liquidation Event without the vote or written consent of the 66 2/3% Preferred Holders if the proceeds paid to the stockholders of the Corporation in connection with such Deemed Liquidation Event are allocated in a manner that results in the holders of shares of Series C Preferred Stock, the holders of shares of Series D Preferred Stock, the holders of shares of Series E Preferred Stock or the holders of shares of Series F Preferred Stock receiving an amount that is less than the Applicable Liquidation Amount provided for under Section 2 above.
5.2 Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock 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 Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (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 Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Class B 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 Preferred Stock, the Corporation shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the
number of full shares of Class B Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Subsection 4.2 in lieu of any fraction of a share of Class B Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of such series of Preferred Stock converted. Such converted Preferred Stock 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 Preferred Stock accordingly.
6. Redemption. Except as set forth in Subsection 2.3.2(b), the Preferred Stock shall not be redeemable at the option of the holder thereof.
7. Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock 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 Preferred Stock following redemption.
8. Waiver. Subject to (and except as provided in) Subsections 2.3.1, 3.2, 3.4, 3.5, 4.4.2, 4.4.6 and 5.1 and Article XIII, any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of Preferred Stock by the affirmative written consent or vote of the Requisite Preferred Holders.
9. Notices. Any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Preferred Stock 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.
ARTICLE V
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 is expressly authorized to make, repeal, alter, amend and rescind any or all of the bylaws of the Corporation.
ARTICLE VI
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.
ARTICLE VII
Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without 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 or in the bylaws of the Corporation.
ARTICLE IX
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 IX 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 IX 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.
ARTICLE X
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 X 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.
ARTICLE XI
Unless this corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action or proceeding brought on behalf of this corporation; (b) any action asserting a claim that is based upon a breach of a fiduciary duty owed by, or other wrongdoing by, any current or former director, officer, stockholder, employee or agent of this corporation to this corporation or this corporation’s stockholders; (c) any action asserting a claim against this corporation or any current or former director, officer, stockholder, employee or agent of this corporation arising pursuant to any
provision of the General Corporation Law, this Restated Certificate or the Bylaws or as to which the General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; (d) any action to interpret, apply, enforce or determine the validity of this Restated Certificate or the Bylaws; (e) any action asserting a claim against this corporation governed by the internal affairs doctrine; or (f) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the General Corporation Law. Unless this corporation 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 Act, or any successor thereto or, to the fullest extent permitted by law, under the Exchange Act, or any successor thereto. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of this corporation shall be deemed to have notice of and to have consented to the provisions of this Article XIII. Failure to enforce the foregoing provisions of this Article XIII would cause this corporation irreparable harm, and this corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
ARTICLE XII
For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Class A Common Stock or Class B Common Stock permitted under this Certificate of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board (in addition to any other consent required under this Certificate of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero.
ARTICLE XIII
The Corporation renounces, to the fullest extent permitted by law, 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 Preferred Stock 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. Furthermore, no Fund (as defined below) shall be liable to the Corporation for any claim arising out of, or based upon, (i) the investment by the Fund in any entity competitive with the Corporation or (ii) actions taken by any advisor, partner, officer, or other representative of the Fund to assist any such competitive entity or otherwise. A “Fund” is
an entity that is a holder of Preferred Stock and that is primarily in the business of investing in other entities, or an entity that manages such entity. Any amendment, repeal or modification of this Article XIII will only be prospective and will not affect the rights under this Article XIII in effect at the time of the occurrence of any actions or omissions to act giving rise to liability. Notwithstanding anything to the contrary contained elsewhere in the Certificate of Incorporation, the affirmative vote of the Requisite Preferred Holders will be required to amend or repeal, or to adopt any provisions inconsistent with this Article XIII.
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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 Ninth Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this Corporation’s Certificate of 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 Ninth Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on June [▪], 2021.
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By:
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/s/Tomer Weingarten
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Tomer Weingarten
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President and Chief Executive Officer
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SENTINELONE, INC.
RESTATED CERTIFICATE OF INCORPORATION
SentinelOne, Inc., a Delaware corporation, hereby certifies as follows:
1. The name of this corporation is SentinelOne, Inc. The date of the filing of its original Certificate of Incorporation with the Secretary of State was January 23, 2013 under the name Sentinel Labs, Inc.
2. The Restated Certificate of Incorporation of this corporation attached hereto as Exhibit A, which is incorporated herein by this reference, and which restates, integrates and further amends the provisions of the Certificate of Incorporation of this corporation, as previously amended and/or restated, has been duly adopted by this corporation’s Board of Directors and by the stockholders in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, with the approval of this corporation’s stockholders having been given by written consent without a meeting in accordance with Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer and the foregoing facts stated herein are true and correct.
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Dated:
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[•]
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SentinelOne, Inc.
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By:
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Name:
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Tomer Weingarten
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Title:
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President and Chief Executive Officer
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EXHIBIT A
SENTINELONE, INC.
RESTATED CERTIFICATE OF INCORPORATION
ARTICLE I: NAME
The name of this corporation is SentinelOne, Inc. (the “Corporation”).
ARTICLE II: AGENT FOR SERVICE OF PROCESS
The address of the registered office of the Corporation in the State of Delaware is 251 Little Falls Drive, City of Wilmington, County of New Castle, 19808. The name of the registered agent of the Corporation in the State of Delaware at such address is Corporation Service Company.
ARTICLE III: PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “General Corporation Law”).
1. Total Authorized.
1.1. The total number of shares of all classes of stock that the Corporation has authority to issue is 1,850,000,000 shares, consisting of three classes: 1,500,000,000 shares of Class A Common Stock, $0.0001 par value per share (“Class A Common Stock”), 300,000,000 shares of Class B Common Stock, $0.0001 par value per share (“Class B Common Stock” and together with the Class A Common Stock, the “Common Stock”), and 50,000,000 shares of Preferred Stock, $0.0001 par value per share (the “Preferred Stock”).
1.2 The number of authorized shares of Class A Common Stock or Class B Common 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 all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, and no vote of the holders of the Class A Common Stock or Class B Common Stock voting separately as a class shall be required therefor.
2. Preferred Stock.
2.1. The Corporation’s Board of Directors (“Board of Directors”) is authorized, subject to any limitations prescribed by the law of the State of Delaware, by resolution or resolutions adopted from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, and, by filing a certificate of designation pursuant to the applicable law of the State of Delaware (“Certificate of Designation”), to establish from time to time the number of shares to be included in each such series, to fix the designation, powers (including voting powers), preferences and relative, participating, optional or other special rights (and the qualifications, limitations or restrictions thereof) of the shares of each such series and,
except where otherwise provided in the applicable Certificate of Designation, to increase (but not above the total number of authorized shares of the Preferred Stock) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any 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 all the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation.
2.2. Except as otherwise expressly provided in this Restated Certificate (including any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV), (i) any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board of Directors without approval of the holders of the Class A Common Stock or the Class B Common Stock or the holders of the Preferred Stock, or any series thereof, and (ii) any such new series may have powers, preferences and rights, including, without limitation, voting powers, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Class A Common Stock or Class B Common Stock, any series of the Preferred Stock, or any future class or series of capital stock of the Corporation.
3. Rights of Class A Common Stock and Class B Common Stock.
3.1. Equal Status. Except as otherwise provided in this Restated Certificate of Incorporation or required by applicable law, shares of Class A Common Stock and Class B Common Stock shall have the same rights and powers, rank equally (including as to dividends and distributions, and upon any liquidation, dissolution or winding up of the Corporation, but excluding voting and other matters as described in Article IV Section 3.2 below), share ratably and be identical in all respects and as to all matters.
3.2. Voting Rights. Except as otherwise expressly provided by this Restated Certificate of Incorporation or as required by law, the holders of shares of Class A Common Stock and Class B Common Stock shall (i) at all times vote together as a single class and not as separate series or classes on all matters (including the election of directors) submitted to a vote of the stockholders of the Corporation, (ii) be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”) and (iii) be entitled to vote upon such matters and in such manner as may be provided by applicable law; provided, however, that, except as otherwise required by law or this Restated Certificate of Incorporation, holders of shares of Class A Common Stock and Class B Common Stock shall not be entitled to vote on any amendment to this Restated Certificate of Incorporation (including any Certificate of Designation relating 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 pursuant to this Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock). Except as otherwise expressly provided herein or required by applicable law,
each holder of Class A Common Stock shall have the right to one (1) vote per share of Class A Common Stock held of record by such holder and each holder of Class B Common Stock shall have the right to twenty (20) votes per share of Class B Common Stock held of record by such holder.
3.3. Dividends and Distribution Rights. Shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect to any dividends or distributions as may be declared and paid from time to time by the Board of Directors out of any assets of the Corporation legally available therefor; provided, however, that in the event a dividend is paid in the form of shares of Class A Common Stock or Class B Common Stock (or rights to acquire such shares), then holders of Class A Common Stock shall receive shares of Class A Common Stock (or rights to acquire such shares, as the case may be) and holders of Class B Common Stock shall receive shares of Class B Common Stock (or rights to acquire such shares, as the case may be), with holders of shares of Class A Common Stock and Class B Common Stock receiving, on a per share basis, an identical number of shares of Class A Common Stock or Class B Common Stock, as applicable. Notwithstanding the foregoing, the Board of Directors may pay or make a disparate dividend or distribution per share of Class A Common Stock or Class B Common Stock (whether in the amount of such dividend or distribution payable per share, the form in which such dividend or distribution is payable, the timing of the payment, or otherwise) if (i) such disparate dividend or distribution is approved in advance by the affirmative vote of the holders of a majority of the then-outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class or (ii) such disparate dividend or distribution is paid in the form of securities (or the right to receive securities) of another entity, and (A) the holders of Class A Common Stock receive securities entitling the holder thereof to cast one vote per security (or the right to receive such securities, as applicable) and (B) the holders of Class B Common Stock receive securities entitling the holder thereof to cast twenty (20) votes per security (or the right to receive such securities, as applicable). The terms of any securities distributed to stockholders pursuant to the preceding clause (ii) shall be substantially identical, other than with respect to voting rights.
3.4. Subdivisions, Combinations or Reclassifications. Shares of Class A Common Stock or Class B Common Stock may not be subdivided, combined or reclassified unless the shares of the other class are concurrently therewith proportionately subdivided, combined or reclassified in a manner that maintains the same proportionate equity ownership between the holders of the outstanding Class A Common Stock and Class B Common Stock on the record date for such subdivision, combination or reclassification; provided, however, that shares of one such class may be subdivided, combined or reclassified in a different or disproportionate manner if such subdivision, combination or reclassification is approved in advance by the affirmative vote of the holders of a majority of the then-outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class.
3.5. Liquidation, Dissolution or Winding Up. Subject to the preferential or other rights of any holders of Preferred Stock then outstanding, upon the liquidation,dissolution or winding up of the Corporation, whether voluntary or involuntary, holders of Class A Common Stock and Class B Common Stock will be entitled to receive ratably, on a per share basis, all assets of the Corporation available for distribution to its stockholders unless disparate or different
treatment of the shares of each such class with respect to distributions upon any such liquidation, dissolution or winding up is approved in advance by the affirmative vote of the holders of a majority of the then-outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class; provided, that for the avoidance of doubt, consideration to be paid or received by a holder of Common Stock pursuant to any employment, consulting, severance or similar services arrangement shall not be deemed to be assets of the Corporation available for distribution to its stockholders for the purpose of this Section 3.5.
3.6. Merger or Consolidation. In the case of any distribution or payment made or other consideration paid in respect, or upon conversion or exchange, of the shares of Class A Common Stock or Class B Common Stock upon the merger or consolidation of the Corporation with or into any other entity, or in the case of any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation, such distribution or payment shall be made, or other consideration shall be paid, ratably on a per share basis among the holders of the Class A Common Stock and Class B Common Stock as a single class; provided, however, that shares of one such class may receive different or disproportionate distributions, payments, or other consideration in connection with such merger, consolidation or other transaction if (i) the only difference in the per share distribution, payment, or other consideration to the holders of the Class A Common Stock and Class B Common Stock is that any securities that a holder of a share of Class B Common Stock receives as part of such merger, consolidation or other transaction upon conversion or in exchange for such holder’s Class B Common Stock shall have twenty (20) times the voting power of any securities that a holder of a share of Class A Common Stock receives as part of such merger, consolidation or other transaction upon conversion or in exchange for such holder’s Class A Common Stock, or (ii) such merger, consolidation or other transaction is approved by the affirmative vote of the holders of a majority of the then-outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class; provided, further, that for the avoidance of doubt, consideration to be paid or received by a holder of Common Stock in connection with any such merger, consolidation or other transaction pursuant to any employment, consulting, severance or similar services arrangement shall not be deemed to be consideration paid in respect, or upon conversion or exchange, of shares of Common Stock for the purpose of this Section 3.6.
3.7. Determinations by the Board of Directors. In case of an ambiguity in the application of any provision set forth in this Section 3 or in the meaning of any term or definition set forth in this Section 3, the Board of Directors, but not a committee thereof, shall have the power to determine, in its sole discretion, the application of any such provision or any such term or definition with respect to any situation based on the facts believed in good faith by it. A determination of the Board of Directors in accordance with the preceding sentence shall be conclusive and binding on the stockholders of the Corporation. Such determination shall be evidenced in a writing adopted by the Board of Directors, and such writing shall be made available for inspection by any holder of capital stock of the Corporation at the principal executive offices of the Corporation.
ARTICLE V: CLASS B COMMON STOCK CONVERSION
1. Optional Conversion. Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the Corporation. Before any holder of Class B Common Stock shall be entitled to convert any of such holder’s shares of such Class B Common Stock into shares of Class A Common Stock, such holder shall deliver an instruction, duly signed and authenticated in accordance with any procedures set forth in the Bylaws or any policies of the Corporation then in effect (which will be available upon request therefor made to the Secretary), at the principal corporate office of the Corporation or of any transfer agent for the Class B Common Stock, and shall give written notice to the Corporation at its principal corporate office of such holder’s election to convert the same and shall state therein the name or names in which the shares of Class A Common Stock issuable on conversion thereof are to be registered on the books of the Corporation. The Corporation shall, as soon as practicable thereafter, register on the Corporation’s books ownership of the number of shares of Class A Common Stock to which such record holder of Class B Common Stock, or to which the nominee or nominees of such record holder, shall be entitled as aforesaid. Such conversion shall be deemed to have occurred immediately prior to the close of business on the date such notice of the election to convert is received by the Corporation, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock as of such date. The Corporation shall not be required to register a conversion of a share of Class B Common Stock pursuant to this Section 1 of Article V unless it is permitted to do so by law.
2. Automatic Conversion. Each share of Class B Common Stock shall automatically, without further action by the Corporation or the holder thereof, be converted into one (1) fully paid and nonassessable share of Class A Common Stock immediately prior to the close of business on the earlier of (i) seven (7) years from the IPO Date (as defined below); (ii) 11:59 p.m. Eastern Time on the first date after the IPO Date that the aggregate number of shares of Class B Common Stock (including shares of Class B Common Stock subject to outstanding stock options) held by the Founder and his Permitted Entities, Permitted Foundations, Permitted IRAs and Permitted Transferees is less than twenty five percent (25%) of the number of shares of Class B Common Stock (including shares of Class B Common Stock subject to outstanding stock options) held by the Founder and his Permitted Entities, Permitted Foundations, Permitted IRAs and Permitted Transferees at 11:59 p.m. Eastern Time on the IPO Date; (iii) the date fixed by the Board of Directors that is no more than 180 days following the first time after 11:59 p.m. Eastern Time on the IPO Date that the Founder is no longer providing services to the Corporation as an officer, employee, consultant or member of the Board of Directors; (iv) the date fixed by the Board of Directors that is no more than 180 days following the date that the Founder’s employment with the Corporation is terminated for Cause; (v) the date that is twelve (12) months after the death or Disability of the Founder; or (vi) the date specified by the affirmative vote of the holders of Class B Common Stock representing not less than two-thirds (2/3) of the voting power of the outstanding shares of Class B Common Stock, voting separately as a single class (each of the events referred to in (i) through (vi) are referred to herein as an “Automatic Conversion”). The Corporation shall provide notice of an Automatic Conversion of shares of
Class B Common Stock pursuant to this Section 2 of Article V to record holders of such shares of Class B Common Stock as soon as practicable following the Automatic Conversion. Such notice shall be provided by any means then permitted by the General Corporation Law; provided, however, that no failure to give such notice nor any defect therein shall affect the validity of an Automatic Conversion. Upon and after an Automatic Conversion, the person registered on the Corporation’s books as the record holder of the shares of Class B Common Stock so converted immediately prior to an Automatic Conversion shall be registered on the Corporation’s books as the record holder of the shares of Class A Common Stock issued upon Automatic Conversion of such shares of Class B Common Stock, without further action on the part of the record holder thereof. Immediately upon the effectiveness of an Automatic Conversion, the rights of the holders of the shares of Class B Common Stock, converted pursuant to an Automatic Conversion shall cease, and the holders shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock into which such shares of Class B Common Stock were converted.
3. Conversion on Transfer. Each share of Class B Common Stock shall automatically, without further action by the Corporation or the holder thereof, be converted into one (1) fully paid and nonassessable share of Class A Common Stock, upon the occurrence of a Transfer (as defined below), other than a Permitted Transfer (as defined below), of such share of Class B Common Stock.
4. Policies and Procedures. The Corporation may, from time to time, establish such policies and procedures, not in violation of applicable law or this Restated Certificate of Incorporation or the Bylaws, relating to the conversion of shares of the Class B Common Stock into shares of Class A Common Stock as it may deem necessary or advisable. If the Corporation has reason to believe that a Transfer that is not a Permitted Transfer has occurred, the Corporation may request that the purported transferor furnish affidavits or other evidence to the Corporation as it reasonably deems necessary to determine whether a Transfer that is not a Permitted Transfer has occurred, and if such transferor does not within ten (10) days after the date of such request furnish sufficient (as determined by the Board of Directors (but not a committee thereof)) evidence to the Corporation (in the manner provided in the request) to enable the Corporation to determine that no such Transfer has occurred, any such shares of Class B Common Stock, to the extent not previously converted, shall be automatically converted into shares of Class A Common Stock on a one to one basis, and such conversion shall thereupon be registered on the books and records of the Corporation. In connection with any action of stockholders taken at a meeting, the stock ledger of the Corporation shall be presumptive evidence as to who are the stockholders entitled to vote in person or by proxy at any meeting of stockholders and the classes of shares held by each such stockholder and the number of shares of each class held by such stockholder.
5. Definitions.
(a) “Cause” shall have the meaning set forth in the Change in Control and Severance Agreement then in effect between the Founder and the Corporation, or, if no such agreement containing a definition of “Cause” is then effect, shall have the meaning set forth in the Corporation’s 2021 Equity Incentive Plan.
(b) “Convertible Security” shall mean any evidences of indebtedness, shares of Preferred Stock or other securities (other than shares of Class B Common Stock) convertible into or exchangeable for Class B Common Stock, either directly or indirectly.
(c) “Disability” or “Disabled” shall have the meaning set forth in the Change in Control and Severance Agreement then in effect between the Founder and this Corporation, or, if no such agreement containing a definition of “Disability” is then in effect, shall have the meaning set forth in this Corporation’s 2021 Equity Incentive Plan.
(d) “Family Member” shall mean with respect to any natural person who is a Qualified Stockholder, the spouse, domestic partner, parents, grandparents, lineal descendants, siblings and lineal descendants of siblings of such Qualified Stockholder. Lineal descendants shall include adopted persons, but only so long as they are adopted while a minor.
(e) “Founder” shall mean Tomer Weingarten.
(f) “IPO Date” shall mean [the pricing date].
(g) “Independent Directors” shall mean the members of the Board of Directors designated as independent directors in accordance with (i) the requirements of any national stock exchange under which the Corporation’s equity securities are listed for trading that are generally applicable to companies with common equity securities listed thereon or (ii) if the Corporation’s equity securities are not listed for trading on a national stock exchange, the requirements of the New York Stock Exchange generally applicable to companies with equity securities listed thereon.
(h) “Option” shall mean rights, options, restricted stock units or warrants to subscribe for, purchase or otherwise acquire Class B Common Stock or Convertible Securities (as defined above).
(i) “Parent” of an entity shall mean any entity that directly or indirectly owns or controls a majority of the voting power of the voting securities of such entity or is otherwise entitled to elect a majority of the members of the Board of Directors, or entitled to appoint or act as the governing body, of such entity.
(j) “Permitted Entity” shall mean with respect to a Qualified Stockholder: (i) a Permitted Trust solely for the benefit of (A) such Qualified Stockholder, (B) one or more Family Members of such Qualified Stockholder, or (C) any other Permitted Entity of such Qualified Stockholder; or (ii) any general partnership, limited partnership, limited liability company, corporation or other entity exclusively owned by (A) such Qualified Stockholder, (B) one or more Family Members of such Qualified Stockholder, or (C) any other Permitted Entity of such Qualified Stockholder.
(k) “Permitted Foundation” shall mean with respect to a Qualified Stockholder: a trust or private non-operating foundation that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), so long as such Qualified Stockholder has dispositive power and Voting Control with respect to the shares of Class B Common Stock held by such trust or organization and the Transfer to such trust does not
involve any payment of cash, securities, property or other consideration (other than an interest in such trust or organization) to such Qualified Stockholder.
(l) “Permitted IRA” shall mean an Individual Retirement Account, as defined in Section 408(a) of the Code, or a pension, profit sharing, stock bonus or other type of plan or trust of which a Qualified Stockholder is a participant or beneficiary and which satisfies the requirements for qualification under Section 401 of the Code; provided that in each case such Qualified Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held in such account, plan or trust.
(m) “Permitted Transfer” shall mean, and be restricted to, any Transfer of a share of Class B Common Stock:
(i) by a Qualified Stockholder to (A) one or more Family Members of such Qualified Stockholder, (B) any Permitted Entity of such Qualified Stockholder, (C) any Permitted Foundation of such Qualified Stockholder, or (D) any Permitted IRA of such Qualified Stockholder; or
(ii) by a Permitted Entity, Permitted Foundation or Permitted IRA of a Qualified Stockholder to (A) such Qualified Stockholder or one or more Family Members of such Qualified Stockholder, or (B) any other Permitted Entity, Permitted Foundation or Permitted IRA of such Qualified Stockholder.
(n) “Permitted Transferee” shall mean a transferee of shares of Class B Common Stock received in a Permitted Transfer.
(o) “Permitted Trust” shall mean a bona fide trust where each trustee is (i) a Qualified Stockholder, (ii) a Family Member of such Qualified Stockholder, (iii) a professional in the business of providing trustee services, including private professional fiduciaries, trust companies and bank trust departments, or (iv) an individual who may be removed and replaced at the sole discretion of a Qualified Stockholder or a Family Member of such Qualified Stockholder.
(p) “Qualified Stockholder” shall mean: (i) the record holder of a share of Class B Common Stock as of the IPO Date; (ii) the initial record holder of any shares of Class B Common Stock that are originally issued by the Corporation after the IPO Date pursuant to the exercise or exchange or conversion of any Option or Convertible Security that, in each case, was outstanding as of the IPO Date; (iii) each natural person who, prior to the IPO Date, transferred shares of capital stock of the Corporation to a Permitted Entity, Permitted Foundation or Permitted IRA that is or becomes a Qualified Stockholder; (iv) each natural person who transferred shares of, or equity awards for, Class B Common Stock (including any Option exercisable or Convertible Security exchangeable for or convertible into shares of Class B Common Stock) to a Permitted Entity, Permitted Foundation or Permitted IRA that is or becomes a Qualified Stockholder; and (v) a Permitted Transferee.
(q) “Transfer” of a share of Class B Common Stock shall mean any direct or indirect sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether
voluntary or involuntary or by operation of law, including, without limitation, a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether there is a corresponding change in beneficial ownership), in each case after 11:59 p.m. Eastern Time on the IPO Date, or the transfer of, or entering into a binding agreement with respect to, Voting Control over such share by proxy or otherwise; provided, however, that the following shall not be considered a “Transfer”:
(i) the granting of a proxy to officers or directors of the Corporation at the request of the Board of Directors in connection with actions to be taken at an annual or special meeting of stockholders;
(ii) entering into a voting trust, agreement or arrangement (with or without granting a proxy) solely with stockholders who are holders of Class B Common Stock that (A) is disclosed either in a Schedule 13D filed with the Securities and Exchange Commission or in writing to the Secretary of the Corporation, (B) either has a term not exceeding one (1) year or is terminable by the holder of the shares subject thereto at any time and (C) does not involve any payment of cash, securities, property or other consideration to the holder of the shares subject thereto other than the mutual promise to vote shares in a designated manner;
(iii) entering into a voting trust, agreement or arrangement (with or without granting a proxy) pursuant to a written agreement to which the Corporation is a party;
(iv) the pledge of shares of Class B Common Stock by a stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction for so long as such stockholder continues to exercise Voting Control over such pledged shares; provided, however, that a foreclosure on such shares or other similar action by the pledgee (including the exercise of any proxy authority granted to such pledgee pursuant to such pledge) shall constitute a Transfer unless such foreclosure or similar action qualifies as a Permitted Transfer;
(v) the fact that, as of the IPO Date or at any time after the IPO Date, the spouse of any holder of Class B Common Stock possesses or obtains an interest in such holder’s shares of Class B Common Stock arising solely by reason of the application of the community property laws of any jurisdiction, so long as no other event or circumstance shall exist or have occurred that constitutes a Transfer of such shares of Class B Common Stock; provided that any transfer of shares by any holder of shares of Class B Common Stock to such holder’s spouse, shall constitute a “Transfer” of such shares of Class B Common Stock unless otherwise exempt from the definition of Transfer;
(vi) entering into a trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with a broker or other nominee; provided, however, that a sale of such shares of Class B Common Stock pursuant to such plan shall constitute a “Transfer” at the time of such sale;
(vii) any redemption, purchase or acquisition by the Corporation of a share of Class B Common Stock or any issuance or reissuance by the Corporation of a share of Class B Common Stock; or
(viii) entering into a support, voting, tender or similar agreement or arrangement (in each case, with or without the grant of a proxy) in connection with a liquidation, dissolution or winding upon of the Corporation (whether voluntary or involuntary), a merger or consolidation of the Corporation with or into any other entity or any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation, a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Corporation, or a transaction or series of related transactions to which the Corporation is a party in which shares of the Corporation are transferred such that in excess of fifty percent (50%) of the Corporation’s voting power is transferred, or in connection with consummating the actions or transactions contemplated thereby (including, without limitation, tendering or voting shares of Class B Common Stock in connection with such a transaction, the consummation of such a transaction or the sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of shares of Class B Common Stock or any legal or beneficial interest in shares of Class B Common Stock in connection with such a transaction); provided that any sale, tender, assignment, transfer, conveyance, hypothecation or other transfer or disposition of Class B Common Stock or any legal or economic interest therein pursuant to such a transaction, or any grant of a proxy over Class B Common Stock with respect to such a transaction without specific instructions as to how to vote such Class B Common Stock, in each case, will constitute a “Transfer” of such Class B Common Stock unless such transaction was approved by the Board of Directors prior to the taking of such action.
A Transfer shall also be deemed to have occurred with respect to a share of Class B Common Stock beneficially held by (A) an entity that is a Permitted Entity, Permitted Foundation or Permitted IRA, if there occurs any act or circumstance that causes such entity to no longer be a Permitted Entity, Permitted Foundation or Permitted IRA or (B) an entity that is a Qualified Stockholder, if, in either case, there occurs a transfer on a cumulative basis, from and after the IPO Date, of a majority of the voting power of the voting securities, or securities that otherwise entitle a party to elect a majority of the members of the board of directors or governing body, of such entity or any direct or indirect Parent of such entity, other than a transfer to parties that are, as of the IPO Date, holders of voting securities of any such entity or Parent of such entity.
(r) “Voting Control” shall mean, with respect to a share of Class B Common Stock, the power (whether exclusive or shared) to vote or direct the voting of such share by proxy, voting agreement or otherwise.
6. Status of Converted Stock. In the event any shares of Class B Common Stock are converted into shares of Class A Common Stock pursuant to this Article V, the shares of Class B Common Stock so converted shall be cancelled, retired and eliminated and shall not be reissued by the Corporation.
7. Effect of Conversion on Payment of Dividends. Notwithstanding anything to the contrary in Sections 1, 2 or 3 of this Article V, if the date on which any share of Class B Common Stock is converted into Class A Common Stock pursuant to the provisions of Sections 1, 2 or 3 of this Article V occurs after the record date for the determination of the holders of Class B Common Stock entitled to receive any dividend or distribution to be paid on the shares of Class B Common Stock, the holder of such shares of Class B Common Stock as of such
record date will be entitled to receive such dividend or distribution on such payment date; provided, that, notwithstanding any other provision of this Restated Certificate of Incorporation, to the extent that any such dividend or distribution is payable in shares of Class B Common Stock, such shares of Class B Common Stock shall automatically be converted to Class A Common Stock on a one-to-one basis.
8. Reservation. The Corporation shall at all times reserve and keep available, out of its authorized and unissued shares of Class A Common Stock, solely for the purpose of effecting conversions of shares of Class B Common Stock into Class A Common Stock, such number of duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all then-outstanding shares of Class B Common Stock. If at any time the number of authorized and unissued shares of Class A Common Stock shall not be sufficient to effect the conversion of all then-outstanding shares of Class B Common Stock, the Corporation shall promptly take such corporate action as may be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, obtaining the requisite stockholder approval of any necessary amendment to this Restated Certificate of Incorporation. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and non-assessable shares. The Corporation shall take all such action as may be necessary to ensure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or regulation.
9. Determinations by the Board of Directors. In case of an ambiguity in the application of any provision set forth in this Article V or in the meaning of any term or definition set forth in this Article V, the Board of Directors (but not a committee thereof), shall have the power to determine, in its sole discretion, the application of any such provision or any such term or definition with respect to any situation based on the facts believed in good faith by it. A determination of the Board of Directors in accordance with the preceding sentence shall be conclusive and binding on the stockholders of the Corporation. Such determination shall be evidenced in a writing adopted by the Board of Directors, and such writing shall be made available for inspection by any holder of capital stock of the Corporation at the principal executive offices of the Corporation.
ARTICLE VI: AMENDMENT OF BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal the Bylaws. Any adoption, amendment or repeal of the Bylaws by the Board of Directors shall require the approval of a majority of the Whole Board. For purposes of this Restated Certificate of Incorporation, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, however, that, notwithstanding any other provision of this Restated Certificate of Incorporation or any provision of law that might otherwise permit a lesser or no vote, but in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Restated Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled
to vote thereon, voting together as a single class, shall be required for the stockholders to adopt, amend or repeal any provision of the Bylaws, provided, further, that, in the case of any proposed adoption, amendment or repeal of any provisions of the Bylaws that is approved by at least two-thirds (2/3) of the Whole Board and submitted to the stockholders for adoption thereby, then only the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to adopt, amend or repeal any such provision of the Bylaws.
ARTICLE VII: MATTERS RELATING TO THE BOARD OF DIRECTORS
1. Director Powers. Except as otherwise provided by the General Corporation Law or this Restated Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
2. Terms; Removal; Number of Directors; Vacancies and Newly Created Directorships.
2.1. The directors shall be divided, with respect to the time for which they severally hold office, into three classes as nearly equal in size as is practicable, designated as Class I, Class II and Class III, respectively (the “Classified Board”). The Board of Directors is authorized to assign members of the Board of Directors already in office to such classes of the Classified Board. The initial term of office of the Class I directors shall expire at the Corporation’s first annual meeting of stockholders following the closing of the Corporation’s initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering the offer and sale of Class A Common Stock to the public (the “Initial Public Offering Closing”), the initial term of office of the Class II directors shall expire at the Corporation’s second annual meeting of stockholders following the Initial Public Offering Closing, and the initial term of office of the Class III directors shall expire at the Corporation’s third annual meeting of stockholders following the Initial Public Offering Closing. At each annual meeting of stockholders following the Initial Public Offering Closing, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office expiring at the third succeeding annual meeting of stockholders after their election.
2.2. Each director shall hold office until the annual meeting at which such director’s term expires and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal. Any director may resign at any time upon notice to the Corporation given in writing or by any electronic transmission.
2.3. No director may be removed from the Board of Directors except for cause and only by the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
2.4. The total number of directors constituting the Whole Board shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board. No
decrease in the number of directors constituting the Board of Directors shall shorten the term of any director.
2.5. Any vacancy occurring in the Board of Directors for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall be filled only by the affirmative vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which the director has been assigned expires and until such director’s successor shall have been duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal.
2.6. The foregoing provisions of this Section 2 of Article VII shall not apply to any directorship elected separately by one or more classes or series of Preferred Stock hereinafter designated pursuant to Article IV, Section 2.1 unless the terms of such designation so provide.
2.7. In case of an ambiguity in the application of any provision set forth in this Section 2 of Article VII or in the meaning of any term or definition set forth in this Section 2 of Article VII (including any such term used in any other provision of this Restated Certificate of Incorporation), the Board of Directors, or a committee thereof, shall have the power to determine, in its sole discretion, the application of any such provision or any such term or definition with respect to any situation based on the facts believed in good faith by it. A determination of the Board of Directors (or a committee thereof, as applicable) in accordance with the preceding sentence shall be conclusive and binding on the stockholders of the Corporation. Such determination shall be evidenced in a writing adopted by the Board of Directors (or a committee thereof, as applicable), and such writing shall be made available for inspection by any holder of capital stock of the Corporation at the principal executive offices of the Corporation.
3. Vote by Ballot. Election of directors need not be by written ballot unless the Bylaws shall so provide.
ARTICLE VIII: DIRECTOR LIABILITY
1. Limitation of Liability. To the fullest extent permitted by law, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, 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.
2. Change in Rights. Neither any amendment nor repeal of this Article VIII, nor the adoption of any provision of this Restated Certificate of Incorporation inconsistent with this Article VIII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.
ARTICLE IX: MATTERS RELATING TO STOCKHOLDERS
1. No Action by Written Consent of Stockholders. Subject to the rights of any series of Preferred Stock then outstanding, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders of the Corporation by written consent in lieu of a meeting.
2. Special Meeting of Stockholders. Special meetings of the stockholders of the Corporation may be called only by the Chairperson of the Board of Directors, the Chief Executive Officer, the Lead Independent Director (as defined in the Bylaws) or the Board of Directors acting pursuant to a resolution adopted by a majority of the Whole Board, and may not be called by the stockholders or any other person or persons.
3. Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings. Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws. Business transacted at special meetings of stockholders shall be limited to the purpose or purposes stated in the notice of meeting.
ARTICLE X: SEVERABILITY
If any provision of this Restated Certificate of Incorporation shall be held to be invalid, illegal, or unenforceable, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of this Restated Certificate of Incorporation (including without limitation, all portions of any section of this Restated Certificate of Incorporation containing any such provision held to be invalid, illegal, or unenforceable, which is not invalid, illegal, or unenforceable) shall remain in full force and effect.
ARTICLE XI: AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
1. General. The Corporation reserves the right to amend or repeal any provision contained in this Restated Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any provision of this Restated Certificate of Incorporation (including any Certificate of Designation) or any provision of law that might otherwise permit a lesser vote or no vote (but subject to Section 2 of Article IV hereof), but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Restated Certificate of Incorporation (including any Certificate of Designation), and subject to Sections 1 and 2.1 of Article IV, the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, this Section 1 of this Article XI, Sections 1.2 and 2 of Article IV, or Article V, Article VI, Article VII, Article VIII, Article IX, Article X or Article XII (the “Specified Provisions”); provided, further, that, if two-thirds (2/3) of the Whole Board has approved such amendment or repeal of, or any provision inconsistent with, the
Specified Provisions, then only the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class (in addition to any other vote of the holders of any class or series of stock of the Corporation required by law or by this Restated Certificate of Incorporation, including any Certificate of Designation), shall be required to amend or repeal, or adopt any provision inconsistent with, the Specified Provisions. Notwithstanding anything to the contrary herein, prior to an Automatic Conversion, and in addition to any other vote required pursuant to this Article XI, the Corporation shall not, without the prior affirmative vote of the holders of at least two-thirds (2/3) of the then-outstanding shares of Class B Common Stock, voting separately as a single class:
1.1. directly or indirectly, whether by amendment, or through merger, recapitalization, consolidation or otherwise, amend or repeal, or adopt any provision of this Restated Certificate of Incorporation inconsistent with, or otherwise alter, any provision of this Restated Certificate of Incorporation relating to the voting, conversion or other rights, powers, preferences, privileges or restrictions of the Class B Common Stock;
1.2. reclassify any outstanding shares of Class A Common Stock into shares having rights as to dividends or liquidation that are senior to the Class B Common Stock or the right to have more than one (1) vote for each share thereof; or
1.3. authorize, or issue any shares of, any class or series of capital stock of the Corporation (other than Class B Common Stock) having the right to more than one (1) vote for each share thereof.
2. Changes to or Inconsistent with Section 3 of Article IV. Notwithstanding any other provision of this Restated Certificate of Incorporation (including any Certificate of Designation) or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Restated Certificate of Incorporation (including any Certificate of Designation), the affirmative vote of the holders of Class A Common Stock representing at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of Class A Common Stock, voting separately as a single class, and the affirmative vote of the holders of Class B Common Stock representing at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of Class B Common Stock, voting separately as a single class, shall be required to amend or repeal, or to adopt any provision inconsistent with, Section 3 of Article IV or this Section 2 of this Article XI.
ARTICLE XII: CHOICE OF FORUM; EXCLUSIVE FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Corporation; (ii) any action asserting a claim that is based upon a breach of a fiduciary duty owed by, or other wrongdoing by, any current or former director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporation’s
stockholders; (iii) any action asserting a claim against the Corporation or any current or former director, officer, stockholder, employee or agent of the Corporation arising pursuant to any provision of the General Corporation Law, this Restated Certificate of Incorporation or the Bylaws or as to which the General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; (iv) any action to interpret, apply, enforce or determine the validity of this Restated Certificate of Incorporation or the Bylaws; (v) any action asserting a claim against the Corporation governed by the internal affairs doctrine; or (vi) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the General Corporation Law. Unless the Corporation 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 Securities Act, or any successor thereto or, to the fullest extent permitted by law, under the Exchange Act, or any successor thereto. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article XII. Failure to enforce the foregoing provisions of this Article XII would cause the Corporation irreparable harm, and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
RESTATED BYLAWS
OF
SENTINEL LABS, INC.
As adopted on February 12, 2013
As amended and restated on July 24, 2020
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Page
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ARTICLE 1 CORPORATE OFFICES
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1
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1.1
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Registered Office
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1
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1.2
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Other Offices
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1
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ARTICLE 2 MEETINGS OF STOCKHOLDERS
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1
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2.1
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Place of Meetings
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1
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2.2
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Annual Meeting
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1
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2.3
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Special Meeting
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1
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2.4
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Notice of Stockholders' Meetings
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1
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2.5
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Manner of Giving Notice; Affidavit of Notice
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2
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2.6
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Validation of Meetings; Waiver of Notice; Consent
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2
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2.7
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Quorum
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2
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2.8
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Adjourned Meeting; Notice
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3
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2.9
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Voting
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3
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2.10
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Stockholder Action by Written Consent Without a Meeting
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3
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2.11
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Record Date for Stockholder Notice, Voting or Giving Consents
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4
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2.12
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Proxies
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5
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2.13
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List of Stockholders Entitled to Vote
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5
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2.14
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Conduct of Meeting of Stockholders
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6
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ARTICLE 3 DIRECTORS
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6
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3.1
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Powers
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6
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3.2
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Number of Directors
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7
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3.3
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Election and Term of Office of Directors
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7
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3.4
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Resignation, Removal and Vacancies
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7
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3.5
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Place of Meetings; Meetings by Telephone
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8
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3.6
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Regular Meetings
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8
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3.7
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Special Meetings; Notice
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8
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3.8
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Quorum
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8
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3.9
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Waiver of Notice
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9
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3.10
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Board Action by Written Consent Without a Meeting
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9
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ARTICLE 4 COMMITTEES
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9
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4.1
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Committees of Directors
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9
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4.2
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Meetings and Action of Committees
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10
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ARTICLE 5 OFFICERS
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10
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5.1
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Officers
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10
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5.2
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Election of Officers
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11
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TABLE OF CONTENTS
(continued)
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Page
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5.3
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Subordinate Officers
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11
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5.4
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Removal and Resignation of Officers; Vacancies in Offices
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11
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5.5
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Powers and Duties of Officers Generally
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11
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5.6
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Duties of the Chairperson of the Board
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11
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5.7
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Duties of the Chief Executive Officer
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12
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5.8
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Duties of the President
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12
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5.9
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Duties of the Vice Presidents
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12
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5.10
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Duties of the Secretary
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13
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5.11
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Duties of the Chief Financial Officer..
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13
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5.12
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Duties of the Assistant Secretary
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13
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5.13
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Duties of the Assistant Treasurer
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13
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5.14
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Salaries
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13
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5.15
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Loans to Officers and Employees
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14
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ARTICLE 6 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
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14
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6.1
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Indemnification of Directors and Officers (Other Than Those by or in the Right of the Corporation)
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14
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6.2
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Indemnification of Directors and Officers (Proceedings by or in the Right of the Corporation)
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15
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6.3
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Authorization of Indemnification
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15
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6.4
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Expenses Payable in Advance
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16
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6.5
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Indemnification by a Court
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16
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6.6
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Limitation on Indemnification and Advancement of Expenses
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16
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6.7
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Nonexclusivity of Rights
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17
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6.8
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Corporation's Indemnification Primary
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17
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6.9
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Effect of Amendment or Repeal; Survival..
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17
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6.10
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Indemnification of Employees and Agents
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17
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6.11
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Insurance; Indemnification Agreements
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17
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6.12
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Reliance Upon Books, Reports and Records
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18
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6.13
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Certain Definitions
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18
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ARTICLE 7 RECORDS AND REPORTS
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18
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7.1
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Maintenance and Inspection of Share Register and Other Books and Records
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18
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7.2
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Waiver of Section 1501
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18
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ARTICLE 8 STOCK AND STOCK CERTIFICATES
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18
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8.1
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Stock Certificates; Partly Paid Shares
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18
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TABLE OF CONTENTS
(continued)
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Page
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8.2
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Special Designation on Certificates
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19
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8.3
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Lost Certificates
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19
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8.4
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Transfer of Stock; Legal Restrictions on Transfer.
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19
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8.5
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Stock Transfer Agreements
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20
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8.6
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Registered Stockholders
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20
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ARTICLE 9 TRANSFERS OF CAPITAL STOCK
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20
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9.1
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Restriction on Transfer.
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20
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9.2
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Application; Waiver; Termination of Rights; Legend
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22
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ARTICLE 10 GENERAL MATTERS
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23
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10.1
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Checks; Drafts; Evidences of Indebtedness
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23
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10.2
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Corporate Contracts and Instruments; How Executed
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23
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10.3
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Fiscal Year
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24
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10.4
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Seal.
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24
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10.5
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Representation of Shares of Other Corporations
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24
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10.6
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Construction; Definitions
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24
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ARTICLE 11 AMENDMENTS
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24
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11.1
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Amendments
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24
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RESTATED BYLAWS
OF
SENTINEL LABS, INC.
ARTICLE 1
CORPORATE OFFICES
1.1 Registered Office
The address of the registered office of the corporation in the State of Delaware shall be at the location originally designated upon formation of the corporation or at a location otherwise designated by the Board of Directors. The corporation's registered agent shall be the agent originally designated upon formation of the corporation or at a location otherwise designated by the Board of Directors.
1.2 Other Offices
The corporation may also have offices in such other places, either within or without the State of Delaware, as the Board of Directors or principal executive officer from time to time may designate or the business of the corporation may from time to time require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings
Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the Board of Directors. In the absence of any such designation, stockholders' meetings shall be held at the principal executive office of the corporation. Alternatively, the Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but shall instead be held solely by means of remote communication as and to the extent permitted under Section 211 of the General Corporation Law of Delaware.
2.2 Annual Meeting
The annual meeting of stockholders shall be held on such date and at such time as may be designated by the Board of Directors. At the meeting, stockholders shall elect directors and transact any other business as may be properly brought before the meeting. The corporation may postpone, reschedule or cancel any annual meeting of the stockholders.
2.3 Special Meeting
A special meeting of the stockholders may be called only by the chairperson of the Board of Directors, the president or the secretary, or by resolution of the Board of Directors.
2.4 Notice of Stockholders' Meetings
Except as may be otherwise provided in the Certificate of Incorporation or required by law, all notices of meetings of the stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 not fewer than 10 nor more than 60 days before the date of
the meeting to each stockholder entitled to vote at such meeting, except for any notice of a meeting to act on a plan of merger or consolidation or on the sale, lease or exchange of all or substantially all of the corporation's property and assets (including its goodwill and corporate franchises), which shall be given not fewer than 20 nor more than 60 days in advance of such meeting. The notice shall specify the place (if any), date and hour of the meeting, the means of remote communication (if any), by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
2.5 Manner of Giving Notice; Affidavit of Notice
Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at the address of such stockholder as it appears on the records of the corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders under the General Corporation Law of Delaware, the Certificate of Incorporation, these Restated Bylaws or otherwise may be given by a form of electronic transmission that satisfies the requirements of the General Corporation Law of Delaware.
An affidavit of the secretary, an assistant secretary, the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
2.6 Validation of Meetings; Waiver of Notice; Consent
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware, the Certificate of Incorporation or these Restated Bylaws, a written waiver thereof signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting and does object, at the beginning of the meeting or upon arrival of such person, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission, unless so required by the Certificate of Incorporation.
2.7 Quorum
The holders of a majority of the stock issued and outstanding and entitled to vote on the matter at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business, except as otherwise provided by the General Corporation Law of Delaware or by the Certificate of Incorporation, provided, however, that where a separate vote by a class or series is required with respect to the matter, a majority of the outstanding shares of such class or series, present in person or represented by proxy, shall also be required for a quorum with respect to the matter. If, however, such quorum is not present or represented at any meeting of the stockholders, then the chairman of the meeting or the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. Once a share is represented for any purpose at a meeting other than solely to object to holding the meeting or transacting business, it shall be deemed present for the remainder of the meeting and any adjournment (unless a new record date is or must be set for the adjourned meeting), notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
2.8 Adjourned Meeting; Notice
The chairperson of the meeting or the holders of a majority of the stock so represented may in his, her or their discretion adjourn the meeting from time to time, whether or not there is such a quorum. When a meeting is adjourned, notice need not be given of the adjourned meeting if the time and place (if any) thereof, and the means of remote communications (if any), by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. If the adjournment is for more than 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. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting.
2.9 Voting
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the Certificate of Incorporation or by the General Corporation Law of Delaware, (i) each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder, (ii) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors, and (iii) every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the shares of stock entitled to vote on the matter that are present in person or represented by proxy at the meeting and are voted for or against the matter.
2.10 Stockholder Action by Written Consent Without a Meeting
Unless otherwise provided in the Certificate of Incorporation, any action required by the General Corporation Law of Delaware to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is 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, provided, however, that an action by written consent to elect directors, unless such action is unanimous, may be in lieu of the holding of an annual meeting only if all the directorships to
which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.
No written consent shall be effective to take the corporate action referred to in such consent unless written consents signed by the requisite number of stockholders required to take the action are delivered to the corporation within 60 days of the earliest dated consent delivered to the corporation in the manner required by this Section 2.10. Delivery to the corporation shall be by delivery to its registered office in the State of Delaware, principal place of business or secretary or assistant secretary, if any, and, except for deliveries to the corporation's registered office in the State of Delaware, may be by electronic transmission to the extent permitted by Section 228 of the General Corporation Law of Delaware, including to the extent and in the manner provided by resolution of the Board of Directors. Any such consent shall be inserted in the minute book as if it were the minutes of a meeting of the stockholders.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by law, be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take action were delivered to the corporation.
2.11 Record Date for Stockholder Notice, Voting or Giving Consents
In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, entitled to express consent to an action in writing without a meeting, entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date. Such record date shall not (i) precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, (ii) be more than 60 or fewer than 10 days before the date of such meeting, (iii) be more than 10 days after the date upon which the resolution fixing the record date for an action by written consent in lieu of a meeting is adopted by the Board of Directors, or (iv) be more than 60 days prior to any other action.
If the Board of Directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;
(ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the General Corporation Law of Delaware, 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; or
(iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
2.12 Proxies
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by a written proxy or by an electronic transmission indicating such proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy with respect to a specific meeting shall entitle the proxy holder to vote at any reconvened meeting following adjournment of such meeting, but shall not be valid after the final adjournment of such meeting. A proxy shall be deemed signed if the stockholder's name is placed on the proxy or the electronic transmission indicating such proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware. A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the intended holder of the proxy or to a proxy solicitation firm, proxy support service or similar agent duly authorized by the intended proxy holder to receive such transmission, provided that any such telegram, cablegram or other electronic transmission must set forth (or be accompanied by information from which it can be determined) that the telegram, cablegram or other electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission by which a stockholder has authorized another person to act as proxy for such stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
2.13 List of Stockholders Entitled to Vote
The corporation shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing contained in this Section 2.13 shall require the corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting (i)
on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the 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. If the meeting is to be held at a place, then the list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to the identity of the stockholders entitled to examine the list or to vote in person or by proxy at any meeting of stockholders.
2.14 Conduct of Meeting of Stockholders
The chairperson of the Board of Directors, or in the chairperson's absence, the chief executive officer, or in the absence of the chief executive officer, the secretary, or in the absence of the secretary, any executive vice president, or in the absence of an executive vice president, a chairperson chosen by a majority of the directors present, shall act as chairperson of the meetings of the stockholders. The Board of Directors 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 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 the meeting to stockholders of record of the corporation, 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 and matters which are to be voted on by ballot.
ARTICLE3
DIRECTORS
3.1 Powers
Subject to the provisions of General Corporation Law of Delaware and any limitations in the Certificate of Incorporation or these Restated Bylaws relating to actions required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.
3.2 Number of Directors
The authorized number of directors of the corporation shall be determined from time to time by resolution of the Board of Directors. In addition, subject to any agreement among stockholders, the stockholders of the corporation shall have the power to reduce the authorized number of directors by vote at a meeting or by written consent.
3.3 Election and Term of Office of Directors
Except as provided in Section 3.4 in connection with filling vacancies and newly created directorships resulting from any increase in the authorized number of directors, directors shall be elected at each annual meeting of stockholders and shall hold office until the next annual meeting and until the successor of such director is elected and qualified or until the death, resignation or removal of such director.
3.4 Resignation, Removal and Vacancies
Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. Any such resignation shall be effective upon delivery, unless the notice of resignation specifies a future effective date, and unless otherwise specified, the acceptance of such resignation shall not be a precondition to its effectiveness. A resignation that is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. When one or more directors so resign and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in Section 3.3.
Unless otherwise restricted by the General Corporation Law of Delaware, by the Certification of Incorporation or by these Restated Bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Notwithstanding the foregoing, the stockholders may enter into voting agreements that restrict their rights to remove directors or that obligate them to vote to remove directors only as permitted by such agreement.
No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires.
Unless otherwise provided in the Certificate of Incorporation or these Restated Bylaws:
(i) Vacancies for any reason and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, or by the stockholders at an annual meeting or at a special meeting called by the Board of Directors for that purpose; or
(ii) Whenever the holders of any class or series of stock are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or series may, unless otherwise set forth in the Certificate of
Incorporation, be filled by a majority of the directors elected by such class or series then in office, by a sole remaining director so elected, or by the stockholders of such class or series at an annual meeting or at a special meeting called by the Board of Directors for that purpose (or by written consent of such stockholders in lieu of such a meeting).
Directors appointed to fill vacancies and newly created directorships shall hold office until the next annual meeting of stockholders and until the successor of such director is elected and qualified or until the death, resignation or removal of such director.
3.5 Place of Meetings; Meetings by Telephone
The Board of Directors may hold meetings, both regular and special, either within or outside the State of Delaware. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee 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 such participation in a meeting shall constitute presence in person at the meeting.
3.6 Regular Meetings
Regular meetings of the Board of Directors shall be held on such dates and at such times and places as the Board of Directors may determine by resolution. Such regularly scheduled meetings may be held without further notice to the directors.
3.7 Special Meetings; Notice
Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairperson of the Board of Directors, the president, the secretary, or any two directors. Special meetings of the Board of Directors shall be held upon four days’ notice by mail or 24 hours’ notice delivered personally, by telephone (including a voice messaging system or other system or technology designed to record and communicate messages), or by other form of electronic transmission. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. A notice, or waiver of notice, need not specify the purpose of any regular or special meeting of the Board of Directors.
3.8 Quorum
A majority of the total number of directors then serving on the Board of Directors, provided, however, that such number may be not less than one-third of the total authorized number of directors fixed or determined by or in the manner provided in these Restated Bylaws, shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, except as may otherwise be specifically provided by the General Corporation Law of Delaware or the Certificate of Incorporation or these Restated Bylaws. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the Certificate of Incorporation or these Restated Bylaws shall require a vote of a greater number. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present. A director of the corporation who is present at a meeting of the Board of Directors, or at a meeting of a committee of the Board of Directors, at which any action is taken shall be deemed to have assented to the action taken unless (i) the director objects at the beginning of the meeting, or promptly upon the director's arrival, to holding the meeting or transacting any business at such meeting, (ii) the director's dissent or abstention from the action taken is entered in the minutes of the meeting, or (iii) the director delivers written notice of the director's dissent or abstention to the presiding officer of the meeting before its adjournment. The right of dissent or abstention is not available to a director who votes in favor of the action taken.
3.9 Waiver of Notice
Whenever notice is required to be given to a director under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Restated Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Without limiting the manner by which such waiver may otherwise be delivered effectively, such waiver shall be deemed delivered if made by electronic transmission. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except when the director attends a meeting for the express purpose of objecting and does object, at the beginning of the meeting or upon the director's arrival, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Restated Bylaws.
3.10 Board Action by Written Consent Without a Meeting
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 the writing or writings or electronic 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.
ARTICLE 4
COMMITTEES
4.1 Committees of Directors
The Board of Directors may designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In case of the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place
of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these Restated Bylaws, 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, subject to the limitations contained in the General Corporate Law of Delaware. Unless otherwise provided in the Certificate of Incorporation, these Restated Bylaws, or the resolution of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
4.2 Meetings and Action of Committees
Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when requested by the Board of Directors. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article 3, including, without limitation, Section 3.5 (Place of Meetings; Meetings by Telephone), Section 3.6 (Regular Meetings), Section 3.7 (Special Meetings; Notice), Section 3.8 (Quorum), Section 3.9 (Waiver of Notice) and Section 3.10 (Board Action by Written Consent Without a Meeting), with such changes in the context of those Restated Bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members, provided, however, that the time of regular meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. Unless the Board of Directors adopts rules for the governance of a committee, then each committee may adopt its own governance rules, provided that such rules shall not be inconsistent with the provisions of the General Corporation Law of Delaware, the Certificate of Incorporation or these Restated Bylaws.
ARTICLE 5
OFFICERS
5.1 Officers
The officers of the corporation shall be a president and/or chief executive officer and a secretary. The corporation may also have, at the discretion of the Board of Directors, a chairperson of the Board of Directors, a chief financial officer, a treasurer, one or more vice presidents, assistant vice presidents, assistant secretaries and assistant treasurers, and any such other officers as may be appointed by the Board of Directors or in accordance with the provisions of Section 5.3. Any number of offices may be held by the same person. Each officer shall hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal.
5.2 Election of Officers
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3, shall be appointed by the Board of Directors.
5.3 Subordinate Officers
The Board of Directors may appoint, or empower the chief executive officer, the president or another officer to appoint or remove, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Restated Bylaws or as the Board of Directors (or, if so empowered, the chief executive officer, the president or another officer) may from time to time determine.
5.4 Removal and Resignation of Officers; Vacancies in Offices
Any officer may be removed, either with or without cause, by the Board of Directors at any regular or special meeting of the Board of Directors or by any officer upon whom such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time upon notice given in writing or by electronic transmission to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in the notice, provided that the Board of Directors (or if so empowered pursuant to Section 5.3, the chief executive officer, the president or another officer) may treat a resignation given with a future effective date as an immediate resignation. Unless otherwise specified in the notice, acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights (if any) of the corporation under any contract to which the officer is a party.
Any vacancy occurring in any office of the corporation may be filled by the Board of Directors (or if so empowered pursuant to Section 5.3, the chief executive officer, the president or another officer).
5.5 Powers and Duties of Officers Generally
The officers of the corporation shall have such powers and duties in the management of the corporation as shall be stated in these Restated Bylaws or in a resolution of the Board of Directors that are not inconsistent with these Restated Bylaws and, to the extent not so stated, as generally pertain to their respective offices and as are necessary to conduct customary management and operation of the corporation, subject to the control of the Board of Directors. A secretary or such other officer appointed to do so by the Board of Directors shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose.
5.6 Duties of the Chairperson of the Board
The chairperson of the Board of Directors, if one is elected, shall, if present, preside at meetings of the Board of Directors and exercise and perform such other powers and duties as may from time to time be assigned by the Board of Directors or as may be prescribed by these Restated Bylaws. The chairperson shall not be considered an officer of the corporation, unless so designated by the Board of Directors.
5.7 Duties of the Chief Executive Officer
Subject to the control of the Board of Directors and such supervisory powers, if any, as may be given by the Board of Directors, the powers and duties of the chief executive officer of the corporation are:
(i) To act as the general manager and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the corporation;
(ii) To preside at all meetings of the stockholders and, in the absence or nonexistence of a chairperson of the Board of Directors or a chair otherwise designated by the Board of Directors at a meeting, at all meetings of the Board of Directors; and
(iii) To affix the signature of the corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing that have been authorized by the Board of Directors; to sign certificates for shares of stock of the corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the corporation and to supervise and direct all officers, agents and employees of the corporation.
The president shall be the chief executive officer of the corporation unless the Board of Directors shall designate another officer to be the chief executive officer. If there is no president, and the Board of Directors has not designated any other officer to be the chief executive officer, then the chairperson of the Board of Directors shall be the chief executive officer.
5.8 Duties of the President
Subject to the supervisory powers of the chief executive officer, if there is such an officer and the president is not such officer, and subject to the control of the Board of Directors, the president shall have general supervision, direction and control of the business and the subordinate officers of the corporation. The president shall have the general powers and duties of management usually vested in the office of president of a corporation, including signing authority similar to the chief executive officer, and shall have such other powers and duties as may be prescribed by the Board of Directors or these Restated Bylaws. If no president is appointed, the chief executive officer shall have the power and authority conferred to the president under these Restated Bylaws.
5.9 Duties of the Vice Presidents
In the absence or disability of the president, the vice presidents (if any) in order of their rank as fixed by the Board of Directors or, if not ranked, a vice president designated by the Board of Directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these Restated Bylaws, the chief executive officer or the president.
5.10 Duties of the Secretary
The secretary shall keep, or cause to be kept, a book of minutes or record of proceedings of all meetings and actions of directors, committees of directors and stockholders.
The secretary may give, or cause to be given, notice of meetings of the stockholders and of the Board of Directors required to be given by law or by these Restated Bylaws. He or she shall keep the seal of the corporation (if any) in safe custody and shall have such other powers and perform such other duties as from time to time may be prescribed by the Board of Directors, these Restated Bylaws, the chief executive officer or the president.
5.11 Duties of the Chief Financial Officer
The chief financial officer shall be the principal financial officer, and, unless such duty is conferred to another officer by the Board of Directors, the chief accounting officer, of the corporation. The chief financial officer shall have general direction of and supervision over the financial and, if applicable, accounting affairs of the corporation. The chief financial officer shall render to the chief executive officer and the Board of Directors, at regular meetings of the Board of Directors, or whenever they may require it, an account of the financial condition of the corporation. The chief financial officer shall have such other powers and perform such other duties as from time to time may be prescribed by the Board of Directors, these Restated Bylaws, the chief executive officer or the president.
The chief financial officer shall also be the treasurer of the corporation unless otherwise designated by the Board of Directors.
5.12 Duties of the Assistant Secretary
The assistant secretary or, if there is more than one, the assistant secretaries, in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of the inability or refusal of such officer to act, perform the duties and exercise the powers of the secretary and shall have such other powers and perform such other duties as from time to time may be prescribed by the Board of Directors, these Restated Bylaws, the chief executive officer or the president.
5.13 Duties of the Assistant Treasurer
The assistant treasurer or, if there is more than one, the assistant treasurers, in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of the inability or refusal of such officer to act, perform the duties and exercise the powers of the treasurer and shall have such other powers and perform such other duties as from time to time may be prescribed by the Board of Directors, these Restated Bylaws, the chief executive officer or the president.
5.14 Salaries
The salaries of the officers shall be fixed from time to time by the Board of Directors or by any committee or officer to which or whom, as the case may be, the Board of Directors has
delegated such authority. No officer shall be disqualified from receiving such salary by reason of the fact that he or she is also a director of the corporation.
5.15 Loans to Officers and Employees
The corporation may lend money to, guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or any of its subsidiaries, including any officer or employee who is a director of the corporation or any of its subsidiaries, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this Section 5.15 shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. Notwithstanding the foregoing, any such loan made, guaranteed or arranged for by the corporation shall contain a provision requiring the borrower to repay the obligation in full if the corporation becomes subject to the restrictions of the Sarbanes-Oxley Act of 2002, as amended, or if the borrower becomes an officer or director of a parent entity that is subject to the restrictions of the Sarbanes-Oxley Act of 2002, as amended.
ARTICLE 6
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
6.1 Indemnification of Directors and Officers (Other Than Those by or in the Right of the Corporation)
To the fullest extent permitted by applicable law as it presently exists or may hereafter be amended (but in the case of such an amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), the corporation shall indemnify 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 (hereinafter, a “Proceeding”) (other than an action by or in the right of the corporation), by reason of the fact that such person is or was a director or officer elected by the Board of Directors of the corporation, or is or was, while a director or officer of the corporation, serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, nonprofit entity or other enterprise, including service with respect to employee benefit plans (collectively, “Another Enterprise”), against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe such person's conduct was unlawful. The termination of any Proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner that such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, shall
not create a presumption that the person had reasonable cause to believe that such person's conduct was unlawful.
6.2 Indemnification of Directors and Officers (Proceedings by or in the Right of the Corporation)
Subject to Section 6.3, the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any Proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or is or was, while a director or officer of the corporation, serving at the request of the corporation as a director, officer, employee or agent of Another Enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses the Court of Chancery or such other court shall deem proper.
6.3 Authorization of Indemnification
Any indemnification under this Article 6 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 6.1 or Section 6.2, as the case may be. In making a determination with respect to entitlement to indemnification, the person or persons or entity making such determination shall presume that the director or officer is entitled to indemnification under these Restated Bylaws. Anyone seeking to overcome this presumption shall have the burden of proof. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of the directors who are not parties to such Proceeding, even though less than a quorum, (ii) by a committee of such directors designated by a majority vote of such directors, even though less than a quorum, (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iv) by the stockholders. Such determination shall be made, with respect to former directors and officers, by any person or persons having the authority to act on the matter on behalf of the corporation. To the extent, however, that a director or officer of the corporation has been successful on the merits or otherwise in defense of any Proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case.
6.4 Expenses Payable in Advance
Reasonable expenses (including attorneys' fees) incurred by a director or officer in defending any Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this Article 6, provided that the corporation shall not be required to prepay any expenses to a person against whom the corporation directly brings a claim alleging that such person has (i) breached such person's duty of loyalty to the corporation, or committed an act or omission not in good faith or that involves intentional misconduct or a knowing violation of law, or (ii) derived an improper personal benefit from a transaction.
6.5 Indemnification by a Court
Notwithstanding any contrary determination in the specific case under Section 6.3, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Section 6.1 or Section 6.2 and for advancement of expenses to the extent otherwise permissible under Section 6.4. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 6.1 or Section 6.2, as the case may be. Neither a contrary determination in the specific case under Section 6.3 nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification or advancement of expenses pursuant to this Section 6.5 shall be given to the corporation promptly upon the filing of such application. If successful in whole or in part in any suit brought pursuant to this Section 6.5, or in a suit brought by the corporation to recover an advancement of expenses (whether pursuant to the terms of an undertaking or otherwise), the person seeking to enforce a right to indemnification or an advancement of expenses hereunder or the person from whom the corporation sought to recover an advancement of expenses, as the case may be, shall be entitled to be paid by the corporation the reasonable expenses (including attorneys' fees) of prosecuting or defending such suit in an amount proportionate with the extent of such person’s success.
6.6 Limitation on Indemnification and Advancement of Expenses
Notwithstanding anything contained in this Article 6 to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 6.5), the corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with prosecuting a Proceeding (or part thereof) initiated by such person, whether initiated in such person's capacity as a director or officer or in any other capacity, or in defending any counterclaim, cross-claim, affirmative defense, or like claim of the corporation in such Proceeding (or part thereof), unless such Proceeding (or part thereof) was authorized or consented to by the Board of Directors.
6.7 Nonexclusivity of Rights
The rights conferred on any person by this Article 6 shall not be exclusive of any other rights that such person may have or may hereafter acquire under any statute, provision of the Certificate of Incorporation or these Restated Bylaws, contractual agreement, vote of the stockholders or disinterested directors or otherwise. Additionally, nothing in this Article 6 shall limit the ability of the corporation, in its discretion, to indemnify or advance expenses to persons whom the corporation is not obligated to indemnify or advance expenses pursuant to this Article 6.
6.8 Corporation's Indemnification Primary
The corporation's obligation (if any) to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity shall be primary relative to, and shall not be reduced by, any amount that such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or nonprofit entity.
6.9 Effect of Amendment or Repeal; Survival
No repeal or modification of this Article 6 shall adversely affect any right or protection afforded hereunder to any person in respect of an act or omission occurring prior to the time of such repeal or modification. The right to indemnification and advancement of expenses under this Article 6 shall be construed as a contractual right of the indemnitees, shall continue as a vested contractual right, even if a person ceases to be a director or officer of the corporation, and shall inure to the benefit of an indemnitee's heirs, executors and administrators.
6.10 Indemnification of Employees and Agents
The corporation may, by action of the Board of Directors, extend the rights described in this Article 6 in whole or in part to individual employees or agents, or groups of employees or agents of the corporation with the same scope and effect as the provisions of this Article 6, provided that an undertaking of the sort described in Section 6.4 shall be required only if specifically requested by the Board of Directors.
6.11 Insurance; Indemnification Agreements
The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or nonprofit entity against any liability asserted against such person and incurred by such person in any such capacity, or arising out of the status of such person as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of the General Corporation Law of Delaware or these Restated Bylaws. The corporation, without further stockholder approval, may enter into indemnification agreements with any person who is or was a director, officer, employee or agent, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or nonprofit entity, in
furtherance of the provisions of this Article 6. In the event of any conflict or inconsistency between any such agreement and the provisions of this Article 6, the provisions of such agreement shall control, provided that the stockholders of the corporation have approved the form of such agreement.
6.12 Reliance Upon Books, Reports and Records
Each director and each member of any committee designated by the Board of Directors of the corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the corporation and upon such information, opinions, reports or statements presented to the corporation by any of its officers or employees, or by any committee of the Board of Directors so designated, or by any other person as to matters the director or committee member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the corporation.
6.13 Certain Definitions
For purposes of this Article 6, references to terms such as “the corporation,” “other enterprises” and “fines” shall have the meaning ascribed in the General Corporation Law of Delaware.
ARTICLE 7
RECORDS AND REPORTS
7.1 Maintenance and Inspection of Share Register and Other Books and Records
The corporation shall keep a record of its stockholders, listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Restated Bylaws as amended to date, accounting books and other records. Stockholders shall have the right to inspect the corporation's stock ledger and its other books and records only to the extent required, and in accordance with, the General Corporation Law of Delaware.
7.2 Waiver of Section 1501
To the fullest extent provided by the law, the corporation shall not be required to cause annual reports to be delivered to its stockholders under Section 1501 of the California General Corporation Law.
ARTICLE 8
STOCK AND STOCK CERTIFICATES
8.1 Stock Certificates; Partly Paid Shares
No shares of the corporation shall be issued unless authorized by the Board of Directors.
The shares of a corporation shall be represented by certificates unless the Board of Directors provides by resolution that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the corporation by
any two authorized officers of the corporation (it being understood that each of the chairperson or vice-chairperson of the Board of Directors, the chief executive officer, the chief financial officer, the treasurer or an assistant treasurer, or the secretary or an assistant secretary, of the corporation shall each be an authorized officer for such purpose), representing the number of shares registered in certificate form. The Board of Directors may in its discretion appoint responsible banks or trust companies from time to time to act as transfer agents and registrars of the stock of the corporation, and, when such appointments shall have been made, no stock certificate thereafter issued shall be valid until countersigned by one of such transfer agents and registered by one of such registrars. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
8.2 Special Designation on Certificates
The corporation may restrict the transfer, the registration of transfer and the ownership of its securities. The corporation may place legends or notations on stock certificates or notices to uncertificated stockholders indicating the restrictions, which shall be binding to the fullest extent permitted by the General Corporation Law of Delaware.
8.3 Lost Certificates
Except as provided in this Section 8.3, no new certificate for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it that is alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or the legal representative of such owner, to give the corporation a bond or an indemnity sufficient to protect it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
8.4 Transfer of Stock; Legal Restrictions on Transfer
Subject to the other provisions of this Article 8, including those relating to uncertificated shares and restrictions on transfer, upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction in its books.
Except to the extent that the corporation has obtained an opinion of counsel acceptable to the corporation that transfer restrictions are not required under applicable securities laws, has otherwise satisfied itself that such transfer restrictions are not required or has provided for another acceptable form of legend, all certificates representing shares of the corporation shall
bear such legends as may be required by applicable law, including without limitation a legend that reads substantially as follows:
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT EFFECTIVE REGISTRATIONS THEREUNDER OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATIONS ARE NOT REQUIRED.”
8.5 Stock Transfer Agreements
The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes or series owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.
8.6 Registered Stockholders
The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
ARTICLE 9
TRANSFERS OF CAPITAL STOCK
9.1 Restriction on Transfer.
(a) In addition to any other limitation on Transfer (as defined below) created by applicable securities laws, these Restated Bylaws or contract, before any Transfer, no stockholder may, directly or indirectly, transfer, sell, assign, pledge, enter into any option, swap, futures contract or other agreement or arrangement (including, without limitation, any agreement or arrangement providing for the creation of (or having the effect of providing for the creation of) any synthetic security, derivative or short position, future contract, or any other derivative or hedging or borrowing transactions, regardless of the form or manner in which such transaction is settled) that transfers to another, in whole or in part, any of the economic consequences of ownership of, or otherwise in any manner dispose of or encumber, whether voluntarily or by operation of law (including by merger, consolidation, division or other form of business combination), or by gift or otherwise (“Transfer”), shares of the corporation’s common stock (the “Common Shares”) without the prior written consent of the Board of Directors, in its sole discretion, except in compliance with this Article 9 and applicable law. For the avoidance of doubt, this Article 9 shall not be applicable with respect to any Transfer of shares of the corporation’s preferred stock and any Common Shares issued upon the conversion thereof.
(b) The restriction on Transfer contained in Section 9.1 shall not apply to the following transactions (each, a “Permitted Transfer”):
(i) any Transfer during the stockholder’s lifetime by gift or pursuant to domestic relations orders to the stockholder’s Immediate Family or a trust for the benefit of stockholder or stockholder’s immediate family, where “Immediate Family” as used herein shall mean spouse, Spousal Equivalent, lineal descendant or antecedent, parent, sibling, stepchild, stepparent, mother in law, father in law, son in law, daughter in law, brother in law or sister in law (and for avoidance of doubt shall include adoptive relationships), and where a person is deemed to be a “Spousal Equivalent” provided the following circumstances are true: (a) irrespective of whether or not the relevant person and the Spousal Equivalent are the same sex, they are the sole spousal equivalent of the other for the last twelve (12) months preceding the date of such Transfer, (b) they intend to remain so indefinitely, (c) neither are married to anyone else, (d) both are at least 18 years of age and mentally competent to consent to contract, (e) they are not related by blood to a degree of closeness that which would prohibit legal marriage in the state in which they legally reside, (f) they are jointly responsible for each other’s common welfare and financial obligations, and (g) they reside together in the same residence for the last twelve (12) months preceding the date of such Transfer and intend to do so indefinitely;
(ii) any Transfer or deemed Transfer effected pursuant to the stockholder’s will or the laws of intestate succession;
(iii) any Transfer by an entity stockholder to an Affiliate (as defined below) (other than an Affiliate that is an SPV Entity (as defined below)) of such stockholder, where, for purposes of this Article, (a) an “Affiliate” of an entity stockholder shall include any individual, firm, corporation, partnership, association, limited liability company, trust or other entity who, directly or indirectly, controls, is controlled by or is under common control with such entity stockholder or such entity stockholder’s principal, including, without limitation, any general partner, managing member, managing partner, officer or director of such entity stockholder, such entity stockholder’s principal 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 entity stockholder or such entity stockholder’s principal, (b) the terms “controlling,” “controlled by,” or “under common control with” shall mean the possession, directly or indirectly, of (x) the power to direct or cause the direction of the management and policies of an entity stockholder, whether through the ownership of voting securities, by contract, or otherwise, or (y) the power to elect or appoint at least 50% of the directors, managers, general partners, or persons exercising similar authority with respect to such entity stockholder, and (c) the term “SPV Entity” shall mean any entity that (x) is formed for the specific purpose of acquiring shares of the corporation’s capital stock and/or (y) has assets, a majority of which consist of shares of the corporation’s capital stock as of immediately following such entity's acquisition of shares of the corporation’s capital stock;
(iv) an entity stockholder’s Transfer of all of its Common Shares to a single transferee pursuant to and in accordance with the terms of any bona fide merger, consolidation, reclassification of shares or capital reorganization of the entity stockholder, or pursuant to a bona fide sale of all or substantially all of the stock or assets of an entity stockholder, provided in each
case that such Transfer is not principally a Transfer of the Common Shares without substantial additional assets other than cash or cash equivalents being transferred;
(v) any Transfer made for no consideration by a stockholder that is a partnership to such stockholder’s limited partners in accordance with the partnership interests of such limited partners;
(vi) any repurchase or redemption of Common Shares by the corporation: (a) at or below cost, upon the occurrence of certain events, such as the termination of employment or services; or (b) at any price pursuant to the corporation’s exercise of a right of first refusal to repurchase such Common Shares (including the purchase of such Common Shares by the corporation’s assignee); or
(vii) in the event of a Transfer or deemed Transfer that is approved in accordance with this Section 9.1, or the application of the restrictions is waived pursuant to Section 9.2(b), and the Common Shares of the transferring stockholder are subject to co-sale rights (the “Co-Sale Rights”), any Transfers by the persons and/or entities who are entitled to and have exercised the Co-Sale Rights in conjunction with such approved Transfer or deemed Transfer giving rise to the exercise of such Co-Sale Right.
(c) Notwithstanding anything to the contrary set forth herein, but subject to Section 9.l(a), as a condition to any Transfer, the corporation may, in its sole discretion, (i) require in connection with such Transfer of Common Shares delivery to the corporation of a written opinion of legal counsel, in form and substance satisfactory to it or its legal counsel in their respective discretion, that such Transfer is exempt from applicable federal, state or other securities laws and regulations (a “Legal Opinion”), (ii) charge the transferor, transferee or both a transfer fee in such amount as may be reasonably determined by the corporation’s management in order to recoup the corporation’s internal and external costs of processing such Transfer, due and payable to the corporation prior to or upon effectiveness of such Transfer, (iii) require such Transferee to expressly agree to be bound by the provisions of this Article 9, and/or (iv) require such Transfer to be effected pursuant to a standard form of transfer agreement in such customary and reasonable form as may be provided by the corporation with opportunity for the transferor and transferee to review.
9.2 Application; Waiver; Termination of Rights; Legend.
(a) In the case of any Transfer permitted hereunder (whether by consent or via a Permitted Transfer), the transferee, assignee or other recipient shall receive and hold such stock subject to the provisions of these Restated Bylaws, and there shall be no further Transfer of such stock except in accordance with these Restated Bylaws.
(b) The provisions of this Article 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 Common Shares to be transferred by the transferring stockholder); provided, however, that such restrictions shall continue to apply to the Common Shares subsequent to such Transfer and shall be binding upon the transferee, assignee
or other recipient of such shares; provided further that the Board of Directors may delegate the power to make any decision to consent to a Transfer under Section 9.1 to either the corporation’s Chief Executive Officer or a committee of executive officers of the corporation as the Board of Directors may determine (subject to such limitations as the Board of Directors may determine, if any).
(c) Any Transfer, or purported Transfer, of securities of the corporation shall be null and void ab initio unless the terms, conditions, and provisions of this Article 9 are strictly observed and followed.
(d) The restrictions on transfer in Section 9.1 shall terminate immediately prior to the closing of a firm commitment underwritten public offering of common stock 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.
(e) Any certificates representing Common Shares subject to the transfer restrictions set forth herein shall bear on their face the following legend so long as the foregoing restrictions on transfer remain in effect:
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE CORPORATION.”
If any Common Shares are uncertificated, the corporation shall provide notice of the restrictions on transfer set forth herein in accordance with applicable law.
ARTICLE 10
GENERAL MATTERS
10.1 Checks; Drafts; Evidences of Indebtedness
From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. The Board of Directors may delegate to an office the authority to make such determinations and authorizations.
10.2 Corporate Contracts and Instruments; How Executed
The Board of Directors, except as otherwise provided in these Restated Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless such power is so authorized or ratified by the Board of Directors, provided in these Restated Bylaws, 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.
10.3 Fiscal Year
The fiscal year of the corporation shall be the same as the calendar year unless otherwise fixed by resolution of the Board of Directors.
10.4 Seal
The corporation may, but is not required to, adopt a corporate seal, which shall be adopted and which may be altered by the Board of Directors, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
10.5 Representation of Shares of Other Corporations
The chairperson of the Board of Directors, the chief executive officer, the president, any vice president, the treasurer, any assistant treasurer, the secretary or any assistant secretary of the corporation, or any other person authorized by the Board of Directors or the president or a vice president, is authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of the corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
10.6 Construction; Definitions
Unless the context requires otherwise, the general provisions, rules of construction and definitions in the General Corporation Law of Delaware shall govern the construction of these Restated Bylaws. Without limiting the generality of the foregoing, the singular number includes the plural, the plural number includes the singular, the term “including” means “including but not limited to,” and the term “person” includes a corporation, limited liability company, trust partnership or other entity and a natural person.
ARTICLE 11
AMENDMENTS
11.1 Amendments
Subject to any voting requirements set forth in the corporation's Certificate of Incorporation, the original or other Restated Bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote or, if so provided in the corporation's Certificate of Incorporation, the Board of Directors. The fact that such power has been so conferred upon the Board of Directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws of the corporation in accordance with these Restated Bylaws and applicable law.
CERTIFICATE OF ADOPTION OF RESTATED BYLAWS
OF
SENTINEL LABS, INC.
The undersigned hereby certifies that the undersigned is the duly elected, qualified and acting Secretary of SENTINEL LABS, Inc., a Delaware corporation (the “Corporation”), and that the foregoing Restated Bylaws constitute the Bylaws of the Corporation as duly adopted by the Corporation’s Board of Directors on July 24, 2020.
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Executed as of July 29, 2020.
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By:
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/s/ Efraim Harari
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Name:
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Efraim Harari
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Title:
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Secretary
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SENTINELONE, INC.
(a Delaware corporation)
RESTATED BYLAWS
As Adopted [▪], 2021 and
As Effective [▪], 2021
SENTINELONE, INC.
(a Delaware corporation)
RESTATED BYLAWS
TABLE OF CONTENTS
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Page
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Article I: STOCKHOLDERS
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1
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Section 1.1:
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Annual Meetings
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1
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Section 1.2:
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Special Meetings
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1
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Section 1.3:
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Notice of Meetings
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1
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Section 1.4:
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Adjournments
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1
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Section 1.5:
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Quorum
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2
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Section 1.6:
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Organization
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2
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Section 1.7:
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Voting; Proxies.
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3
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Section 1.8:
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Fixing Date for Determination of Stockholders of Record
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3
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Section 1.9:
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List of Stockholders Entitled to Vote
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4
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Section 1.10:
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Inspectors of Elections.
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4
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Section 1.11:
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Conduct of Meetings
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5
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Section 1.12:
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Notice of Stockholder Business; Nominations.
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6
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Section 1.13:
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Delivery to the Corporation
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14
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Article II: BOARD OF DIRECTORS .
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14
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Section 2.1:
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Number; Qualifications
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14
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Section 2.2:
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Election; Resignation; Removal; Vacancies
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15
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Section 2.3:
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Regular Meetings
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15
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Section 2.4:
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Special Meetings
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15
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Section 2.5:
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Remote Meetings Permitted
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15
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Section 2.6:
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Quorum; Vote Required for Action
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15
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Section 2.7:
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Organization
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16
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Section 2.8:
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Unanimous Action by Directors in Lieu of a Meeting
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16
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Section 2.9:
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Powers
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16
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Section 2.10:
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Compensation of Directors
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16
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Section 2.11:
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Confidentiality
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16
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Section 2.12:
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Emergency Bylaws
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Article III: COMMITTEES
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17
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Section 3.1:
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Committees
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Section 3.2:
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Committee Rules
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17
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TABLE OF CONTENTS
(continued)
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Article IV:OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR
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Section 4.1:
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Generally
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Section 4.2:
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Chief Executive Officer
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Section 4.3:
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Chairperson of the Board
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Section 4.4:
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Lead Independent Director
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Section 4.5:
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President
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Section 4.6:
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Chief Financial Officer
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Section 4.7:
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Treasurer
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Section 4.8:
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Vice President
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Section 4.9:
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Secretary
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Section 4.10:
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Delegation of Authority
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Section 4.11:
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Removal
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Article V:STOCK
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Section 5.1:
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Certificates; Uncertificated Shares
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Section 5.2:
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Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares
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Section 5.3:
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Other Regulations
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Article VI:INDEMNIFICATION
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Section 6.1:
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Indemnification of Officers and Directors
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Section 6.2:
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Advance of Expenses
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Section 6.3:
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Non-Exclusivity of Rights
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Section 6.4:
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Indemnification Contracts
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Section 6.5:
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Right of Indemnitee to Bring Suit
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Section 6.6:
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Successful Defense
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Section 6.7:
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Nature of Rights
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Section 6.8:
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Insurance
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Article VII:NOTICES
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Section 7.1:
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Notice.
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Section 7.2:
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Waiver of Notice
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Article VIII:INTERESTED DIRECTORS
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Section 8.1:
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Interested Directors
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Section 8.2:
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Quorum
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Article IX:MISCELLANEOUS
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Section 9.1:
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Fiscal Year
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Section 9.2:
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Seal
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24
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Section 9.3:
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Form of Records
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TABLE OF CONTENTS
(continued)
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Page
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Section 9.4:
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Reliance Upon Books and Records
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24
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Section 9.5:
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Certificate of Incorporation Governs
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Section 9.6:
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Severability
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Section 9.7:
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Time Periods
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Article X:AMENDMENT
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SENTINELONE, INC.
(a Delaware corporation)
RESTATED BYLAWS
As Adopted [▪], 2021 and
As Effective [▪], 2021
ARTICLE I: STOCKHOLDERS
Section 1.1: Annual Meetings. If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board of Directors (the “Board”) of SentinelOne, Inc. (the “Corporation”) shall each year fix. The meeting may be held either at a place, within or without the State of Delaware as permitted by the Delaware General Corporation Law (the “DGCL”), or by means of remote communication as the Board in its sole discretion may determine. Any proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any purpose or purposes shall be called in the manner set forth in the Restated Certificate of Incorporation of the Corporation (as the same may be amended and/or restated from time to time, the “Certificate of Incorporation”). The special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of the meeting.
Section 1.3: Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by applicable law (including, without limitation, as set forth in Section 7.1.1 of these Bylaws) stating the date, time and place, if any, of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for determining the stockholders entitled to notice of the meeting). In the case of a special meeting, such notice shall also set forth the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation, notice of any 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 of record entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.
Section 1.4: Adjournments. Notwithstanding Section 1.5 of these Bylaws, the chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any) regardless of whether a quorum is present, at any time and for any reason. Any meeting of stockholders, annual or special, may be adjourned from time to time, and notice need not be given of any such adjourned meeting if the time, date and place (if any) thereof and the means of remote communication (if any) by which stockholders and proxy holders may be
deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If, after the adjournment, a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. To the fullest extent permitted by law, if a quorum is present at the original meeting, it shall also be deemed present at the adjourned meeting. To the fullest extent permitted by law, the Board may postpone, reschedule or cancel at any time and for any reason any previously scheduled special or annual meeting of stockholders before it (or any adjournment) is to be held, regardless of whether any notice or public disclosure with respect to any such meeting (or adjournment) has been sent or made pursuant to Section 1.3 hereof or otherwise, in which case notice shall be provided to the stockholders of the new date, time and place, if any, of the meeting as provided in Section 1.3 above.
Section 1.5: Quorum. Except as otherwise required by applicable law or as provided by the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the holders of a majority of the voting power of the shares of stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that where a separate vote by a class or classes or series of stock is required by applicable law or the Certificate of Incorporation, the holders of a majority of the voting power of the shares of such class or classes or series of the stock issued and outstanding and entitled to vote on such matter, present in person or represented by proxy at the meeting, shall constitute a quorum entitled to take action with respect to the vote on such matter. If a quorum shall fail to attend any meeting, the chairperson of the meeting or, if directed to be voted on by the chairperson of the meeting, the holders of a majority of the voting power of the shares entitled to vote who are present in person or represented by proxy at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum, including, to the fullest extent permitted by law, at any adjournment thereof (unless a new record date is fixed for the adjourned meeting).
Section 1.6: Organization. Meetings of stockholders shall be presided over by (a) such person as the Board may designate, or (b) in the absence of such a person, the Chairperson of the Board, or (c) in the absence of such person, the Lead Independent Director, or, (d) in the absence of such person, the Chief Executive Officer of the Corporation, or (e) in the absence of such
person, the President of the Corporation, or (f) in the absence of such person, by a Vice President. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Each stockholder of record entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast by the holders of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. At all meetings of stockholders at which a quorum is present, unless a different or minimum vote is required by applicable law, rule or regulation applicable to the Corporation or its securities, the rules or regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation or these Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each class or series, the holders of a majority of the voting power of the shares of stock of that class or series present in person or represented by proxy at the meeting voting for or against such matter).
Section 1.8: Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board 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, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at 5:00 p.m. Eastern Time on the day next preceding the day on which notice is given, or, if notice is waived, at 5:00 p.m. Eastern Time 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 may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60) days prior to such action. If no such record date is fixed by the Board, then the record date for determining stockholders for any such purpose shall be at 5:00 p.m. Eastern Time on the day on which the Board adopts the resolution relating thereto.
Section 1.9: List of Stockholders Entitled to Vote. The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date), arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing herein shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting, (a) on a reasonably accessible electronic network as permitted by applicable law (provided that the information required to gain access to the list is provided with the notice of the meeting), or (b) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, a list of stockholders entitled to vote at the meeting shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 1.9 or to vote in person or by proxy at any meeting of stockholders.
Section 1.10: Inspectors of Elections.
1.10.1 Applicability. Unless otherwise required by the Certificate of Incorporation or by applicable law, the following provisions of this Section 1.10 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.10 shall be optional, and at the discretion of the Board.
1.10.2 Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chairperson of the meeting shall appoint one or more inspectors to act at the meeting.
1.10.3 Inspector’s Oath. Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.
1.10.4 Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.
1.10.5 Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.
1.10.6 Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies pursuant to Section 211(a)(2)b.(i) of the DGCL, or in accordance with Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.10 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.
Section 1.11: Conduct of Meetings. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the chairperson of any meeting of stockholders shall have the right and authority to convene and (for any reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairperson of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairperson of the meeting shall
determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) limitations on the time (if any) allotted to questions or comments by participants; (f) restricting the use of audio/video recording devices and cell phones; and (g) complying with any state and local laws and regulations concerning safety and security. The chairperson of any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such chairperson should so determine, such chairperson shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
Section 1.12: Notice of Stockholder Business; Nominations.
1.12.1 Annual Meeting of Stockholders.
(a) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only: (i) pursuant to the Corporation’s notice of such meeting (or any supplement thereto), (ii) by or at the direction of the Board or any committee thereof or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.12 (the “Record Stockholder”), who is entitled to vote at such meeting and who complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. For the avoidance of doubt, the foregoing clause (iii) shall be the exclusive means for a stockholder to make nominations or propose business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “Exchange Act”)), at an annual meeting of stockholders, and such stockholder must fully comply with the notice and other procedures set forth in this Section 1.12 to bring such nominations or other business properly before an annual meeting.
(b) For nominations or other business to be properly brought before an annual meeting by a Record Stockholder pursuant to Section 1.12.1(a):
(i) the Record Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and have provided any updates or supplements to such notice at the times and in the forms required by this Section 1.12;
(ii) such other business (other than the nomination of persons for election to the Board) must otherwise be a proper matter for stockholder action;
(iii) if the Proposing Person (as defined below) has provided the Corporation with a Solicitation Notice (as defined below), such Proposing Person must, in the case of a proposal other than the nomination of persons for election to the Board, 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 Proposing Person to be sufficient to elect the nominee or nominees proposed to be nominated by such Record 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 1.12, the Proposing Person 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 Section 1.12.
To be timely, a Record Stockholder’s notice must be delivered to the Secretary at the principal executive offices of the Corporation not later than 5:00 p.m. Eastern Time on the ninetieth (90th) day nor earlier than 5:00 p.m. Eastern Time on the one hundred and twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting (except in the case of the Corporation’s first annual meeting following its initial public offering, for which such notice shall be timely if delivered in the same time period as if such meeting were a special meeting governed by Section 1.12.3 of these Bylaws); provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, or if no annual meeting was held in the preceding year, notice by the Record Stockholder to be timely must be so delivered (A) no earlier than 5:00 p.m. Eastern Time on the one hundred and twentieth (120th) day prior to such annual meeting and (B) no later than 5:00 p.m. Eastern Time on the later of the ninetieth (90th) day prior to such annual meeting or 5:00 p.m. Eastern Time on the tenth (10th) day following the day on which Public Announcement (as defined below) of the date of such meeting is first made by the Corporation. In no event shall an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for providing the Record Stockholder’s notice.
(c) As to each person whom the Record Stockholder proposes to nominate for election or reelection as a director, in addition to the matters set forth in paragraph (e) below, such Record Stockholder’s notice shall set forth:
(i) the name, age, business address and residence address of such person;
(ii) the principal occupation or employment of such nominee;
(iii) the class, series and number of any shares of stock of the Corporation that are beneficially owned or owned of record by such person or any Associated Person (as defined in Section 1.12.4(c));
(iv) the date or dates such shares were acquired and the investment intent of such acquisition;
(v) all other information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or would be otherwise required, in each case pursuant to and in accordance with Section 14(a) (or any successor provision) under the Exchange Act and the rules and regulations thereunder;
(vi) such person’s written consent (A) to being named in the Corporation’s proxy statement as a nominee, (B) to the public disclosure of information regarding or related to such person provided to the Corporation by such person or otherwise pursuant to this Section 1.12 and (C) to serving as a director, if elected;
(vii) whether such person meets the independence requirements of the stock exchange upon which the Corporation’s Class A Common Stock is primarily traded;
(viii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such Proposing Person or any of its respective affiliates and associates, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the Proposing Person or any of its respective affiliates and associates were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and
(ix) a completed and signed questionnaire, representation and agreement required by Section 1.12.2 of these Bylaws.
(d) As to any business other than the nomination of a director or directors that the Record Stockholder proposes to bring before the meeting, in addition to the matters set forth in paragraph (e) below, such Record Stockholder’s notice shall set forth:
(i) a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the text of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such Proposing Person, including any anticipated benefit to any Proposing Person therefrom; and
(ii) a description of all agreements, arrangements and understandings between or among any such Proposing Person and any of its respective affiliates or associates, on the one hand, and any other person or persons, on the other hand, (including their names) in connection with the proposal of such business by such Proposing Person;
(e) As to each Proposing Person giving the notice, such Record Stockholder’s notice shall set forth:
(i) the current name and address of such Proposing Person, including, if applicable, their name and address as they appear on the Corporation’s stock ledger, if different;
(ii) the class or series and number of shares of stock of the Corporation that are directly or indirectly owned of record or beneficially owned by such Proposing Person, including any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future;
(iii) whether and the extent to which any derivative interest in the Corporation’s equity securities (including without limitation any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of shares of the Corporation or otherwise, and any cash-settled equity swap, total return swap, synthetic equity position or similar derivative arrangement (any of the foregoing, a “Derivative Instrument”), as well as any rights to dividends on the shares of any class or series of shares of the Corporation that are separated or separable from the underlying shares of the Corporation) or any short interest in any security of the Corporation (for purposes of this Bylaw a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any increase or decrease in the value of the subject security, including through performance-related fees) is held directly or indirectly by or for the benefit of such Proposing Person, including without limitation whether and the extent to which any ongoing hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including without limitation any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such Proposing Person with respect to any share of stock of the Corporation (any of the foregoing, a “Short Interest”);
(iv) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such Proposing Person or any of its respective affiliates or associates is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership;
(v) any direct or indirect material interest in any material contract or agreement with the Corporation, any affiliate of the Corporation or any Competitor (as defined below) (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement);
(vi) any significant equity interests or any Derivative Instruments or Short Interests in any Competitor held by such Proposing Person and/or any of its respective affiliates or associates;
(vii) any other material relationship between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any Competitor, on the other hand;
(viii) all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations
promulgated thereunder by such Proposing Person and/or any of its respective affiliates or associates;
(ix) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) (or any successor provision) under the Exchange Act and the rules and regulations thereunder;
(x) such Proposing Person’s written consent to the public disclosure of information provided to the Corporation pursuant to this Section 1.12;
(xi) a complete written description of any agreement, arrangement or understanding (whether oral or in writing) (including any knowledge that another person or entity is Acting in Concert (as defined in Section 1.12.4(c)) with such Proposing Person) between or among such Proposing Person, any of its respective affiliates or associates and any other person Acting in Concert with any of the foregoing persons;
(xii) a representation that the Record Stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination;
(xiii) a representation whether such Proposing Person intends (or is part of a group that intends) to deliver a proxy statement or form of proxy to holders of, in the case of a 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 being a “Solicitation Notice”); and
(xiv) any proxy, contract, arrangement, or relationship pursuant to which the Proposing Person has a right to vote, directly or indirectly, any shares of any security of the Corporation.
The disclosures to be made pursuant to the foregoing clauses (ii), (iii), (iv) and (vi) shall not include any information with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner.
(f) A stockholder providing written notice required by this Section 1.12 shall update 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 determining the stockholders entitled to notice of the meeting and (ii) 5:00 p.m. Eastern Time on the tenth (10th) business day prior to the meeting or any adjournment or postponement thereof. In the case of an update pursuant to clause (i) of the foregoing sentence, such update shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to notice of
the meeting, and in the case of an update and supplement pursuant to clause (ii) of the foregoing sentence, such update and supplement shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than eight (8) business days prior to the date for the meeting, and, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed). For the avoidance of doubt, the obligation to update as set forth in this paragraph shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or nomination or to submit any new proposal, including by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of the stockholders.
(g) Notwithstanding anything in Section 1.12 or any other provision of the Bylaws to the contrary, any person who has been determined by a majority of the Whole Board to have violated Section 2.11 of these Bylaws or a Board Confidentiality Policy (as defined below) while serving as a director of the Corporation in the preceding five (5) years shall be ineligible to be nominated to serve as a member of the Board, absent a prior waiver for such nomination approved by two-thirds of the Whole Board.
1.12.2 Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any stockholder for election or reelection as a director of the Corporation, the person proposed to be nominated must deliver (in accordance with the time periods prescribed for delivery of notice under Section 1.12 of these Bylaws) to the Secretary at the principal executive offices of the Corporation a completed and signed questionnaire in the form required by the Corporation (which form the stockholder shall request in writing from the Secretary of the Corporation and which the Secretary shall provide to such stockholder within ten days of receiving such request) with respect to the background and qualification of such person to serve as a director of the Corporation and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made and a signed representation and agreement (in the form available from the Secretary upon written request) that such person: (a) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (ii) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (b) is not and will not become a party to any Compensation Arrangement (as defined below) that has not been disclosed therein, (c) if elected as a director of the Corporation, will comply with all informational and similar requirements of applicable insurance policies and laws and regulations in connection with service or action as a director of the Corporation, (d) if elected as a director of the Corporation, will comply with all corporate governance, conflict of interest, stock ownership requirements, confidentiality and trading policies and guidelines of the Corporation publicly disclosed from time to time, (e) if elected as a director of the Corporation, will act in the best interests of the Corporation and its stockholders and not in the interests of individual constituencies, (f) consents to being named as a nominee in the Corporation’s proxy statement
pursuant to Rule 14a-4(d) under the Exchange Act and any associated proxy card of the Corporation and agrees to serve if elected as a director and (g) intends to serve as a director for the full term for which such individual is to stand for election.
1.12.3 Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of such meeting (a) by or at the direction of the Board or any committee thereof or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice and other procedures set forth in this Section 1.12.3 in all applicable respects. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 1.12.1(b) of these Bylaws shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation (i) no earlier than the one hundred and twentieth (120th) day prior to such special meeting and (ii) no later than 5:00 p.m. Eastern Time on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) 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 to be elected at such meeting. In no event shall an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for providing such notice.
1.12.4 General.
(a) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to be elected at a meeting of stockholders and serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law or these Bylaws, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.12 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 1.12, unless otherwise required by law, if the stockholder (or a Qualified Representative of the stockholder (as defined below)) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
(b) Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights of (i) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) the holders of any series of Common Stock or Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.
(c) For purposes of these Bylaws the following definitions shall apply:
(i) a person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or toward a common goal relating to the management, governance or control of the Corporation in substantial parallel with, such other person where (A) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (B) at least one additional factor suggests that such persons intend to act in concert or in substantial parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions or making or soliciting invitations to act in concert or in substantial parallel; provided that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) (or any successor provision) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person;
(ii) “affiliate” and “associate” shall have the meanings ascribed thereto in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”); provided, however, that the term “partner” as used in the definition of “associate” shall not include any limited partner that is not involved in the management of the relevant partnership;
(iii) “Associated Person” shall mean with respect to any subject stockholder or other person (including any proposed nominee) (A) any person directly or indirectly controlling, controlled by or under common control with such stockholder or other person, (B) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder or other person, (C) any associate of such stockholder or other person, and (D) any person directly or indirectly controlling, controlled by or under common control or Acting in Concert with any such Associated Person;
(iv) “Compensation Arrangement” shall mean any direct or indirect compensatory payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, including any agreement, arrangement or understanding with respect to any direct or indirect compensation, reimbursement or indemnification in connection with candidacy, nomination, service or action as a nominee or as a director of the Corporation;
(v) “Competitor” shall mean any entity that provides products or services that compete with or are alternatives to the principal products produced or services provided by the Corporation or its affiliates;
(vi) “Proposing Person” shall mean (A) the Record Stockholder providing the notice of business proposed to be brought before an annual meeting or nomination of persons for election to the Board at a stockholder meeting, (B) the beneficial owner or beneficial owners, if different, on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made, and (C) any Associated Person on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made;
(vii) “Public Announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act; and
(viii) to be considered a “Qualified Representative” of a stockholder, a person must be a duly authorized officer, manager, trustee or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as a proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction thereof, at the meeting. The Secretary of the Corporation, or any other person who shall be appointed to serve as secretary of the meeting, may require, on behalf of the Corporation, reasonable and appropriate documentation to verify the status of a person purporting to be a “Qualified Representative” for purposes hereof.
Section 1.13: Delivery to the Corporation. Whenever this Article I requires one or more persons (including a record or beneficial owner of stock) to deliver a document or information to the Corporation or any officer, employee or agent thereof (including any notice, request, questionnaire, revocation, representation or other document or agreement), the Corporation shall not be required to accept delivery of such document or information unless the document or information is in writing (and not in an electronic transmission) and delivered by hand (including, without limitation, overnight courier service) or by certified or registered mail, return receipt requested.
ARTICLE II: BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The total number of directors constituting the Whole Board shall be fixed from time to time in the manner set forth in the Certificate of Incorporation and the term “Whole Board” shall have the meaning specified in the Certificate of Incorporation. No decrease in the authorized number of directors constituting the Whole Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. Election of directors need not be by written ballot. Each director shall hold office until the annual meeting at which such director’s term expires and until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification or removal. Any director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at a later time or upon the happening of an event. Subject to the special rights of holders of any series of Preferred Stock to elect directors, directors may be removed only as provided by the Certificate of Incorporation and applicable law. All vacancies occurring in the Board and any newly created directorships resulting from any increase in the authorized number of directors shall be filled in the manner set forth in the Certificate of Incorporation.
Section 2.3: Regular Meetings. Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.
Section 2.4: Special Meetings. Special meetings of the Board may be called by the Chairperson of the Board, the Chief Executive Officer, the Lead Independent Director or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by or at the direction of the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission; provided, however, that if, under the circumstances, the Chairperson of the Board, the Lead Independent Director or the Chief Executive Officer calling a special meeting deems that more immediate action is necessary or appropriate, notice may be delivered on the day of such special meeting. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.
Section 2.5: Remote Meetings Permitted. Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of the Board, a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.
Section 2.7: Organization. Meetings of the Board shall be presided over by (a) the Chairperson of the Board, or (b) in the absence of such person, the Lead Independent Director, or (c) in such person’s absence, by the Chief Executive Officer, or (d) in such person’s absence, by a chairperson chosen by the Board at the meeting. The Secretary shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8: Unanimous Action by Directors in Lieu of a Meeting. Any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission. After an action is taken, the consent or consents shall be filed with the minutes of proceedings of the Board or committee, as applicable. 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 2.9: Powers. Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.
Section 2.10: Compensation of Directors. Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.
Section 2.11: Confidentiality. Each director shall maintain the confidentiality of, and shall not share with any third party person or entity (including third parties that originally sponsored, nominated or designated such director (the “Sponsoring Party”)), any nonpublic information learned in their capacities as directors, including communications among Board members in their capacities as directors. The Board may adopt a board confidentiality policy further implementing and interpreting this bylaw (a “Board Confidentiality Policy”). All directors are required to comply with this bylaw and any such Board Confidentiality Policy unless such director or the Sponsoring Party for such director has entered into a specific written agreement with the Corporation, in either case as approved by the Board, providing otherwise with respect to such confidential information.
Section 2.12: Emergency Bylaws. This Section 2.12 shall be operative during any emergency condition as contemplated by Section 110 of the DGCL (an “Emergency”), notwithstanding any different or conflicting provisions in these Bylaws, the Certificate of Incorporation or the DGCL. In the event of any Emergency, or other similar emergency condition, the director or directors in attendance at a meeting of the Board or a standing committee thereof shall constitute a quorum. Such director or directors in attendance may further take action to appoint one or more of themselves or other directors to membership on any standing or temporary committees of the Board as they shall deem necessary and appropriate. Except as the Board may otherwise determine, during any Emergency, the Corporation and its directors and officers, may exercise any authority and take any action or measure contemplated by Section 110 of the DGCL.
ARTICLE III: COMMITTEES
Section 3.1: Committees. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.
Section 3.2: Committee Rules. Each committee shall keep records of its proceedings and make such reports as the Board may from time to time request. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws. Except as otherwise provided in the Certificate of Incorporation, these Bylaws or the resolution of the Board designating the committee, any committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and may delegate to any such subcommittee any or all of the powers and authority of the committee.
ARTICLE IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR
Section 4.1: Generally. The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a President, a Secretary and a Treasurer and may consist of such other officers, including, without limitation, a Chief Financial Officer, and one or more Vice Presidents, as may from time to time be appointed by the Board. All officers shall be elected by the Board; provided, however, that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Except as otherwise provided by law, by the Certificate of Incorporation or these Bylaws, each officer shall hold office until such officer’s successor is duly elected and qualified or until such officer’s earlier resignation, death, disqualification or removal. Any number of offices may be held by the same person. Any officer may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board and the Board may, in its discretion, leave unfilled, for
such period as it may determine, any offices. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is duly elected and qualified or until such officer’s earlier resignation, death, disqualification or removal.
Section 4.2: Chief Executive Officer. Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:
(a) to act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation; and
(b) to affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation (if any); and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
Section 4.3: Chairperson of the Board. Subject to the provisions of Section 2.7 of these Bylaws, the Chairperson of the Board shall have the power to preside at all meetings of the Board and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe. The Chairperson of the Board may or may not be an officer of the Corporation.
Section 4.4: Lead Independent Director. The Board may, in its discretion, elect a lead independent director from among its members that are Independent Directors (as defined below) (such director, the “Lead Independent Director”). The Lead Independent Director shall preside at all Board meetings at which the Chairperson of the Board is not present and shall exercise such other powers and duties as may from time to time be assigned to him or her by the Board or as prescribed by these Bylaws. For purposes of these Bylaws, “Independent Director” has the meaning ascribed to such term under the rules of the exchange upon which the Corporation’s Class A Common Stock is primarily traded.
Section 4.5: President. The person holding the office of Chief Executive Officer shall be the President of the Corporation unless the Board shall have designated one individual as the President and a different individual as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.
Section 4.6: Chief Financial Officer. The person holding the office of Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.7: Treasurer. The person holding the office of Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.8: Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer or President in the event of the Chief Executive Officer’s or President’s absence or disability.
Section 4.9: Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.10: Delegation of Authority. Notwithstanding any provision hereof, the Board may from time to time delegate the powers or duties of any officer of the Corporation to any other officers or agents of the Corporation.
Section 4.11: Removal. Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any officer of the Corporation, then such officer may also be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.
ARTICLE V: STOCK
Section 5.1: Certificates; Uncertificated Shares. The shares of capital stock of the Corporation shall be uncertificated shares; provided, however, that the resolution of the Board that the shares of capital stock of the Corporation shall be uncertificated shares shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or the transfer agent or registrar, as the case may be). Notwithstanding the foregoing, the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be certificated shares. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation, by any two authorized officers of
the Corporation (it being understood that each of the Chairperson of the Board, the Vice-Chairperson of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary, and any Assistant Secretary shall be an authorized officer for such purpose), representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate previously issued by it, 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, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
Section 5.3: Other Regulations. Subject to applicable law, the Certificate of Incorporation and these Bylaws, the issue, transfer, conversion and registration of shares represented by certificates and of uncertificated shares shall be governed by such other regulations as the Board may establish.
ARTICLE VI: INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, legislative, investigative, preliminary, informal or formal, or any other type whatsoever, including any arbitration or other alternative dispute resolution and including any appeal of the foregoing (a “Proceeding”), by reason of the fact that such person (or a person of whom such person is the legal representative), is or was a member of the Board of the Corporation or is or was an officer of the Corporation designated by the Board to be entitled to the indemnification and advancement rights set forth in this Article VI or, while serving in such capacity, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (for purposes of this Article VI, an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the DGCL as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith, provided such Indemnitee acted in good faith and in a
manner that the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer of the Corporation and shall inure to the benefit of such Indemnitees’ heirs, executors and administrators. Notwithstanding the foregoing, subject to Section 6.5 of this Article VI, the Corporation shall indemnify any such Indemnitee seeking indemnity in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board or such indemnification is authorized by an agreement approved by the Board.
Section 6.2: Advance of Expenses. Except as otherwise provided in a written indemnification agreement between the Corporation and the Indemnitee, the Corporation shall pay all reasonable expenses (including attorneys’ fees) incurred by an Indemnitee in defending any Proceeding as they are incurred or otherwise in advance of its final disposition; provided, however, that if the DGCL then so requires, the advancement of such expenses (i.e., payment of such expenses as incurred or otherwise in advance of the final disposition of the Proceeding) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay such amounts if it shall ultimately be determined by final judicial decision from which there is no appeal that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board is, or as otherwise delegated by the Board to the officers of the Corporation, the officers are, authorized to cause the Corporation to enter into indemnification contracts with any member of the Board, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.
Section 6.5: Right of Indemnitee to Bring Suit. The following shall apply to the extent not in conflict with any indemnification contract provided for in Section 6.4 of this Article VI.
6.5.1 Right to Bring Suit. If a claim under Section 6.1 or 6.2 of this Article VI is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the Indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee also shall be entitled to be paid, to the fullest extent permitted by law, the expense of prosecuting or defending such suit. In any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the Indemnitee has not met any applicable standard for indemnification set forth in applicable law. In any suit brought by the Corporation to recover the advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in applicable law.
6.5.2 Effect of Determination. Neither the absence of a determination by or on behalf of the Corporation prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination by or on behalf of the Corporation that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.
6.5.3 Burden of Proof. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI, or otherwise, shall be on the Corporation.
Section 6.6: Successful Defense. To the extent that an Indemnitee has been successful on the merits or otherwise in defense of any proceeding (or in defense of any claim, issue or matter therein), such Indemnitee shall be indemnified under this Section 6.6 against expenses (including attorneys’ fees) actually and reasonably incurred in connection with such defense. Indemnification under this Section 6.6 shall not be subject to satisfaction of a standard of conduct, and the Corporation may not assert the failure to satisfy a standard of conduct as a basis to deny indemnification or recover amounts advanced, including in a suit brought pursuant to Section 6.5 of this Article VI (notwithstanding anything to the contrary therein); provided, however, that, any Indemnitee who is not a current or former member of the Board or officer (as such term is defined in the final sentence of Section 145(c)(1) of the DGCL) shall be entitled to indemnification under Section 6.1 of this Article VI and this Section 6.6 only if such Indemnitee has satisfied the standard of conduct required for indemnification under Section 145(a) or Section 145(b) of the DGCL.
Section 6.7: Nature of Rights. The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a member of the Board, officer, employee or agent and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. Any amendment, repeal or modification of any provision of this Article VI that adversely affects any right of an Indemnitee or an Indemnitee’s successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI with respect to any Proceeding involving any
occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment, repeal or modification.
Section 6.8: Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any member of the Board, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.
ARTICLE VII: NOTICES
Section 7.1: Notice.
7.1.1 Form and Delivery. Except as otherwise required by law, notice may be given in writing directed to a stockholder’s mailing address as it appears on the records of the Corporation and shall be given: (a) if mailed, when notice is deposited in the U.S. mail, postage prepaid; and (b) if delivered by courier service, the earlier of when the notice is received or left at such stockholder’s address. So long as the Corporation is subject to the Securities and Exchange Commission’s proxy rules set forth in Regulation 14A under the Exchange Act, notice shall be given in the manner required by such rules. To the extent permitted by such rules, or if the Corporation is not subject to Regulation 14A, notice may be given by electronic transmission directed to the stockholder’s electronic mail address, and if so given, shall be given when directed to such stockholder’s electronic mail address unless the stockholder has notified the Corporation in writing or by electronic transmission of an objection to receiving notice by electronic mail or such notice is prohibited by Section 232(e) of the DGCL. If notice is given by electronic mail, such notice shall comply with the applicable provisions of Sections 232(a) and 232(d) of the DGCL. Notice may be given by other forms of electronic transmission with the consent of a stockholder in the manner permitted by Section 232(b) of the DGCL and shall be deemed given as provided therein.
7.1.2 Affidavit of Giving Notice. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 7.2: Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice.
ARTICLE VIII: INTERESTED DIRECTORS
Section 8.1: Interested Directors. No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.
Section 8.2: Quorum. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes a contract or transaction described in Section 8.1 of this Article VIII.
ARTICLE IX: MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board.
Section 9.2: Seal. The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.
Section 9.3: Form of Records. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of any other information storage device, method or one or more electronic networks or databases (including one or more distributed electronic networks or databases), electronic or otherwise, provided that the records so kept can be converted into clearly legible paper form within a reasonable time and otherwise comply with the DGCL. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.
Section 9.4: Reliance Upon Books and Records. A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person’s duties, be fully protected in relying in good faith upon the books and records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other person’s professional or
expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any conflict between the provisions of the Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.
Section 9.7: Time Periods. In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used (unless otherwise specified herein), the day of the doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE X: AMENDMENT
Notwithstanding any other provision of these Bylaws, any alteration, amendment or repeal of these Bylaws, and any adoption of new Bylaws, shall require the approval of the Board or the stockholders of the Corporation as expressly provided in the Certificate of Incorporation.
__________________________
CERTIFICATION OF RESTATED BYLAWS
OF
SENTINELONE, INC.
(a Delaware corporation)
I, Efi Harari, certify that I am Secretary of SentinelOne, Inc., a Delaware corporation (the “Corporation”), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and complete copy of the Restated Bylaws of the Corporation in effect as of the date of this certificate.
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Dated: [▪], 2021
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/s/
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Chief Legal & Trust Officer and Secretary
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Final Form
SENTINEL LABS, INC.
SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as of October 28, 2020, by and among Sentinel Labs, Inc., a Delaware corporation d/b/a SentinelOne (the "Company"), each of the holders of shares of the Company's Series Seed Preferred Stock listed on Schedule A hereto (the "Series Seed Investors"), each of the holders of shares of the Company's Series A Preferred Stock listed on Schedule B hereto (the "Series A Investors"), each of the holders of shares of the Company's Series B Preferred Stock listed on Schedule C hereto (the "Series B Investors"), each of the holders of shares of the Company's Series C Preferred Stock listed on Schedule D hereto (the "Series C Investors"), each of the holders of shares of the Company's Series D Preferred Stock listed on Schedule E (the "Series D Investors"), each of the holders of shares of the Company's Series E Preferred Stock listed on Schedule F (the "Series E Investors") and each of the holders of shares of the Company's Series F Preferred Stock listed on Schedule G (the “Series F Investors,” and together with the Series Seed Investors, the Series A Investors, the Series B Investors, the Series C Investors, the Series D Investors and the Series E Investors, the "Investors"), and each of the stockholders listed on Schedule H hereto, each of whom is referred to herein as a "Key Holder."
RECITALS
WHEREAS, the Company, the Series Seed Investors, the Series A Investors, the Series B Investors, the Series C Investors, the Series D Investors, the Series E Investors and the Key Holders (collectively, the "Existing Parties") have entered into that certain Fifth Amended and Restated Investors' Rights Agreement dated as of February 7, 2020 (the "Prior Agreement") and the requisite Existing Parties desire to amend and restate the Prior Agreement in accordance with Section 6.6 thereof;
WHEREAS, the Company and the Series F Investors are parties to the Series F Preferred Stock Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to which the Series F Investors have agreed to purchase shares of Series F Preferred Stock; and
WHEREAS, in order to induce the Existing Parties to approve the issuance of shares of Series F Preferred Stock and to induce the Series F Investors to invest funds in the Company pursuant to the Purchase Agreement, the Investors, the Key Holders 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, to receive certain information from the Company, and to participate in future equity offerings by the Company, and shall govern certain other matters as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Existing Parties hereby agree that the Prior Agreement shall be superseded and replaced in its entirety by this Agreement, and the parties to this Agreement further agree as follows:
1. Definitions. For purposes of this Agreement:
"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 private equity or 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.
“Board of Directors” means the board of directors of the Company.
"Common Stock" means shares of the Company's common stock, par value $0.0001 per share.
"Competitor" means a Person engaged, directly or indirectly (including through any partnership, limited liability company, corporation, joint venture or similar arrangement (whether now existing or formed hereafter)), in the business of developing, marketing, selling and distributing endpoint security solutions, but shall not include (a) any financial investment firm or collective investment vehicle that, together with its Affiliates, holds less than 20% of the outstanding equity of any Competitor and does not, nor do any of its Affiliates, have a right to designate any members of the board of directors of any Competitor or (b) any private equity or venture capital fund (including, for the avoidance of doubt, Anchorage Illiquid Opportunities Offshore Master V, L.P. and its Affiliates (collectively, "Anchorage")
"Damages" means any loss, damage, claim 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, claim 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 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.
"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.
“Direct Listing” has the meaning set forth in the Restated Certificate.
"Disqualifying Event" means any "bad actor" disqualifying event described in Rule 506(d)(l)(i) to (viii) of the Securities Act, except for a Disqualifying Event as to which Rule 506(d)(2)(ii)-(iv) or (d)(3) is applicable.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"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; (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 or (v) a registration for a Direct Listing.
"FOIA Party" means a Person that, in the reasonable determination of the Board of Directors, may be subject to, and thereby required to disclose non-public information furnished by or relating to the Company under, the Freedom of Information Act, 5 U.S.C. 552 ("FOIA"), any state public records access law, any state or other jurisdiction's laws similar in intent or effect to FOIA, or any other similar statutory or regulatory requirement.
"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.
"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.
"GAAP" means generally accepted accounting principles in the United States.
"Holder" means any holder of Registrable Securities who is a party to this Agreement.
"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.
"Initiating Holders" means, collectively, Holders who properly initiate a registration request under this Agreement.
"IPO" means the Company's first underwritten public offering of its Common Stock under the Securities Act.
"Insight" means Insight Venture Partners X, L.P., Insight Venture Partners (Cayman) X, L.P., Insight Venture Partners X (Co-Investors), L.P., and Insight Venture Partners (Delaware) X, L.P.
"Key Holder Registrable Securities" means (i) the shares of Common Stock held by the Key Holders, 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 shares.
"Major Investor" means any Investor that, individually or together with such Investor's Affiliates, holds at least 3,000,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof).
"New Securities" means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities; provided, however, that New Securities shall not include Exempted Securities (as defined in the Restated Certificate).
"Person" means any individual, corporation, partnership, trust, limited liability company, association or other entity.
"Preferred Stock" means, collectively, shares of the Company's Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock.
“Qualified Investor” means any Investor that (i) purchased shares of Series F Preferred Stock pursuant to the Purchase Agreement and (ii) as of immediately prior to the IPO or the Direct Listing with a DL Private Placement (as defined herein), continues to hold, individually or together with such Investor's Affiliates, at least 1,658,182 shares of Series F Preferred Stock (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof); provided, that Insight shall be deemed to hold one additional share of Series F Preferred Stock for every two Secondary Shares (as defined in the Purchase Agreement) purchased by Insight in the Secondary (as
defined in the Purchase Agreement) (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof) that Insight continues to hold as of immediately prior to the IPO or the Direct Listing with a DL Private Placement (the “Insight Proviso”).
"Registrable Securities" means (i) any Common Stock held by the Investors, including Common Stock issuable or issued upon conversion of the Preferred Stock; (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investors after the date hereof; (iii) the Key Holder Registrable Securities, provided, however, that such Key Holder Registrable Securities shall not be deemed Registrable Securities and the Key Holders shall not be deemed Holders for the purposes of Subsections 2.1 (and any other applicable Section or Subsection with respect to registrations under Subsection 2.1), 2.10, 3.1, 3.2, 4.1 and 6.7; and (iv) 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, the shares referenced in clauses (i) and (ii) above; 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 pursuant to Subsection 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Subsection 2.13 of this Agreement.
"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.
“Restated Certificate” means the Company's Eighth Amended and Restated Certificate of Incorporation (as it may be amended and/or restated from time to time).
"Restricted Securities" means the securities of the Company required to bear the legend set forth in Subsection 2.12(b) hereof.
"SEC" means the Securities and Exchange Commission.
"SEC Rule 144" means Rule 144 promulgated by the SEC under the Securities Act.
"SEC Rule 145" means Rule 145 promulgated by the SEC under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"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 Subsection 2.6.
"Series A Preferred Stock" means shares of the Company's Series A Preferred Stock, par value $0.0001 per share.
"Series B Preferred Stock" means shares of the Company's Series B Preferred Stock, par value $0.0001 per share.
"Series C Preferred Stock" means shares of the Company's Series C Preferred Stock, par value $0.0001 per share.
"Series D Preferred Stock" means shares of the Company's Series D Preferred Stock, par value $0.0001 per share.
1.1 "Series E Preferred Stock" means shares of the Company's Series E Preferred Stock, par value $0.0001 per share.
1.2 "Series F Preferred Stock" means shares of the Company's Series F Preferred Stock, par value $0.0001 per share.
1.3 "Series Seed Preferred Stock" means shares of the Company's Series Seed Preferred Stock, par value $0.0001 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 during the period commencing on the date that is one hundred eighty (180) days after the effective date of the registration statement for the IPO or the Direct Listing, the Company receives a request from Holders of at least thirty percent (30%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with an anticipated aggregate offering price, net of Selling Expenses, of not less than $10 million, then the Company shall (x) 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 (y) 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 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 Subsection 2.1(c) and Subsection 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 at least thirty percent (30%) of the 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 $5 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 Subsection 2.1(c) and Subsection 2.3.
(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Subsection 2.1 a certificate signed by the Company's chief executive officer stating that in the good faith judgment of the 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, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than one hundred twenty (120) 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 one hundred twenty (120) 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 Subsection 2.1(a) (i) during the one hundred eighty (180) day period commencing on 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 Subsections 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 Subsection 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(b) (i) 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; or (ii) if the Company has effected two registrations pursuant to Subsection 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as "effected" for purposes of this Subsection 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 Subsection 2.6, in which case such withdrawn registration statement shall be counted as "effected" for purposes of this Subsection 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 Subsection 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 Subsection 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 Subsection 2.6.
2.3 Underwriting Requirements.
(a) If, pursuant to Subsection 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 Subsection 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 Subsection 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 Subsection 2.3, if the managing underwriter advises 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 which are not Key Holder Registrable Securities to be included in such underwriting shall not be reduced unless all Key Holder Registrable 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 Subsection 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 (if the Company has not already completed a Direct Listing), 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 or (iii) notwithstanding (ii) above, any Registrable Securities which are not Key Holder Registrable Securities be excluded from such underwriting unless all Key Holder Registrable Securities are first excluded from such offering. For purposes of the provision in this Subsection 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 Subsection 2.1, a registration shall not be counted as "effected" if, as a result of an exercise of the underwriter's cutback provisions in Subsection 2.3(a), fewer than fifty percent (50%) of 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 a majority 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 180 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 managing 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
(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.
In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act or a Direct Listing shall have become effective, its insider trading policy shall provide that the Company's directors may implement a trading program under Rule 10b5-1 of the Exchange Act.
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 $25,000, 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 Subsection 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all 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 a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Subsection 2.1(a) or Subsection 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, business, or prospects 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 Subsection 2.1(a) or Subsection 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. All expenses incurred by the Company in connection with a Direct Listing, including, without limitation, all registration, filing and qualification fees, printers' and accounting fees, and fees and disbursements of counsel for the Company shall be borne by the Company.
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 (i) under this Section 2 or (ii) in connection with a Direct Listing:
(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 Subsection 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 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 Subsection 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 Subsections 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 Subsection 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 Subsection 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
Subsection 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 Subsection 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 Subsection 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 Subsection 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 Subsection 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 Subsection 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Subsection 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.
(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 Subsection 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 or Direct Listing (whichever occurs first);
(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 or Direct Listing (whichever occurs first)), 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) and (ii) 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. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of at least fifty-five percent (55%) of the Registrable Securities then outstanding, voting together as a single class on an as-converted basis (such Holders, the "Requisite Holders"), enter into any agreement with any holder or prospective holder of any securities of the Company that (i) would provide to such holder the right to include securities in any registration on other than either a pro rata basis with respect to the Registrable Securities or on a subordinate basis after all Holders have had the opportunity to include in the registration and offering all shares of Registrable Securities that they wish to so include or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Subsection 6.11.
2.11 "Market Stand-off" Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days (plus an additional eighteen (18) days to the extent necessary to comply with regulatory requirements) in the case of the IPO (if the Company has not already completed a Direct Listing)), or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2241, or any successor provisions or amendments thereto)(such period, the "Standoff Period"), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Subsection 2.11 shall apply only to the IPO (if the Company has not already completed a Direct Listing) and shall not apply to the sale of any shares in a Direct Listing, or to an underwriter pursuant to an underwriting agreement, or the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the
Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company obtains a similar agreement from all directors and officers of the Company and 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). The underwriters in connection with such registration are intended third-party beneficiaries of this Subsection 2.11 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Subsection 2.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters ( other than discretionary financial hardship waivers not exceeding $50,000 for any Holder of shares of Common Stock) shall apply pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.
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 Subsection 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 Subsection 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. The Company will not require such a legal opinion or "no action" letter (x) in any transaction in compliance with SEC Rule 144 or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Subsection 2.12. 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 Subsection 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.
(d) Each Holder agrees not to make any sale, assignment, transfer, pledge or other disposition of any securities of the Company, or any beneficial interest therein, to any person other than the Company unless and until the proposed transferee confirms to the reasonable satisfaction of the Company that the proposed transferee is not subject to any Disqualifying Event, except as set forth in Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act and disclosed, reasonably in advance of the transfer, in writing in reasonable detail to the Company.
2.13 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Subsection 2.1 or Subsection 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 Restated Certificate;
(b) as to any holder of less than one percent (1%) of the outstanding Registrable Securities, at such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder's shares without limitation during a three-month period without registration; and
(c) the fifth anniversary of the IPO or a Direct Listing (whichever occurs first).
3. Information Rights.
3.1 Delivery of Financial Statements. The Company shall deliver to each Major Investor, provided that the Board of Directors has not reasonably determined that such Major Investor is a Competitor of the Company:
(a) as soon as practicable, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Company, (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and (iii) a statement of stockholders' equity as of the end of such year; all such financial statements prepared in accordance with GAAP and audited and certified by independent public accountants of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five (45) days after the end of each quarter of each fiscal year of the Company, unaudited statements of income and of cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders' equity as of the end of such fiscal quarter all prepared in accordance with GAAP ( except that such financial statements may (i) be subject to normal year-end audit adjustments; and (ii) not contain all notes thereto that may be required in accordance with GAAP);
(c) as soon as practicable, but in any event within thirty (30) days before the end of each fiscal year, a budget and operating plan for the next fiscal year (the "Budget"), prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company; and
(d) upon request, with respect to the financial statements called for in Subsection 3.1(a), Subsection 3.1(b), and Subsection 3.1(c), an instrument executed by the chief financial officer and chief executive officer of the Company certifying that such financial statements were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (except as otherwise set forth in Subsection 3.1(b), and Subsection 3.1(c)) and fairly present the financial condition of the Company and its results of operation for the periods specified therein.
Notwithstanding any of the foregoing, the Company shall not be obligated under this Subsection 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.
Notwithstanding anything else in this Subsection 3.1 to the contrary, the Company may cease providing the information set forth in this Subsection 3.1 during the period starting with the date sixty (60) days before the Company's good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering or Direct Listing; provided that the Company's covenants under this Subsection 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.
For purposes of this Section 3.1, Qualcomm Ventures LLC, its Affiliates, and each of their permitted successors and assigns (collectively, “Qualcomm”) shall be deemed to be a “Major Investor” and entitled to the delivery of financial information as permitted herein to the Major Investors of the Company. The provisions of this Section 3.1 as it relates to the right of Qualcomm to receive financial information of the Company may be amended and the observance of any term thereof may be waived only with the written consent of Qualcomm.
3.2 Inspection. The Company shall permit each Major Investor (provided that the Board of Directors has not reasonably determined that such Major Investor is a Competitor of the Company), at such Major Investor's expense, to visit and inspect the Company's properties; examine its books of account and records; and discuss the Company's affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Subsection 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
3.3 Observer Rights.
(a) As long as Data Collective II, L.P. ("Data Collective") owns not less than fifty percent (50%) of the shares of Series Seed Preferred Stock originally purchased by it under the Seed Agreement (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite Matthew Ocko to attend all meetings of the Board of Directors and committees of the Board of Directors in a nonvoting observer capacity. In this respect, the Company shall give Mr. Ocko copies of all notices, minutes, consents, and other materials that it provides to its directors; provided, however, that Mr. Ocko agrees to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided and to be bound by the provisions of Subsection 3.5 of this Agreement; and provided further, that the Company reserves the right to withhold any information and to exclude Mr. Ocko from any meeting or portion thereof if access to such information or attendance at such meeting that the company reasonably believes, upon advice of counsel, would adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if Mr. Ocko is a Competitor of the Company. For the avoidance of doubt, the Company shall not be obligated to provide observer rights under this Subsection 3.3 to any representative of Data Collective other than Mr. Ocko.
(b) As long as Redpoint Omega II, L.P. ("Redpoint") owns not less than fifty percent (50%) of the shares of Series C Preferred Stock originally purchased by it under the Purchase Agreement (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite one designee of Redpoint, who shall initially be Elliot Geidt, to attend all meetings of the Board of Directors in a nonvoting observer capacity. In this respect, the Company shall give such designee copies of all notices, minutes, consents, and other materials that it provides to its directors; provided, however, that such designee agrees to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided and to be bound by the provisions of Subsection 3.5 of this Agreement; and provided further, that the Company reserves the right to withhold any information and to exclude such designee from any meeting or portion thereof if access to such information or attendance at such meeting that the company reasonably believes, upon advice of counsel, would adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets, or if such designee is a Competitor of the Company.
(c) As long as Anchorage owns not less than fifty percent (50%) of the shares of Series D Preferred Stock originally purchased by it under the Purchase Agreement (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite one designee of Anchorage, who shall initially be Alex Kassan, to attend all meetings of the Board of Directors in a nonvoting observer capacity. In this respect, the Company shall give such designee copies of all notices, minutes, consents, and other materials that it provides to its directors; provided, however, that such designee agrees to hold in confidence and trust all information so provided and to be bound by the provisions of Subsection 3.5 of this Agreement; and provided further, that the Company reserves the right to withhold any information and to exclude such designee from any meeting or portion thereof if access to such information or attendance at such meeting that the Company reasonably believes, upon advice of counsel, would adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets.
3.4 Termination of Information and Observer Rights. The covenants set forth in Subsection 3.1, Subsection 3.2 and Subsection 3.3 shall terminate and be of no further force or effect (i) immediately before the consummation of an IPO or a Direct Listing (whichever occurs first), (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Restated Certificate, whichever event occurs first.
3.5 Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained directly or indirectly from the Company (including notice of the Company's intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general ( other than as a result of a breach of this Subsection 3.5 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of or reliance upon the Company's confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Subsection 3.5, provided that (x) the Investor provides such prospective purchaser's identity to the Company prior to any disclosure of confidential information and (y) the Board of Directors confirms in writing that it has determined that such prospective purchaser is not a Competitor of the Company; (iii) to any existing or prospective Affiliate, partner, limited partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business; provided, that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be (x) required by law, including under a judicial or governmental order or in connection with a judicial or governmental proceeding, or (y) required or requested under any regulation or any regulatory or supervisory authority with authority over such Investor, provided that, to the extent practical and permitted to do so under applicable law, rule, regulation or order, the Investor promptly notifies the Company of such disclosure (other than in the case of where such disclosure is made in connection with an examination by any regulatory or supervisory authority) and takes reasonable steps to minimize the extent of any such required disclosure.
4. Rights to Future Stock Issuances.
4.1 Right of First Offer. Subject to the terms and conditions of this Subsection 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Major Investor. A Major Investor shall be entitled to apportion the right of first offer hereby granted to it in such proportions as it deems appropriate, among (i) itself, (ii) its Affiliates and (iii) its beneficial interest holders, such as limited partners, members or any other Person having "beneficial ownership," as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of such Major Investor ("Investor Beneficial Owners"); provided that, each such Affiliate or Investor Beneficial Owner: (x) is not a Competitor or FOIA Party, unless such party's purchase of New Securities is otherwise consented to by the Board of Directors, and (y) agrees to enter into this Agreement and each of the Seventh Amended and Restated Voting Agreement and Sixth Amended and Restated Right of First Refusal and Co-Sale Agreement of even date herewith among the Company, the Investors and the other parties named therein, as an "Investor" under each such agreement (provided that, any Competitor or FOIA Party shall not be entitled to any rights as a Major Investor under Subsections 3.1, 3.2 and 4.1 hereof).
(a) The Company shall give notice (the "Offer Notice") to each Major Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.
(b) By notification to the Company within twenty (20) days after the Offer Notice is given, each Major Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock then held by such Major Investor (including all shares of Common Stock then issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held by such Major Investor) bears to the total Common Stock then outstanding (assuming full conversion and/or exercise, as applicable, of all Preferred Stock and other Derivative Securities) (such portion of the New Securities hereinafter referred to as a Major Investor's "Pro Rata Share"). At the expiration of such twenty (20) day period, the Company shall promptly notify each Major Investor that elects to purchase or acquire all the shares available to it (each, a "Fully Exercising Investor") of any other Major Investor's failure to do likewise. During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Major Investors were entitled to subscribe but that were not subscribed for by the Major Investors which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Subsection 4.1(b) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Subsection 4.1(c).
(c) If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Subsection 4.1(b), the Company may, during the ninety (90) day period following the expiration of the periods provided in Subsection 4.1(b), offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not
enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this Subsection 4.1.
(d) The right of first offer in this Subsection 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Restated Certificate), (ii) shares of Common Stock issued in the IPO or (iii) shares of Series F Preferred Stock issued pursuant to the Purchase Agreement, including, without limitation, shares issued at the Insight Closing (as defined in the Purchase Agreement), if any.
(e) Notwithstanding anything to the contrary herein, if the rights of a Major Investor under Subsection 4.1 with respect to an offering of New Securities are waived without the consent of such Major Investor, and any Major Investor actually purchases any New Securities in any such offering, then each Major Investor who did not consent to such waiver shall be permitted to participate in such offering on a pro rata basis (based on the level of participation of the Major Investor purchasing the largest portion of such Major Investor's Pro Rata Share), in accordance with the other provisions (including notice and election periods) set forth in Subsection 4.1; provided, however, that in no event shall this Subsection 4.1(e) give rise to a right of any Major Investor to purchase more New Securities than such Major Investor's Pro Rata Share. The preceding sentence may not be amended or waived without the consent of each Major Investor.
4.2 Termination. The covenants set forth in Subsection 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of an IPO or a Direct Listing (whichever occurs first), (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Restated Certificate, whichever event occurs first.
5. Additional Covenants.
5.1 Employee Agreements. The Company will cause each person now or hereafter employed by it or by any subsidiary ( or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nondisclosure and proprietary rights assignment agreement substantially in the form approved by the Board of Directors.
5.2 Employee Stock. Unless otherwise approved by the Board of Directors, all future employees and consultants of the Company who purchase, receive options to purchase, or receive awards of shares of the Company's capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for (i) vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares vesting following twelve (12) months of continued employment or service, and the remaining shares vesting in equal monthly installments over the following thirty-six (36) months, and (ii) a market stand-off provision substantially similar to that in Subsection 2.11. In addition, unless otherwise approved by the Board of Directors, the Company shall retain a "right of first refusal" on employee transfers until the IPO or a Direct Listing (whichever occurs first) and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted stock.
5.3 Insurance. The Company shall use commercially reasonable efforts to maintain, from financially sound and reputable insurers, (a) "directors and officers" liability insurance and (b) term "key person" insurance on each of Tomer Weingarten and Almog Cohen, each in an amount and on terms and conditions satisfactory to the Board of Directors, and will use
commercially reasonable efforts to cause such insurance policies to be maintained until such time as the Board of Directors determines that such insurance should be discontinued. The key person policy shall name the Company as loss payee, and neither policy shall be cancelable by the Company without prior approval by the Board of Directors. Notwithstanding any other provision of this Section 5.3 to the contrary, for so long as a Series B Director, a Series C Director or a Series D Director (each as defined in the Seventh Amended and Restated Voting Agreement, dated as of the date hereof, by and among the Company and the other parties thereto) is serving on the Board of Directors, the Company shall not cease to maintain a "directors and officers" liability insurance policy with a carrier and in an amount satisfactory to the Board of Directors.
5.4 Directed Shares. If the Company undertakes (x) an IPO or (y) a Direct Listing that is completed concurrently with a private placement transaction that is exempt from the Securities Act (a "DL Private Placement"), whichever occurs first, the Company will:
(a) in the event of an IPO, use its commercially reasonable efforts to allocate, or to cause its managing underwriter(s) to allocate, to each Qualified Investor, either under a “directed share program” or in a concurrent private placement transaction that is exempt from the Securities Act (an "IPO Private Placement" and, together with the DL Private Placement, each a "Concurrent Private Placement"), such decision being at the Company's sole discretion, in either case on the same terms being offered to the public investors in the IPO, the right (but not the obligation) to purchase up to a number of shares of Common Stock in the IPO or the IPO Private Placement equal to such Qualified Investor's Share Allocation (as defined below).
(b) in the event of a DL Private Placement, use its commercially reasonable efforts to allocate to each Qualified Investor, in such DL Private Placement, on the terms being offered by the Company in such DL Private Placement, the right (but not the obligation) to purchase up to a number of shares of Common Stock in the DL Private Placement equal to such Qualified Investor's Share Allocation (as defined below).
(c) For purposes of this Section 5.4, a Qualified Investor's “Share Allocation” is a number of shares of Common Stock with an aggregate purchase price equal to (i) a fraction, the numerator of which is the number of shares of Common Stock issued or issuable upon conversion of the shares of Series F Preferred Stock held by each Qualified Investor (including, with respect to Insight, the shares of Series F Preferred Stock deemed held by Insight in accordance with the Insight Proviso) as of immediately prior to the IPO or the DL Private Placement, as applicable, and the denominator of which is the aggregate number of shares of Common Stock issued or issuable upon conversion of the shares of Series F Preferred Stock held by all Qualified Investors (including the shares of Series F Preferred Stock deemed held by Insight in accordance with the Insight Proviso) as of immediately prior to the IPO or the DL Private Placement, as applicable, multiplied by (ii) the lesser of (a) $50,000,000 and (b) 20% of the aggregate gross proceeds received by the Company in the IPO or the DL Private Placement. Each Qualified Investor shall have the right to apportion its Share Allocation among itself and its Affiliates. If a Qualified Investor (including any of its Affiliates) does not purchase the entire Share Allocation apportioned to such Qualified Investor (a “Non-Fully Participating Investor”), and the other Qualified Investor(s) (including any of their Affiliates) purchase(s) the entire Share Allocation apportion to such other Qualified Investor(s) (collectively, the “Fully Participating Investors”), each such Fully Participating Investor will have the right (but not the obligation) to purchase on a pro rata basis (based on the level of participation of the Fully Participating Investors purchasing the entire Share Allocation of each such Fully Participating Investors Share Allocation) the Share Allocation for such Non-Fully Participating Investor was entitled to purchase but did not purchase. Each Qualified Investor acknowledges that notwithstanding the
terms of this Agreement, the designation of shares by the managing underwriter(s) and/or the issuance of shares in a Concurrent Private Placement will only be made in compliance with all federal and state securities laws, including, without limitation, the Securities Act, all applicable rules and regulations promulgated by FINRA (including FINRA Rules 2010 and 5130) and such other self-regulatory organizations as may be applicable in connection with the IPO, the Direct Listing or the Concurrent Private Placement or have authority over the participants therein. The Company and the Investor each acknowledge that this indication of interest is not intended to be an offer to purchase from the Investor but merely an indication of interest to assist the Company in structuring the IPO or the Concurrent Private Placement and preparing the appropriate disclosure, if any, in the registration statement. The Qualified Investors agree and acknowledge that in case of a Direct Listing, the Company in its sole discretion may determine whether to complete a primary component in connection with such Direct Listing, and if the Company completes a Direct Listing with no primary component, the Investor agrees that its Share Allocation rights pursuant to this Subsection 5.4 shall be deemed waived and of no further force or effect without any further action by the Investor or the Company. All shares purchased pursuant to this Subsection 5.4 shall be subject to a customary “market stand-off” agreement to be entered into with the underwriters for the duration of the Standoff Period. Any discretionary release, waiver or termination of the restrictions of any or all of such “market stand-off” agreements ( other than discretionary financial hardship waivers not exceeding $50,000 for any Holder of shares of Common Stock) shall apply pro rata to all Holders subject to such agreements, based on the number of shares subject to such agreements.
5.5 Termination of Covenants. The covenants set forth in this Section 5, except for Subsections 5.5 and 5.6 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO or a Direct Listing (whichever occurs first), (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Restated Certificate, whichever event occurs first.
5.6 Bad Actor Status
(a) The Company will notify the Investors promptly in writing in the event a "bad actor" Disqualifying Event becomes applicable to the Company.
(b) Each party to this Agreement ( other than the Company) will promptly notify the Company in writing if it or, to its knowledge, any person specified in Rule 506(d)(l) under the Securities Act becomes subject to any Disqualifying Event.
5.7 FCPA Compliance. The Company shall not, and shall not permit any of its subsidiaries and Affiliates or any of its or their respective directors, officers, managers, employees, independent contractors, representatives or agents ( collectively, “Representatives”) to, promise, authorize or make any payment to, or otherwise contribute any item of value to, any person in violation of the U.S. Foreign Corrupt Practices Aet (“FCPA”) or any other applicable anti-bribery or anti-corruption law. The Company shall, and shall cause each of its subsidiaries and Affiliates to, cease all of its or their respective activities, as well as remediate any actions taken by the Company, its subsidiaries or Affiliates or any of its or their respective Representatives in violation of the FCPA or any other applicable anti-bribery or anti-corruption law. The Company shall, and shall cause each of its Affiliates and subsidiaries to, maintain systems or internal controls (such as accounting systems, purchasing systems and billing systems) designed to ensure compliance with the FCPA or any other applicable anti-bribery or anti-corruption law.
5.8 U.S. Real Property Holding Company: The Company shall conduct its affairs so as to avoid the Company being treated as a “United States Real Property Holding Corporation” within the meaning of Section 897(c)(2) of the Internal Revenue Code, as amended (the “Code”) and any applicable regulations promulgated thereunder (“USRPHC”). The Company shall notify the Investor promptly following any “determination date” (as defined in Treasury Regulations section 1.897-2(c)(1)) or otherwise within five (5) business days of becoming aware that the Company is, or is reasonably likely to be, a USRPHC. In addition, at any time upon the Investor's request, the Company shall issue a statement to the Investor, in form and substance as described in Treasury Regulations sections 1.897-2(h)(1) and 1.1445-2(c) (or any successor regulations) and signed under penalties of perjury, regarding whether any interest in the Company constitutes a “U.S. real property interest” within the meaning of Section 897(c) of the Code, together with an executed notice to the Internal Revenue Service described in Treasury Regulations section 1.897-2(h)(2) (or any successor regulation). Such statement shall be delivered within ten (10) business days of the Investor's written request therefor.
5.9 Additional Tax Matters. The Company shall take such actions, including making an election to be treated as an association taxable as a corporation, as may be required to ensure that at all times the Company is classified as corporation for United States federal income tax purposes.
6. Miscellaneous.
6.1 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 an Affiliate of a Holder (including, without limitation, an affiliated charitable foundation, a retired partner or member of a Holder); (ii) 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 (iii) after such transfer, holds at least 200,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); 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 Subsection 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 or stockholder 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.
6.2 Governing Law. This Agreement shall be governed by the internal law of the State of Delaware as applied to agreements entered into among Delaware residents to be performed entirely within Delaware without regard to principles of conflicts of law.
6.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the
same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
6.4 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.
6.5 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 the Schedules 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 Subsection 6.5. If notice is given to the Company, a copy (which itself shall not constitute notice) shall also be sent to Fenwick & West LLP, 801 California St., Mountain View, CA 94041, Attention: Cynthia Hess and Steve Levine, and if notice is given to any Investor or Key Holder, a copy shall also be given to any person or persons so designated by such Investor or Key Holder. If notice is given to Tiger Global Private Investment Partners VII, L.P. and/or Tiger Global Private Investment Partners XII, L.P., a copy (which itself shall not constitute notice) shall also be sent to Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP,1250 Broadway, 23rd Floor, New York, NY 10001, Attention: Steven L. Baglio.
6.6 Consent to Electronic Notice. Each Investor and Key Holder consents to the delivery of any stockholder notice pursuant to the Delaware General Corporation Law (the "DGCL"), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (or any successor thereto) at the electronic mail address set forth below such Investor's or Key Holder's name on the Schedules hereto, as updated from time to time by notice to the Company, or as on the books of the Company. To the extent that any notice given by means of electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted electronic notice shall be ineffective and deemed to not have been given. Each Investor and Key Holder agrees to promptly notify the Company of any change in such stockholder's electronic mail address, and that failure to do so shall not affect the foregoing.
6.7 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 55% of the shares of the shares of Common Stock then issued or issuable upon conversion of the shares of Preferred Stock held by the Investors (voting as a single class); provided that the Company may in its sole discretion waive compliance with Subsection 2.12(c); 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, (a) 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; (b) Subsection 5.4 and any other subsection
applicable to the specific rights of the Qualified Investors under Subsection 5.4 (including this clause (b) of this Subsection 6.7) may not be amended, modified, terminated or waived without the prior written consent of the holders of a majority of the shares of the shares of Common Stock then issued or issuable upon conversion of the shares of Series F Preferred Stock held by the Qualified Investors (voting as a separate class). Further, this Agreement may not be amended, and no provision hereof may be waived, in each case, in any way which would adversely affect the rights of the Key Holders hereunder in a manner disproportionate to any adverse effect such amendment or waiver would have on the rights of the Investors hereunder, without also the written consent of the holders of at least a majority of the Registrable Securities held by the Key Holders who are then providing services to the Company as officers, employees or consultants. 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 Subsection 6.7 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.
6.8 Waiver of Right of First Offer and Notice under the Prior Agreement. Pursuant to Section 6.6 of the Prior Agreement, the Company and the Requisite Holders hereby waive any and all purchase rights and related notice rights pursuant to Section 4.1 of the Prior Agreement with respect to the Company's issuance and sale of up to (a) 22,128,984 shares of Series F Preferred Stock pursuant to Section 1.1 of the Purchase Agreement and (b) 1,927,298 shares of Series F Preferred Stock pursuant to Section 1.3 of the Purchase Agreement.
6.9 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.
6.10 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.
6.11 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company's Series F Preferred Stock after the date hereof, any purchaser of such shares of Series F 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.
6.12 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. Upon the effectiveness of this Agreement, the Prior Agreement shall be deemed amended and restated and superseded and replaced in its entirety by this Agreement, and shall be of no further force or effect.
6.13 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and ( c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THE TRANSACTIONS HEREUNDER, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
Each party will bear its own costs in respect of any disputes arising under this Agreement. The prevailing party shall be entitled to reasonable attorney's fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled. Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in the U.S. District Court for the District of Delaware or any court of the State of Delaware having subject matter jurisdiction.
6.14 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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COMPANY:
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SENTINEL LABS, INC.
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By:
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/s/ Tomer Weingarten
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Name:
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Tomer Weingarten
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Title:
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Chief Executive Officer
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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KEY HOLDERS:
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/s/ Tomer Weingarten
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Tomer Weingarten
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Almog Cohen
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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KEY HOLDERS:
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Tomer Weingarten
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/s/ Almog Cohen
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Almog Cohen
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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INVESTOR:
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TIGER GLOBAL PRIVATE INVESTMENT PARTNERS VII, L.P.
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By:
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Tiger Global PIP Performance VII, L.P.
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Its General Partner
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By:
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Tiger Global PIP Management VII, Ltd.
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Its General Partner
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By:
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/s/ Steve Boyd
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Name:
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Steve Boyd
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Title:
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Director
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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INVESTOR
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TIGER GLOBAL PRIVATE INVESTMENT PARTNERS VII, L.P.
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By:
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Tiger Global PIP Performance XII, L.P.
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Its General Partner
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By:
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Tiger Global PIP Management XII, Ltd.
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Its General Partner
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By:
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/s/ Steve Boyd
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Name:
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Steven Boyd
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Title:
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General Counsel
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JOHN CURTIUS
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John Curtius
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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INVESTOR
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TIGER GLOBAL PRIVATE INVESTMENT PARTNERS XII, L.P.
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By:
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Tiger Global PIP Performance XII, L.P.
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Its General Partner
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By:
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Tiger Global PIP Management XII, Ltd.
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Its General Partner
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By:
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Name:
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Steve Boyd
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Title:
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General Counsel
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JOHN CURTIUS
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/s/ John Curtius
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John Curtius
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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INVESTORS:
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SCGE FUND, L.P.
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By:
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/s/ Kimberly Summe
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Name:
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Kimberly Summe
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Title:
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Chief Operating Officer and General Counsel
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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INVESTORS:
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INSIGHT VENTURE PARTNERS X, L.P.
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By:
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Insight Venture Associates X, L.P., its general partner
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By:
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Insight Venture Associates X, Ltd., its general partner
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By:
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/s/ Andrew Prodromos
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Name:
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Andrew Prodromos
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Title:
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Authorized Officer
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INSIGHT VENTURE PARTNERS (CAYMAN) X, L.P.
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By:
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Insight Venture Associates X, L.P., its general partner
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By:
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Insight Venture Associates X, Ltd., its general partner
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By:
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/s/ Andrew Prodromos
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Name:
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Andrew Prodromos
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Title:
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Authorized Officer
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INSIGHT VENTURE PARTNERS (DELAWARE) X, L.P.
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By:
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Insight Venture Associates X, L.P., its general partner
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By:
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Insight Venture Associates X, Ltd., its general partner
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By:
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/s/ Andrew Prodromos
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Name:
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Andrew Prodromos
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Title:
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Authorized Officer
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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INVESTORS:
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INSIGHT VENTURE PARTNERS X (CO- INVESTORS), L.P.
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By:
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Insight Venture Associates X, L.P., its general partner
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By:
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Insight Venture Associates X, Ltd., its general partner
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By:
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/s/ Andrew Prodromos
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Name:
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Andrew Prodromos
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Title:
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Authorized Officer
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SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Am ended and Restated Investors' Rights Agreement as of the date first written above.
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INVESTORS:
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THIRD POINT VENTURES LLC
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as nominee for funds managed and/or advised by Third Point LLC
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By:
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THIRD POINT LLC, its Attorney-in-Fact
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By:
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/s/ Josh Targoff
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Name:
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Josh Targoff
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Title:
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Partner, COO and General Counsel
|
Third Point Ventures LLC executes this signature page as nominee for funds managed and/or advised by Third Point LLC and not in its individual capacity.
SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
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|
INVESTORS:
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WESTLY CAPITAL PARTNERS FUND III, L.P.
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by its General Partner Westly Capital Associates III, L.L.C.
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By:
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/s/ Steve Westly
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Name:
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Steve Westly
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Title:
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Managing Member
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WESTLY CAPITAL PARTNERS FUND II, L.P.
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by its General Partner Westly Capital Associates II, L.L.C.
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By:
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/s/ Steve Westly
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Name:
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Steve Westly
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Title:
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Managing Member
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GREEN COMMUNITIES FUND, L.P.
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|
by its General Partner Green Communities Associates , L.L.C.
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By:
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/s/ Steve Westly
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Name:
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Steve Westly
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|
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Title:
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Managing Member
|
SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
|
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|
INVESTORS:
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|
ANCHORAGE ILLIQUID OPPORTUNITIES OFFSHORE MASTER V, L.P.
|
|
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|
By:
|
Anchorage Capital Group, L.L.C., its investment manager
|
|
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|
|
|
|
By:
|
/s/ Jason Cohen
|
|
|
Name:
|
Jason Cohen
|
|
|
Title:
|
Secretary
|
SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
|
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|
|
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|
INVESTORS:
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|
|
|
|
|
|
VISTA PUBLIC STRATEGIES FUND, L.P.
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|
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By:
|
Vista Public Strategies Fund GP, LLC, its General Partner
|
|
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|
|
|
|
By:
|
VEP Group, LLC, its Senior Managing Member
|
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|
|
By:
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/s/ Robert F. Smith
|
|
|
|
|
|
|
Name:
|
Robert F. Smith
|
|
|
|
|
|
|
Title:
|
Managing Member
|
SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
|
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|
|
|
|
|
|
|
|
|
|
INVESTORS:
|
|
|
|
|
|
|
|
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|
|
SINEWAVE VENTURES FUND I, L.P.
|
|
|
By:
|
SineWave Ventures GP, LLC its General Partner
|
|
|
|
|
|
|
By:
|
/s/ Yanev Suissa
|
|
|
|
|
|
|
Name:
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Yanev Suissa
|
|
|
|
|
|
|
Title:
|
Managing Member
|
|
|
|
|
|
|
SINEWAVE VENTURES DIRECT 3B, L.P.
|
|
|
By:
|
SineWave Ventures GP, LLC its General Partner
|
|
|
|
|
|
|
By:
|
/s/ Yanev Suissa
|
|
|
|
|
|
|
Name:
|
Yanev Suissa
|
|
|
|
|
|
|
Title:
|
Managing Member
|
SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
|
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|
|
|
|
|
|
|
|
|
|
INVESTORS:
|
|
|
|
|
|
|
REDPOINT OMEGA II, L.P.
|
|
|
By:
|
Redpoint Omega II, LLC Its general partner
|
|
|
|
|
|
|
By:
|
/s/ R. Thomas Dyal
|
|
|
Name:
|
R. Thomas Dyal
|
|
|
|
|
|
|
Title:
|
Managing Director
|
|
|
|
|
|
|
REDPOINT OMEGA ASSOCIATES II, LLC, as nominee
|
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|
|
|
|
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|
By:
|
/s/ R. Thomas Dyal
|
|
|
Name:
|
R. Thomas Dyal
|
|
|
|
|
|
|
Title:
|
Managing Director
|
SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
|
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|
|
|
|
|
|
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|
|
|
INVESTORS:
|
|
|
|
|
|
|
DATA COLLECTIVE II, L.P.
on behalf of itself and as nominee for Data Collective II Alpha, L.P., and certain affiliated entities
|
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|
|
|
|
|
By:
|
Data Collective II GP, LLC
|
|
|
Its:
|
General Partner
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Zachary Bogue
|
|
|
Name:
|
Zachary Bogue
|
|
|
Title:
|
Managing Member
|
|
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|
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|
DCVC OPPORTUNITY FUND II, L.P.
on behalf of itself and as nominee for certain affiliated entities
|
|
|
|
|
|
|
By:
|
DCVC Opportunity Fund II GP, LLC
|
|
|
Its:
|
General Partner
|
|
|
|
|
|
|
By:
|
/s/ Zachary Bogue
|
|
|
Name:
|
Zachary Bogue
|
|
|
Title:
|
Managing Member
|
SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amended and Restated Investors' Rights Agreement as of the date first written above.
|
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|
|
|
|
|
|
|
|
|
|
INVESTORS:
|
|
|
|
|
|
|
GRANITE HILL OPPORTUNITIES FUND II, L.P.
|
|
|
|
|
|
|
By:
|
GH Opportunities GP II, LLC
|
|
|
Its:
|
general partner
|
|
|
|
|
|
|
By:
|
/s/ Sameet Mehta
|
|
|
|
|
|
|
Name:
|
Sameet Mehta
|
|
|
|
|
|
|
Title:
|
Managing Member
|
SIGNATURE PAGE TO SIXTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
SCHEDULE A
SERIES SEED INVESTORS
|
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Name and Address
|
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|
Granite Hill India Opportunities Fund, L.P.
|
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|
Granite Hill India Parallel Fund, L.P.
|
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|
Data Collective II, L.P.
|
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|
|
|
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|
CC11 (B) L.L.C.
|
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|
|
|
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|
|
|
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|
|
|
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|
|
Dan and Zoë Scheinman Family Trust
|
|
|
Dated 2/23/01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elan Scheinman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Address
|
|
|
|
|
|
Roushan A. Zenooz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andreas Bechtolsheim
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
LIC Sound, LLC
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
SCHEDULE B
SERIES A INVESTORS
|
|
|
|
|
|
|
|
Tiger Global Private Investment Partners VII, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With a copy (which shall not constitute notice) to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westly Capital Partners Fund II, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Data Collective II, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CC11 (B) L.L.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dan and Zoë Scheinman Family Trust
|
|
|
Dated 2/23/01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elan Scheinman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roushan A. Zenooz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andreas Bechtolsheim
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granite Hill India Opportunities Fund, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granite Hill India Parallel Fund, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE C
SERIES B INVESTORS
|
|
|
|
|
|
|
Third Point Ventures LLC
as nominee for funds managed and/or advised by
Third Point LLC
|
|
|
|
|
|
as nominee for funds managed and/or advised by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With copies to (which shall not constitute notice):
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SineWave Ventures Fund I, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tiger Global Private Investment Partners VII, L.P.
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With a copy (which shall not constitute notice) to:
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Data Collective II, L.P.
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Westly Capital Partners Fund II, L.P.
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Granite Hill India Opportunities Fund, L.P.
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Granite Hill India Parallel Fund, L.P.
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Pradeep & Juhi Aswani Trust
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Green Communities Fund, L.P.
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SCHEDULE D
SERIES C INVESTORS
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Redpoint Omega II, L.P.
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Redpoint Omega Associates II, LLC
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Exclusive Ventures SA
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ITV Ventures IV, Inc.
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Third Point Ventures LLC
as nominee for funds managed
and/or advised by
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Third Point LLC
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With copies to (which shall not constitute notice):
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and
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SineWave Ventures Fund I, L.P.
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SineWave Ventures Direct 3, L.P.
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Anchorage IIliquid Opportunities Offshore Master V, L.P.
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DCVC Opportunity Fund II, L.P.
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Westly Capital Partners Fund II, L.P.
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Green Communities Fund
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Granite Hill Opportunities Fund II, L.P.
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LIC Sound, LLC
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Andreas Bechtolscheim
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Vintage Investment Partners VIII (Cayman) L.P.
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Vintage Investment Partners VIII (Israel) L.P.
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Vintage Opportunity Fund, L.P.
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SCHEDULE E
SERIES D INVESTORS
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Anchorage Illiquid Opportunities Offshore Master V, L.P.
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DCVC Opportunity Fund II, L.P.
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Green Communities Fund
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Granite Hill Opportunities Fund II, L.P.
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Redpoint Omega II, L.P
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Redpoint Omega Associates II, LLC
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Third Point Ventures LLC
as nominee for funds managed
and/or advised by
Third Point LLC
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With copies to (which shall not constitute notice):
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and
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Vintage Investment Partners VIII (Cayman) L.P.
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Vintage Investment Partners VIII (Israel) L.P.
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Vintage Opportunity Fund, L.P.
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Westly Capital Partners Fund II, L.P.
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Westly Capital Partners Fund III, L.P.
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SVIC No. 39 New Technology Business Investment L.L.P.
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ITV Ventures IV, Inc.
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NextEquity Partners LLC
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Insight Venture Partners X, L.P.
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with a copy to (which shall not constitute notice):
|
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Insight Venture Partners (Cayman) X, L.P.
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with a copy to (which shall not constitute notice):
|
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Insight Venture Partners X (Co-Investors), L.P.
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with a copy to (which shall not constitute notice):
|
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Insight Venture Partners (Delaware) X, L.P.
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With a copy (which shall not constitute notice) to:
|
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SCHEDULE F
SERIES E INVESTORS
|
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|
Insight Venture Partners X, L.P.
|
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|
Insight Venture Partners X (Co-Investors), L.P.
|
|
Insight Venture Partners (Cayman) X, L.P.
|
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|
Insight Venture Partners (Delaware) X, L.P.
|
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With a copy (which shall not constitute notice) to:
|
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Third Point Ventures LLC
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|
as nominee for funds managed and/or advised by Third Point LLC
|
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With copies to (which shall not constitute notice):
|
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and
|
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Tiger Global Private Investment Partners VII, L.P.
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With a copy (which shall not constitute notice) to:
|
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John Curtius
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With a copy (which shall not constitute notice) to:
|
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Anchorage Illiquid Opportunities Offshore Master V, L.P.
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Redpoint Omega II, L.P.
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Redpoint Omega Associates II, LLC
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Data Collective II, L.P.
|
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NextEquity Partners LLC
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|
Green Communities Fund, L.P.
|
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|
Westly Capital Partners Fund II, L.P.
|
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Westly Capital Partners Fund III, L.P.
|
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SineWave Ventures Fund I, L.P.
|
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SineWave Ventures Direct 3A, L.P.
|
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Integrated Healthcare Services Group, LLC
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Alta Park Partners, LLC, General Partner of Alta Park Fund, LP
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Vista Public Strategies Fund, L.P.
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Qualcomm Ventures LLC
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SCHEDULE G
SERIES F INVESTORS
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Tiger Global Private Investment Partners XII, L.P.
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With a copy (which shall not constitute notice) to:
|
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|
John Curtius
|
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With a copy (which shall not constitute notice) to:
|
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SCGE Fund, L.P.
|
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Insight Venture Partners X, L.P.
|
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|
Insight Venture Partners X (Co-Investors), L.P.
|
|
Insight Venture Partners (Cayman) X, L.P.
|
|
|
lnsight Venture Partners (Delaware) X, L.P.
|
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|
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Third Point Ventures LLC
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as nominee for funds managed and/or advised by Third Point LLC
|
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With copies to (which shall not constitute notice)
|
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and
|
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Westly Capital Partners Fund III, L.P.
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|
Westly Capital Partners Fund II, L.P.
|
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|
Green Communities Fund, L.P.
|
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Granite Hill Opportunities Fund II, L.P.
|
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Anchorage Illiquid Opportunities Offshore Master V, L.P.
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Vista Public Strategies Fund, L.P.
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SineWave Ventures Fund I, L.P
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SineWave Ventures Direct 3A, L.P.
|
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SCHEDULE H
KEY HOLDERS
|
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Tomer Weingarten
|
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Almog Cohen
|
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Udi Shamir
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THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE STOCK
Company: SentinelOne, Inc., a Delaware corporation
Number of Shares: As set forth in Paragraph A below
Type/Series of Stock: Common Stock, $0.0001 par value per share
Warrant Price: $____ per Share, subject to adjustment
Issue Date: ___________
Expiration Date: ___________ See also Section 5.1(b).
Credit Facility: This Warrant to Purchase Stock (“Warrant”) is issued in connection with that certain Loan and Security Agreement of even date herewith among Silicon Valley Bank, the Company and the other party thereto (as amended and/or modified and in effect from time to time, the “Loan Agreement”).
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY BANK (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase up to such number of fully paid and non-assessable shares of the above-stated Type/Series of Stock (the “Class”) of the above-named company (the “Company”) as determined pursuant to Paragraph A below, at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Reference is made to Section 5.4 of this Warrant whereby Silicon Valley Bank shall transfer this Warrant to its parent company, SVB Financial Group.
A. Number of Shares. This Warrant shall be exercisable for the Initial Shares, plus the Additional Shares, if any (collectively, and as may be adjusted from time to time pursuant to the provisions of this Warrant, the “Shares”).
(1) Initial Shares. As used herein, “Initial Shares” means ______ shares of the Class, subject to adjustment from time to time pursuant to the provisions of this Warrant.
(2) Additional Shares. Upon the making of each Term Loan Advance (as defined in the Loan Agreement) to the Company, this Warrant automatically shall become exercisable for such number of additional shares of the Class as shall equal (a) the Additional Shares Pool, multiplied by (b) a fraction, the numerator of which shall equal the amount of such Term Loan Advance and the denominator of which shall equal $__________, subject to adjustment thereafter from time to time in accordance with the provisions of this Warrant. All shares, if any, for which this Warrant becomes exercisable pursuant to this Paragraph A(2) are referred to herein cumulatively as the “Additional Shares.
(3) Additional Shares Pool. As used herein, “Additional Shares Pool” means ______ shares of the Class, as such number may be adjusted from time to time in accordance with the provisions of this Warrant (as if the Additional Shares Pool constituted “Shares” at all times for such purpose).
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
SECTION 1. EXERCISE.
1.1 Method of Exercise. Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise. On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:
X = Y(A-B)/A
where:
X = the number of Shares to be issued to the Holder;
Y = the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);
A= the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and
B = the Warrant Price.
1.3 Fair Market Value. If shares of the Class are then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”), the fair market value of a Share shall be the closing price or last sale price of a share of the Class reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If shares of the Class are not then traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant. Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition. For the purpose of this Warrant, “Acquisition” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company; (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
(b) Treatment of Warrant at Acquisition. In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), and the fair market value of one Share as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant pursuant to Section 1.1 above as to all Shares, then this Warrant shall automatically be deemed to be Cashless Exercised pursuant to Section 1.2 above as to all Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as of the date thereof and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.
(c) Upon the closing of any Acquisition other than a Cash/Public Acquisition, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(d) As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in a Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
1.7 Certain Agreements. Following any exercise of this Warrant and solely with respect to the Shares issued thereupon, Holder shall, if the Company so requests in writing, become a party, by execution and delivery to the Company of a counterpart signature page, joinder agreement, instrument of accession or similar instrument, to that certain Third Amended and Restated Investors' Rights Agreement, dated as of January 12, 2017 (the “Rights Agreement”), by and among the Company and certain of the Company’s stockholders (as may be amended from time to time) or similar agreement and that certain Third Amended and Restated Voting Agreement, dated as of January 12, 2017, by and among the Company and certain of the Company's stockholder (as may be amended from time to time), in each case only if (i) holders of not less than eighty percent (80%) of the then-outstanding shares of the Class are then parties thereto, and (ii) such agreement is then by its terms in force and effect. Provided that the conditions described in the foregoing clauses (i) and (ii) are met as to any such agreement at the time of any exercise of this Warrant, Holder shall, effective upon such exercise, automatically become bound by, and the Shares issued upon such exercise automatically become subject to, such agreement.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in additional shares of the Class or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution. Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, replacements or other similar events.
2.3 No Fractional Share. No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
2.4 Notice/Certificate as to Adjustments. Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company represents and warrants to, and agrees with, the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the fair market value of a share of the Class as determined by the most recently completed valuation, approved by the Company’s Board of Directors, of the Company’s stock for purposes of its compliance with Section 409A of the Internal Revenue Code of 1986, as amended.
(b) The number of Initial Shares first set forth above together with the Additional Shares Pool first set forth above collectively represents not less than 0.4250% of the Company's total issued and outstanding shares of common stock, calculated on and as of the Issue Date hereof on a fully-diluted, common stock-equivalent basis assuming (i) the conversion into common stock of all outstanding securities and instruments (including, without limitation, securities deemed to be outstanding pursuant to clause (ii) of this Section 3.1(b)) convertible by their terms into shares of common stock (regardless of whether such securities or instruments are by their terms now so convertible), (ii) the exercise in full of all outstanding options, warrants (including, without limitation, this Warrant) and other rights to purchase or acquire shares of common stock or securities exercisable for or convertible into shares of common stock (regardless of whether such options, warrants or other rights to purchase or acquire are by their terms now exercisable); and (iii) the inclusion of all shares of common stock reserved for issuance under all of the Company’s incentive stock and stock option plans and not now subject to outstanding grants or options.
(c) All Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of the Class and other securities as will be sufficient to permit the exercise in full of this Warrant.
(d) The Company’s capitalization table attached hereto as Schedule 1 is true and complete, in all material respects, as of the Issue Date.
3.2 Notice of Certain Events. If the Company proposes at any time to:
(a) declare any dividend or distribution upon the outstanding shares of the Class, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);
(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class;
(d) effect an Acquisition or to liquidate, dissolve or wind up; or
(e) effect its initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under the Act (the “IPO”);
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
then, in connection with each such event, the Company shall give Holder:
(1) in the case of the matters referred to in (a) and (b) above, at least seven (7) Business Days prior written notice of the earlier to occur of the effective date thereof or the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any;
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event and such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such event giving rise to the notice); and
(3) with respect to the IPO, at least seven (7) Business Days prior written notice of the date on which the Company proposes to file its registration statement in connection therewith.
The Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder's accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER.
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account. This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.
4.2 Disclosure of Information. Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder's investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
4.4 Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.
4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.
4.6 No Voting Rights. Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
4.7 Market Stand-off Agreement. The Holder agrees that the Shares shall be subject to the Market Standoff provisions of the Rights Agreement.
SECTION 5. MISCELLANEOUS.
5.1 Term; Automatic Cashless Exercise Upon Expiration.
(a) Term. Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the Expiration Date and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares issued upon such exercise to Holder.
5.2 Legends. Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AM ENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED MAY 8, 2018, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issued upon exercise of this Warrant may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
not require Holder to provide an opinion of counsel if the transfer is to SVB Financial Group (Silicon Valley Bank’s parent company) or any other affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.
5.4 Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group. By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issued upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant and/or Shares being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company's prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices. All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
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Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
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With a copy (which shall not constitute notice) to:
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5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
5.8 Counterparts; Facsimile/Electronic Signatures. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
5.10 Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
5.11 Business Days. “Business Day” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
[Remainder of page left blank intentionally]
[Signature page follows]
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.
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“COMPANY”
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SENTINELONE, INC.
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By:
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Name:
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Title:
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CEO
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“HOLDER”
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SILICON VALLEY BANK
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Title:
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Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right to purchase _____________ shares of the Common/Series _____________ Preferred [circle one] Stock of ___________________ (the “Company”) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
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check in the amount of $_________ payable to order of the Company enclosed herewith
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Wire transfer of immediately available funds to the Company’s account
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Cashless Exercise pursuant to Section 1.2 of the Warrant
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Other [Describe]
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2. Please issue a certificate or certificates representing the Shares in the name specified below:
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.
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HOLDER:
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Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
SCHEDULE 1
Company Capitalization Table
See attached
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INDEMNITY AGREEMENT
This Indemnity Agreement (the “Agreement”), dated as of _______________, is made by and between SentinelOne, Inc., a Delaware corporation (the “Company”), and ______________________, a director, officer or key employee of the Company or one of the Company’s Subsidiaries or Affiliates (as those terms are defined below) or other service provider who satisfies the definition of Indemnifiable Person set forth below (“Indemnitee”).
RECITALS
A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as representatives of corporations unless they are protected by comprehensive liability insurance and indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no relationship to the compensation of such representatives;
B. The members of the Board of Directors of the Company (the “Board”) have concluded that to retain and attract talented and experienced individuals to serve as representatives of the Company and its Subsidiaries and Affiliates and to encourage such individuals to take the business risks necessary for the success of the Company and its Subsidiaries and Affiliates, it is necessary for the Company to contractually indemnify certain of its representatives and the representatives of its Subsidiaries and Affiliates, and to assume for itself maximum liability for Expenses and Other Liabilities (as those terms are defined below) in connection with claims against such representatives in connection with their service to the Company and its Subsidiaries and Affiliates;
C. Section 145 of the Delaware General Corporation Law (“Section 145”), empowers the Company to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Company, as directors, officers, employees or agents of other corporations, partnerships, joint ventures, trusts or other enterprises. The Bylaws of the Company (the “Bylaws”) require indemnification of the directors and officers of the Company subject to specific terms and conditions. Indemnitee may also be entitled to indemnification pursuant to Section 145. The Bylaws and Section 145 expressly provide that the indemnification pursuant thereto is 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.
D. This Agreement is a supplement to and in furtherance of the Bylaws and any resolutions adopted pursuant thereto, as well as any rights of Indemnitees under the Delaware General Corporation Law (the “DGCL”) or any directors and officers liability insurance policy or other applicable insurance policies, and this Agreement shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
E. The Company desires and has requested Indemnitee to serve or continue to serve as a representative of the Company and/or the Subsidiaries or Affiliates of the Company free from undue concern about inappropriate claims for damages arising out of or related to such services to the Company and/or the Subsidiaries or Affiliates of the Company.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions.
(a) Affiliate. For purposes of this Agreement, “Affiliate” of the Company means any corporation, partnership, limited liability company, joint venture, trust or other enterprise or non-profit entity in respect of which Indemnitee is or was or will be serving as a director, officer, trustee, manager, member, partner, employee, agent, attorney, consultant, member of the entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise), fiduciary, or in any other similar capacity at the request, election or direction of the Company, and including, but not limited to, any employee benefit plan of the Company or a Subsidiary or Affiliate of the Company.
(b) Change in Control. For purposes of this Agreement, “Change in Control” means any event or circumstance where (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than a Subsidiary or a trustee or other fiduciary holding securities under an employee benefit plan of the Company or Subsidiary, is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding capital stock, (ii) during any period of two 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 Sections 1(b)(i), 1(b)(iii) or 1(b)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board, (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the outstanding capital stock of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) at least 50% of the total voting power represented by the capital stock of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.
(c) Expenses. For purposes of this Agreement, “Expenses” means all reasonable and reasonably documented direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements, and other out-of-pocket costs) actually paid or incurred by Indemnitee in connection with the investigation, defense or appeal of, or being a witness or otherwise involved in (i) a Proceeding (as defined below), or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise; provided, however, that Expenses shall not include any judgments, fines, taxes (including ERISA or other benefit plan related excise taxes or penalties) or amounts paid in settlement of a Proceeding; (ii) any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent; or (iii) recovery under any directors and officers liability insurance policies or other applicable insurance policies maintained by the Company,
regardless of whether Indemnitee is ultimately determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.
(d) Indemnifiable Event. For purposes of this Agreement, “Indemnifiable Event” means any event or occurrence related to Indemnitee’s service for the Company or any Subsidiary or Affiliate as an Indemnifiable Person (as defined below), or by reason of anything done or not done, or any act or omission, by Indemnitee in any such capacity.
(e) Indemnifiable Person. For the purposes of this Agreement, “Indemnifiable Person” means any person who is or was a director, officer, trustee, manager, member, partner, employee, attorney, consultant, member of an entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise) or other agent or fiduciary of the Company or a Subsidiary or Affiliate of the Company.
(f) Independent Counsel. For purposes of this Agreement, “Independent Counsel” means legal counsel (i) who has not performed services for the Company or Indemnitee in the five years preceding the time in question and who would not, under applicable standards of professional conduct, have a conflict of interest in representing either the Company or Indemnitee, and (ii) is selected by Indemnitee and approved by the Board, which approval may not be unreasonably withheld, delayed or conditioned.
(g) Independent Director. For purposes of this Agreement, “Independent Director” means a member of the Board who is not a party to the Proceeding for which a claim for advancement or indemnification is made under this Agreement.
(h) Other Liabilities. For purposes of this Agreement, “Other Liabilities” means any and all liabilities of any type whatsoever, including, but not limited to, judgments, fines, penalties, taxes (including excise taxes or penalties related to ERISA or other benefit plans), and amounts paid in settlement, and all interest, taxes, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, or penalties or amounts paid in settlement.
(i) Proceeding. For the purposes of this Agreement, “Proceeding” means any threatened, pending, or completed action, suit, claim or other proceeding, whether civil, criminal, administrative, investigative, legislative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution and including any appeal of any of the foregoing.
(j) Subsidiary. For purposes of this Agreement, “Subsidiary” means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an Indemnifiable Person in the capacity or capacities in which Indemnitee currently serves the Company as an Indemnifiable Person, and any additional capacity or capacities in which Indemnitee may agree to serve, until such time as Indemnitee’s service in a particular capacity shall end according to the terms of an agreement, the Company’s Certificate of Incorporation (the “Certificate of Incorporation”) or Bylaws, governing law, or otherwise. Nothing contained in this Agreement is intended to create any right to continued employment or other form of service for the Company or a Subsidiary or Affiliate of the Company by Indemnitee.
3. Mandatory Indemnification.
(a) Agreement to Indemnify. In the event Indemnitee is a person who was or is a party to or witness in or is threatened to be made a party to or witness in any Proceeding by reason of an Indemnifiable Event, the Company shall indemnify Indemnitee from and against any and all Expenses and Other Liabilities incurred by Indemnitee in connection with (including in preparation for) such Proceeding to the fullest extent permitted by the DGCL, as the same may be amended from time to time (but only to the extent that such amendment permits the Company to provide broader indemnification rights than the DGCL permitted prior to the adoption of such amendment), provided that such indemnification is subject to the exclusions set forth in Section 9 below. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Certificate of Incorporation, the Bylaws, vote of the Company’s stockholders or disinterested directors or applicable law.
(b) Company Obligations Primary. The Company hereby acknowledges that Indemnitee may have rights to advancement and/or indemnification for Expenses and Other Liabilities provided by a venture capital firm or other sponsoring organization (“Other Indemnitor”). The Company agrees with Indemnitee that the Company is the indemnitor of first resort of Indemnitee with respect to matters for which advancement and/or indemnification is provided under this Agreement and that the Company will be obligated to make all payments due to or for the benefit of Indemnitee under this Agreement without regard to any rights that Indemnitee may have against the Other Indemnitor. To the extent not in contravention of any insurance policy purchased by the Company, Subsidiary or Affiliate, the Company hereby waives any equitable rights to contribution or indemnification from the Other Indemnitor in respect of any amounts paid to Indemnitee hereunder. The Company further agrees that no reimbursement of Other Liabilities or payment of Expenses by the Other Indemnitor to or for the benefit of Indemnitee shall affect the obligations of the Company hereunder, and that the Company shall be obligated to repay the Other Indemnitor for all amounts so paid or reimbursed to the extent that the Company has an obligation to pay Indemnitee for such Expenses or Other Liabilities hereunder.
4. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses or Other Liabilities but not entitled, however, to indemnification for the total amount of such Expenses or Other Liabilities, the Company shall nevertheless indemnify Indemnitee for such total amount except as to the portion thereof for which indemnification is prohibited by this Agreement or the DGCL. In any review, process and/or Proceeding to determine the extent of indemnification to which Indemnitee is entitled, the Company shall bear the burden to establish, by clear and convincing evidence, the lack of a successful resolution of a particular claim, issue or matter and which amounts sought in indemnity are allocable to claims, issues or matters that were not successfully resolved.
5. Liability Insurance. So long as Indemnitee shall continue to serve the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person and thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding as a result of an Indemnifiable Event, the Company shall use reasonable efforts to maintain in full force and effect for the benefit of Indemnitee as an insured (i) directors and officers liability insurance issued by one or more reputable insurers and having the policy amount and deductible deemed appropriate by the Board and providing in all respects coverage at least comparable to and in the same amount as that provided to the Chairman of the Board or the Chief Executive Officer of the Company, and (ii) any renewal, replacement or substitute directors and officers liability insurance policies issued by one or more reputable insurers providing in all respects coverage at least comparable to and in the same amount as that being provided
to the Chairman of the Board or the Chief Executive Officer of the Company. The purchase, establishment and maintenance of any such insurance or other arrangements shall not in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such insurance or other arrangement. In the event of a Change in Control subsequent to the date of this Agreement, or the Company’s becoming insolvent (including but not limited to being placed into receivership, an assignment for the benefit of creditors, or entering the federal bankruptcy process), the Company shall use reasonable efforts to maintain in force any and all insurance policies then maintained by the Company for the purpose of providing coverage to the Company’s officers or directors (including but not limited to directors and officers liability, fiduciary and employment practices insurance) for a fixed period of no less than six years thereafter. Such coverage shall be non-cancelable and shall be placed and serviced by the Company’s incumbent insurance broker or a broker selected by a majority of the non-management members of the Board.
6. Mandatory Advancement of Expenses. If requested by Indemnitee, the Company shall advance, to the fullest extent permitted by law, prior to the final disposition of the Proceeding, all Expenses incurred by Indemnitee in connection with (including in preparation for) a Proceeding not initiated by Indemnitee (and any Proceeding initiated by Indemnitee to the extent such Proceeding is initiated by Indemnitee in accordance with clauses (i)-(iii) of Section 9(a) of this Agreement) related to an Indemnifiable Event within (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. The right to advances under this Section shall in all events continue until final disposition of any Proceeding, including any appeal therefrom and/or a final adjudication not subject to further appeal. Indemnitee hereby undertakes to repay such amounts advanced if, and only if and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company and no additional form of undertaking with respect to such obligation to repay shall be required. Indemnitee’s undertaking to repay any Expenses advanced to Indemnitee hereunder shall be unsecured and shall not be subject to the accrual or payment of any interest thereon. This Section 6 shall not apply to any request for advancement of Expenses made by Indemnitee for which such advancement of Expenses is excluded pursuant to Section 9 of this Agreement.
7. Notice and Other Indemnification Procedures.
(a) Notification. Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, unless the Company is a named co-defendant with Indemnitee (or the Company is the recipient of such threat), Indemnitee shall, if Indemnitee believes the advancement of Expenses or the indemnification of Other Liabilities with respect thereto may be sought from the Company under this Agreement, notify the Company in writing of the commencement or threat of commencement thereof. The written notification to the Company shall include, in reasonable detail, a description of the nature of and facts related to the Proceeding. However, a failure by Indemnitee to notify the Company promptly following Indemnitee’s receipt of such notice shall not relieve the Company from any liability that it may have to Indemnitee except to the extent that the Company is materially prejudiced in its defense of such Proceeding as a result of such failure, provided, however, that the Company shall have the burden to prove the existence of such material prejudice by clear and convincing evidence.
(b) Insurance Notice and Other Matters. If, at the time of the receipt of a notice of the commencement of a Proceeding pursuant to Section 7(a) above, the Company has director and
officer liability insurance and/or any other type of insurance that might provide coverage to Indemnitee in effect, the Company shall give prompt notice of the commencement of such Proceeding on behalf of Indemnitee to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all commercially reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such insurance policies. In addition, the Company will instruct the insurers and the Company’s insurance broker that they may communicate directly with Indemnitee regarding such Proceeding.
(c) Assumption of Defense. In the event the Company shall be obligated to advance Expenses for any Proceeding against Indemnitee, the Company, if deemed appropriate by the Company, shall be entitled to assume the defense of such Proceeding as provided herein. Such defense by the Company may include the representation of two or more parties by one attorney or law firm as permitted under the ethical rules and legal requirements related to joint representations. Following delivery of written notice to Indemnitee of the Company’s election to assume the defense of such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld, delayed or conditioned) of counsel designated by the Company, and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees and expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. If (i) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (ii) Indemnitee shall have notified the Board in writing that Indemnitee or separate counsel for Indemnitee has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, (iii) the Company fails to employ counsel to assume the defense of such Proceeding, or (iv) after a Change in Control, the employment of counsel by Indemnitee has been approved by Independent Counsel, the Expenses related to work conducted by Indemnitee’s counsel shall be subject to indemnification and/or advancement pursuant to the terms of this Agreement. Indemnitee agrees that any such separate counsel retained by Indemnitee will be a member of any approved list of panel counsel under the Company’s applicable insurance policies, should the applicable policies provide for a panel of approved counsel. Nothing herein shall prevent Indemnitee from employing counsel for any Proceeding at Indemnitee’s own expense.
(d) Settlement. The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company’s written consent; provided, however, that if a Change in Control has occurred subsequent to the date of this Agreement, the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if Independent Counsel has approved the settlement. Neither the Company nor any Subsidiary or Affiliate shall enter into a settlement of any Proceeding that might result in the imposition of any Expense, Other Liability, penalty, limitation or detriment on Indemnitee, whether indemnifiable under this Agreement or otherwise, without Indemnitee’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold, delay or condition consent from any settlement of any Proceeding. The Company shall promptly notify Indemnitee upon the Company’s receipt of an offer to settle, or if the Company makes an offer to settle, any Proceeding, and provide Indemnitee with a reasonable amount of time to consider such settlement, in the case of any such settlement for which the consent of Indemnitee would be required hereunder. The Company shall not settle any part of any Proceeding to which Indemnitee is a party with respect to other parties (including the Company) without the written consent of Indemnitee if any portion of the settlement is to be funded from insurance proceeds paid from an insurance policy or policies providing coverage to Indemnitee unless approved by a majority of the Independent Directors, provided that this sentence shall cease to be of any force and effect if it has been determined in accordance with this Agreement that Indemnitee is not entitled to
indemnification hereunder with respect to such Proceeding or if the Company’s obligations hereunder to Indemnitee with respect to such Proceeding have been fully discharged.
8. Determination of Right to Indemnification.
(a) Success on the Merits or Otherwise. To the extent that Indemnitee has been successful on the merits or otherwise in the defense of any Proceeding referred to in Section 3(a) above or in the defense of any claim, issue or matter described therein, the Company shall indemnify Indemnitee against Expenses incurred in connection therewith.
(b) Indemnification in Other Situations. In the event that Section 8(a) is inapplicable, the Company shall also indemnify Indemnitee if Indemnitee has met the applicable standard of conduct for indemnification to the fullest extent permitted by law.
(c) Determination of Entitlement to Indemnification. Indemnitee shall be entitled to select the manner in which the determination of whether or not Indemnitee has met the applicable standard of conduct shall be decided, and such election will be made from among the following:
i. A majority of the Independent Directors even though less than a quorum;
ii. A committee of Independent Directors designated by a majority vote of Independent Directors, even though less than a quorum; or
iii. Independent Counsel, who shall make such determination in a written opinion.
If Indemnitee is an officer or a director of the Company at the time that Indemnitee is selecting the manner in which the determination of whether Indemnitee has met the applicable standard of conduct shall be decided, then Indemnitee shall not select Independent Counsel as the manner for the determination to be made unless (i) there are no Independent Directors, or (ii) a majority of the Independent Directors (even though less than a quorum) approve of the selection of Independent Counsel, which approval may not be unreasonably withheld, delayed or conditioned.
The party or parties selected in accordance with this Section 8(c) shall be referred to herein as the “Reviewing Party.” Notwithstanding the foregoing, following any Change in Control subsequent to the date of this Agreement, the Reviewing Party shall be Independent Counsel.
(d) Decision Timing. As soon as practicable, and in no event later than thirty (30) days after receipt by the Company of written notice of Indemnitee’s choice of the Reviewing Party pursuant to Section 8(c) above, the Company and Indemnitee shall each submit to the Reviewing Party such information as they believe is appropriate for the Reviewing Party to consider. The Reviewing Party shall arrive at its decision within a reasonable period of time following the receipt of all such information from the Company and Indemnitee, but in no event later than thirty (30) days following the receipt of all such information, provided that the time by which the Reviewing Party must reach a decision may be extended by mutual agreement of the Company and Indemnitee. All Expenses associated with the process set forth in this Section 8(d), including but not limited to the Expenses of the Reviewing Party, shall be paid by the Company.
(e) Delaware Court of Chancery. Notwithstanding a final determination by any Reviewing Party that Indemnitee is not entitled to indemnification with respect to a specific Proceeding,
Indemnitee shall have the right to apply to the Delaware Court of Chancery, for the purpose of enforcing Indemnitee’s right to indemnification pursuant to this Agreement.
(f) Expenses. The Company shall indemnify Indemnitee against all Expenses incurred by Indemnitee in connection with any process, hearing or Proceeding under this Section 8 involving Indemnitee and against all Expenses incurred by Indemnitee in connection with any other Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the rights of Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims of Indemnitee in any such Proceeding was frivolous or made in bad faith.
(g) Determination of “Good Faith”. For purposes of any determination of whether Indemnitee acted in “good faith” or acted in “bad faith,” Indemnitee shall be deemed to have acted in good faith or not acted in bad faith if, in taking or failing to take the action in question, Indemnitee relied on the records or books of account of the Company or a Subsidiary or Affiliate, including financial statements, or on information, opinions, reports or statements provided to Indemnitee by the officers or other employees of the Company or a Subsidiary or Affiliate in the course of their duties, or on the advice of legal counsel for the Company or a Subsidiary or Affiliate, or on information or records given or reports made to the Company or a Subsidiary or Affiliate by an independent certified public accountant or by an appraiser or other expert selected by the Company or a Subsidiary or Affiliate, or by any other person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other person’s professional or expert competence and who has or have been selected with reasonable care by or on behalf of the Company or a Subsidiary or Affiliate. In connection with any determination as to whether Indemnitee is entitled to be indemnified hereunder, the Reviewing Party or court shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on the Company to establish, by clear and convincing evidence, that Indemnitee is not so entitled. The provisions of this Section 8(g) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failures to act, of any other person serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person shall not be imputed to Indemnitee for purposes of determining the right to indemnification hereunder.
9. Exceptions. Any other provision herein to the contrary notwithstanding, Indemnitee’s rights to indemnification and/or advancement are subject to the following exceptions.
(a) Claims Initiated by Indemnitee. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (i) with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement, any other statute or law, as permitted under Section 145, or otherwise, (ii) where the Board has consented to the initiation of such Proceeding, or (iii) with respect to Proceedings brought to discharge Indemnitee’s fiduciary responsibilities, whether under ERISA or otherwise, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board finds it to be appropriate.
(b) Actions Based on Federal Statutes Regarding Profit Recovery and Return of Bonus Payments. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of (i) any suit in which judgment is rendered against Indemnitee by a court of competent jurisdiction in a final adjudication not subject to further appeal for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Exchange Act and amendments thereto or similar provisions of any federal, state or local statutory law, (ii) any reimbursement paid to the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act, including but not limited to any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act; or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act.
(c) Unlawful Indemnification. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for Other Liabilities if such indemnification is prohibited by law as determined by a court of competent jurisdiction in a final adjudication not subject to further appeal.
(d) Exception for Amounts Covered by Insurance and Other Sources. The Company shall not be obligated to advance or indemnify Indemnitee for Expenses or Other Liabilities of any type whatsoever, including, but not limited to judgments, fines, penalties, taxes (including excise taxes or penalties related to ERISA or other benefit plans) and amounts paid in settlement, to the extent such have been paid directly to Indemnitee (or paid directly to a third party on Indemnitee’s behalf) by any directors and officers liability insurance or other type of insurance maintained by the Company; provided, however, that payment made to Indemnitee pursuant to an insurance policy purchased and maintained by Indemnitee at his or her own expense of any amounts otherwise indemnifiable or obligated to be made pursuant to this Agreement shall not reduce the Company’s obligations to Indemnitee pursuant to this Agreement.
10. Non-exclusivity. The provisions for advancement of Expenses and indemnification of Other Liabilities set forth in this Agreement shall not be deemed exclusive of any other rights that Indemnitee may have under any provision of law, the Certificate of Incorporation or the Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to acts or omissions in his or her official capacity and to acts or omissions in another capacity while serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person.
11. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
12. Entire Agreement; Supersession, Modification and Waiver. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any prior indemnification agreement between the Indemnitee and the Company, its Subsidiaries or its Affiliates, provided, however, that this Agreement is a supplement to and in
furtherance of Section 145, the Certificate of Incorporation, the Bylaws, any directors and officers liability insurance or other insurance policy providing coverage to Indemnitee maintained by the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder. If the Company and Indemnitee have previously entered into an indemnification agreement providing for the indemnification of Indemnitee by the Company, the entry into this Agreement by both parties hereto shall be deemed to amend and restate such prior agreement to read in its entirety as, and be superseded by, this Agreement. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) and except as expressly provided herein, no such waiver shall constitute a continuing waiver.
13. Successors and Assigns; Survival of Rights. The terms of this Agreement shall bind, and shall inure to the benefit of, and be enforceable by the parties hereto and, as applicable, their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, executors, administrators and personal and legal representatives (collectively, “Successors”). Indemnitee’s rights hereunder shall continue after Indemnitee has ceased serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and shall inure to the benefit of Indemnitee’s Successors. In addition, the Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement and indemnify Indemnitee to the fullest extent permitted by law.
14. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and a receipt is provided by the party to whom such communication is delivered, (ii) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the signing by the recipient of an acknowledgement of receipt form accompanying delivery through the U.S. mail, (iii) by personal service by a process server, (iv) by delivery to the recipient’s address by overnight delivery (e.g., FedEx, UPS or DHL) or other commercial delivery service, or (v) if via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day. The address for notice to the Indemnitee shall be the Indemnitee’s most recent address on file with the Company. Delivery of communications to the Company with respect to this Agreement shall be sent to the attention of the Company’s Chief Legal & Trust Officer (or equivalent position).
15. No Presumptions. For purposes of this Agreement, the termination of any Proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise. In addition, neither the failure of the Company or a Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Company or a Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of Proceedings by Indemnitee to secure a judicial determination by exercising Indemnitee’s rights under Section 8(e) of this Agreement shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has failed to meet any particular standard of conduct or did not have any particular belief or is not entitled to indemnification under applicable law or
otherwise. Additionally, any admission of liability by the Company in connection with any settlement by the Company with a regulatory agency shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise.
16. Subrogation and Contribution.
(a) Except as otherwise expressly provided in this Agreement, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
(b) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by or on behalf of Indemnitee, whether for Expenses or Other Liabilities, in connection with any Proceeding relating to an Indemnifiable Event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
17. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so elects, to institute Proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee may elect to pursue.
18. Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Execution of a PDF copy shall have the same force and effect as execution of an original, and a copy of a signature will be admissible in any legal proceeding as if an original.
19. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
20. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely with Delaware.
21. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any Proceeding which arises out of or relates to this Agreement.
[Signature Page Follows]
The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.
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SENTINELONE, INC.
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By:
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Its:
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INDEMNITEE
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[INDEMNITEE’S NAME]
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SCALYR, INC.
2011 STOCK INCENTIVE PLAN
Adopted by the Board of Directors on December 19, 2011
Approved by the Stockholders on December 19, 2011
As Amended on April 10, 2014
As Amended on December 12, 2014
As Amended on February 9, 2017
As Amended on November 16, 2017
As Amended on February 12, 2019
TABLE OF CONTENTS
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Page
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SECTION 1. PURPOSE
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1
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SECTION 2. DEFINITIONS.
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1
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2.1
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"Board"
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1
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2.2
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"Change in Control
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1
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2.3
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"Code"
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2
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2.4
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"Committee"
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2
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2.5
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"Company"
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2
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2.6
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"Consultant"
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2
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2.7
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"Disability"
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2
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2.8
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"Employee"
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2
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2.9
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"Exchange Act"
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2
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2.10
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"Exercise Price"
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2
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2.11
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"Fair Market Value"
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2
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2.12
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"ISO"
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3
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2.13
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"NSO"
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3
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2.14
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"Option"
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3
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2.15
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"Optionee"
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3
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2.16
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"Outside Director"
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3
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2.17
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"Parent"
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3
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2.18
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"Plan"
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3
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2.19
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"Purchase Price"
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3
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2.20
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"Purchaser"
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3
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2.21
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"Restricted Share Agreement"
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3
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2.22
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"Securities Act"
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3
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2.23
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"Service"
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3
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2.24
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"Share"
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4
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2.25
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"Stock"
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4
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2.26
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"Stock Option Agreement"
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4
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2.27
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"Subsidiary"
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4
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2.28
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"Ten-Percent Stockholder"
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4
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SECTION 3. ADMINISTRATION.
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4
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3.1
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General Rule
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4
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3.2
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Board Authority and Responsibility
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4
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SECTION 4. ELIGIBILITY.
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5
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4.1
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General Rule
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5
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SECTION 5. STOCK SUBJECT TO PLAN.
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5
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SECTION 6. RESTRICTED SHARES.
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5
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6.1
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Restricted Share Agreement
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5
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6.2
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Duration of Offers and Nontransferability of Purchase Rights
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5
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6.3
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Purchase Price
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5
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6.4
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Repurchase Rights and Transfer Restrictions
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6
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SECTION 7. STOCK OPTIONS.
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6
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7.1
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Stock Option Agreement
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6
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7.2
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Number of Shares; Kind of Option
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6
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7.3
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Exercise Price
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6
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7.4
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Term
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6
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7.5
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Exercisability
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6
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7.6
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Repurchase Rights and Transfer Restrictions
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7
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7.7
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Transferability of Options
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7
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7.8
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Exercise of Options on Termination of Service
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7
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7.9
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No Rights as a Stockholder
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7
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7.10
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Modification, Extension and Renewal of Options
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8
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SECTION 8. PAYMENT FOR SHARES.
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8
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8.1
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General
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8
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8.2
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Surrender of Stock
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8
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8.3
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Services Rendered
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8
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8.4
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Promissory Notes
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8
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8.5
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Exercise/Sale
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8
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8.6
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Exercise/Pledge
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9
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8.7
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Other Forms of Payment
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9
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SECTION 9. ADJUSTMENT OF SHARES.
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9
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9.1
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General
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9
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9.2
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Dissolution or Liquidation
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9
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9.3
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Mergers and Consolidations
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9
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9.4
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Reservation of Rights
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9
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SECTION 10. REPURCHASE RIGHTS.
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10
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10.1
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Company's Right To Repurchase Shares
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10
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SECTION 11. WITHHOLDING AND OTHER TAXES.
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10
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11.1
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General
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10
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11.2
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Share Withholding
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10
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11.3
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Cashless Exercise/Pledge
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10
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11.4
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Other Forms of Payment
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11
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11.5
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Employer Fringe Benefit Taxes
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11
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SECTION 12. SECURITIES LAW REQUIREMENTS.
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11
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12.1
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General
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11
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12.2
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Dividend Rights
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11
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SECTION 13. NO RETENTION RIGHTS.
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11
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SECTION 14. DURATION AND AMENDMENTS.
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11
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14.1
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Term of the Plan
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11
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14.2
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Right to Amend or Terminate the Plan
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11
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14.3
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Effect of Amendment or Termination
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12
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SECTION 15. EXECUTION.
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13
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SCALYR, INC.
2011 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE.
The purpose of the Plan is to offer selected service providers the opportunity to acquire equity in the Company through awards of Options (which may constitute incentive stock option or nonstatutory stock options) and the award or sale of Shares.
The award of Options and the award or sale of Shares under the Plan is intended to be exempt from the securities qualification requirements of the California Corporations Code by satisfying the exemption under Section 25102(o) of the California Corporations Code. However, awards of Options and the award or sale of Shares may be made in reliance upon other state securities law exemptions. To the extent that such other exemptions are relied upon, the terms of this Plan which are included only to comply with Section 25102(o) shall be disregarded to the extent provided in the Stock Option Agreement or Restricted Share Agreement. In addition, to the extent that Section 25102(o) or the regulations promulgated thereunder are amended to delete any requirements set forth in such law or regulations, the terms of this Plan which are included only to comply with Section 25102(o) or the regulations promulgated thereunder as in effect prior to any such amendment shall be disregarded to the extent permitted by applicable law.
SECTION 2. DEFINITIONS.
"Board" shall mean the Board of Directors of the Company, as constituted from time to time.
"Change in Control" shall mean the occurrence of any of the following events:
(a) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect parent corporation of such continuing or surviving entity;
(b) The consummation of the sale, transfer or other disposition of all or substantially all of the Company's assets or the stockholders of the Company approve a plan of complete liquidation of the Company; or
(c) Any "person" (as defined below) who, by the acquisition or aggregation of securities, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the "Base
Capital Stock"); except that any change in the relative beneficial ownership of the Company's securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person's ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person's beneficial ownership of any securities of the Company.
For purposes of Section 2.2(c), the term "person" shall have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent or Subsidiary and (ii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Stock.
Notwithstanding the foregoing, the term "Change in Control" shall not include (w) a transaction the sole purpose of which is to change the state of the Company's incorporation, (x) a transaction the sole purpose of which is to form a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction, (y) a transaction the sole purpose of which is to make an initial public offering of the Company's Stock or (z) any change in the beneficial ownership of the securities of the Company as a result of a private financing of the Company that is approved by the Board.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the committee designated by the Board, which is authorized to administer the Plan, as described in Section 3 hereof.
"Company" shall mean Scalyr, Inc., a Delaware corporation.
"Consultant" shall mean a consultant or advisor who is not an Employee or Outside Director and who performs bona fide services for the Company, a Parent or Subsidiary.
"Disability" shall mean a condition that renders an individual unable to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment.
"Employee" shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary and who is an "employee" within the meaning of Section 3401(c) of the Code and regulations issued thereunder.
"Exchange Act" shall mean the U.S. Securities and Exchange Act of 1934, as amended.
"Exercise Price" shall mean the amount for which one Share may be purchased upon the exercise of an Option, as specified in a Stock Option Agreement.
"Fair Market Value" means, with respect to a Share, the market price of one Share of Stock, determined by the Board in good faith. Such determination shall be conclusive and binding on all persons. The Board shall use such procedures to determine fair market
value in compliance with Section 409A of the Code and the regulations promulgated thereunder.
"ISO" shall mean an incentive stock option described in Section 422(b) of the Code.
"NSO" shall mean a stock option that is not an ISO.
"Option" shall mean an ISO or NSO granted under the Plan and entitling the holder to purchase Shares.
"Optionee" shall mean an individual or estate that holds an Option.
"Outside Director" shall mean a member of the Board of the Company, a Parent or a Subsidiary who is not an Employee.
"Parent" shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.
"Plan" shall mean the Scalyr, Inc. 2011 Stock Incentive Plan.
"Purchase Price" shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option).
"Purchaser" shall mean a person to whom the Board has offered the right to acquire Shares under the Plan (other than upon exercise of an Option).
"Restricted Share Agreement" shall mean the agreement between the Company and a Purchaser who acquires Shares under the Plan that contains the terms, conditions and restrictions pertaining to the acquisition of such Shares.
"Securities Act" shall mean the U.S. Securities Act of 1933, as amended.
"Service" shall mean service as an Employee, a Consultant or an Outside Director, subject to such further limitations as may be set forth in the applicable Stock Option Agreement or Restricted Share Agreement. Service shall be deemed to continue during a bona fide leave of absence approved by the Company in writing if and to the extent that continued crediting of Service for purposes of the Plan is expressly required by the terms of such leave or by applicable law, as determined by the Company. However, for purposes of determining whether an Option is entitled to ISO status, and to the extent required under the Code, an Employee's employment will be treated as terminating three months after such Employee went on leave, unless such Employee's right to return to active work is guaranteed by law or by a contract or such Employee immediately returns to active work.
The Company determines which leaves count toward Service, and when Service terminates for all purposes under the Plan.
"Share" shall mean one share of Stock, as adjusted in accordance with Section 9 (if applicable)."Stock" shall mean the common stock of the Company.
"Stock Option Agreement" shall mean the agreement between the Company and an Optionee which contains the terms, conditions and restrictions pertaining to the Optionee's Option.
"Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.
"Ten-Percent Stockholder" means an individual who owns more than ten percent of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries. In determining stock ownership for purposes of this Section 2.28, the attribution rules of Section 424(d) of the Code shall be applied.
SECTION 3. ADMINISTRATION.
General Rule. The Plan shall be administered by the Board. However, the Board may delegate any or all administrative functions under the Plan otherwise exercisable by the Board to one or more Committees. Each Committee shall consist of at least one member of the Board who has been appointed by the Board. Each Committee shall have the authority and be responsible for such functions as the Board has assigned to it. If a Committee has been appointed, any reference to the Board in the Plan shall be construed as a reference to the Committee to whom the Board has assigned a particular function. To the extent permitted by applicable law, the Board may also authorize one or more officers of the Company to designate Employees, other than such authorized officer or officers, to receive awards and/or to determine the number of such awards to be received by such persons; provided, however, that the Board shall specify the total number of awards that such officer or officers may so award.
Board Authority and Responsibility. Subject to the provisions of the Plan, the Board shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. All decisions, interpretations and any other actions of the Board with respect to the Plan shall be final and binding on all persons deriving rights under the Plan.
SECTION 4. ELIGIBILITY.
General Rule. Only Employees shall be eligible for the grant of ISOs. Only Employees, Consultants and Outside Directors shall be eligible for the grant of NSOs or the award or sale of Shares.
SECTION 5. STOCK SUBJECT TO PLAN.
5.1 Share Limit. Subject to Sections 5.2 and 9, the aggregate number of Shares which may be issued under the Plan shall not exceed 9,412,342 Shares. The number of Shares which are subject to Options or other rights outstanding at any time shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. Shares offered under the Plan maybe authorized but unissued Shares or treasury Shares.
5.2 Additional Shares. In the event that any outstanding Option or other right expires or is canceled for any reason, the Shares allocable to the unexercised portion of such Option or other right shall remain available for issuance pursuant to the Plan. If a Share previously issued under the Plan is reacquired by the Company pursuant to a forfeiture provision, right of repurchase or right of first refusal, then such Share shall again become available for issuance under the Plan.
SECTION 6. RESTRICTED SHARES.
Restricted Share Agreement. Each award or sale of Shares under the Plan (other than upon exercise of an Option) shall be evidenced by a Restricted Share Agreement between the Purchaser and the Company. Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions imposed by the Board, as set forth in the Restricted Share Agreement, that are not inconsistent with the Plan. The provisions of the various Restricted Share Agreements entered into under the Plan need not be identical.
Duration of Offers and Nontransferability of Purchase Rights. Any right to acquire Shares (other than an Option) shall automatically expire if not exercised by the Purchaser within 30 days after the Company communicates the grant of such right to the Purchaser. Such right shall be nontransferable and shall be exercisable only by the Purchaser to whom the right was granted.
Purchase Price. To the extent an award consists of newly issued Shares, the award recipient shall furnish consideration having a value not less than the par value of such Shares as determined by the Board. Subject to the foregoing in this Section 6.3, the Board shall determine the amount of the Purchase Price in its sole discretion. The Purchase Price shall be payable in a form described in Section 8.
Repurchase Rights and Transfer Restrictions. Each award or sale of Shares shall be subject to such forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board may determine, subject to the requirements of Section 10. Such restrictions shall be set forth in the applicable Restricted Share Agreement and shall apply in addition to any restrictions otherwise applicable to holders of Shares generally.
SECTION 7. STOCK OPTIONS.
Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. The Option shall be subject to all applicable terms and conditions of the Plan and maybe subject to any other terms and conditions imposed by the Board, as set forth in the Stock Option Agreement, whichare not inconsistent with the Plan. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.
Number of Shares; Kind of Option. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 9. The Stock Option Agreement shall also specify whether the Option is intended to be an ISO or an NSO.
Exercise Price. Each Stock Option Agreement shall set forth the Exercise Price, which shall be payable in a form described in Section 8. Subject to the following requirements, the Exercise Price under any Option shall be determined by the Board in its sole discretion:
(a) Minimum Exercise Price for ISOs. The Exercise Price per Share of an ISO shall not be less than 100% of the Fair Market Value of a Share on the date of grant; provided, however, that the Exercise Price per Share of an ISO granted to a Ten-Percent Stockholder shall not be less than 110% of the Fair Market Value of a Share on the date of grant.
(b) Minimum Exercise Price for NSOs. The Exercise Price per Share of an NSO shall not be less than 100% of the Fair Market Value of a Share on the date of grant.
Term. Each Stock Option Agreement shall specify the term of the Option. The term of an Option shall in no event exceed ten years from the date of grant. The term of an ISO granted to a Ten-Percent Stockholder shall not exceed five years from the date of grant. Subject to the foregoing, the Board in its sole discretion shall determine when an Option shall expire.
Exercisability. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable; provided, however, that no Option shall be exercisable unless the Optionee has delivered to the Company an executed copy of the Stock Option Agreement. Subject to the following restrictions, the Board in its sole discretion shall determine when all or any installment of an Option is to become
exercisable and may, in its discretion, provide for accelerated exercisability in the event of a Change in Control or other events:
(a) Options Granted to Outside Directors. The exercisability of an Option granted to an Optionee for service as an Outside Director shall be automatically accelerated in full in the event of a Change in Control.
(b) Early Exercise. A Stock Option Agreement may permit the Optionee to exercise the Option as to Shares that are subject to a right of repurchase by the Company in accordance with the requirements of Section 10.1.
Repurchase Rights and Transfer Restrictions. Shares purchased on exercise of Options shall be subject to such forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board may determine, subject to the requirements of Section10. Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any restrictions otherwise applicable to holders of Shares generally.
Transferability of Options. During an Optionee's lifetime, his or her Options shall be exercisable only by the Optionee or by the Optionee's guardian or legal representatives, and shall not be transferable other than by beneficiary designation, will or the laws of descent and distribution. Notwithstanding the foregoing, however, to the extent permitted by the Board in its sole discretion, an NSO may be transferred by the Optionee to a revocable trust or to one or more family members or a trust established for the benefit of the Optionee and/or one or more family members to the extent permitted by Section 260.140.41(c) of Title 10 of the California Code of Regulations and Rule 701 of the Securities Act.
Exercise of Options on Termination of Service. Each Option shall set forth the extent to which the Optionee shall have the right to exercise the Option following termination of the Optionee's Service. Each Stock Option Agreement shall provide the Optionee with the right to exercise the Option following the Optionee's termination of Service during the Option term, to the extent the Option was exercisable for vested Shares upon termination of Service, for at least 30 days if termination of Service is due to any reason other than cause, death or Disability, and for at least six months after termination of Service if due to death or Disability (but in no event later than the expiration of the Option term). If the Optionee's Service is terminated for cause, the Stock Option Agreement may provide that the Optionee's right to exercise the Option terminates immediately on the effective date of the Optionee's termination. To the extent the Option was not exercisable for vested Shares upon termination of Service, the Option shall terminate when the Optionee's Service terminates. Subject to the foregoing, such provisions shall be determined in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.
No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by the Option until such person
becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant to the terms of the Option. No adjustments shall be made, except as provided in Section 9.
Modification, Extension and Renewal of Options. Within the limitations of the Plan, the Board may modify, extend or renew outstanding Options or may accept the cancellation of outstanding Options (to the extent not previously exercised), whether or not granted hereunder, in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, materially impair his or her rights or increase the Optionee's obligations under such Option.
SECTION 8. PAYMENT FOR SHARES.
General. The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash, cash equivalents or one of the other forms provided in this Section 8.
Surrender of Stock. To the extent permitted by the Board in its sole discretion, payment may be made in whole or in part by surrendering (in good form for transfer), or attesting to ownership of, Shares which have already been owned by the Optionee; provided, however, that payment may not be made in such form if such action would cause the Company to recognize any (or additional) compensation expense with respect to the Option for financial reporting purposes. Such Shares shall be valued at their Fair Market Value on the date of Option exercise.
Services Rendered. As determined by the Board in its discretion, Shares may be awarded under the Plan in consideration of past or future services rendered to the Company, a Parent or Subsidiary.
Promissory Notes. To the extent permitted by the Board in its sole discretion, payment may be made in whole or in part with a full-recourse promissory note executed by the Optionee or Purchaser. The interest rate payable under the promissory note shall not be less than the minimum rate required to avoid the imputation of income for U.S. federal income tax purposes. Shares shall be pledged as security for payment of the principal amount of the promissory note, and interest thereon; provided that if the Optionee or Purchaser is a Consultant, such note must be collateralized with such additional security to the extent required by applicable laws. In no event shall the stock certificate(s) representing such Shares be released to the Optionee or Purchaser until such note is paid in full. Subject to the foregoing, the Board shall determine the term, interest rate and other provisions of the note.
Exercise/Sale. To the extent permitted by the Board in its sole discretion, and if a public market for the Shares exists, payment may be made in whole or in part by delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes.
Exercise/Pledge. To the extent permitted by the Board in its sole discretion, and if a public market for the Shares exists, payment may be made in whole or in part by delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker or lender approved by the Company to pledge Shares, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes.
Other Forms of Payment. To the extent permitted by the Board in its sole discretion, payment may be made in any other form that is consistent with applicable laws, regulations and rules.
SECTION 9. ADJUSTMENT OF SHARES.
General. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a combination or consolidation of the outstanding Stock into a lesser number of Shares, are capitalization, a spin-off, a reclassification, or a similar occurrence, the Board shall make appropriate adjustments to the following: (a) the number of Shares available for future awards under Section 5; (b) the number of Shares covered by each outstanding Option; (c) the Exercise Price under each outstanding Option; and (d) the price of Shares subject to the Company's right of repurchase. All such adjustments under this Section 9 shall be made in a manner to comply with the provisions of Sections 409A and 424 of the Code.
Dissolution or Liquidation. To the extent not previously exercised or settled, Options shall terminate immediately prior to the dissolution or liquidation of the Company.
Mergers and Consolidations. In the event that the Company is a party to a merger or other consolidation, or in the event of a transaction providing for the sale of all or substantially all of the Company's stock or assets, outstanding Options shall be subject to the agreement of merger, consolidation or sale. Such agreement may provide for one or more of the following, in each case without the Optionee's consent: (a) the continuation of the outstanding Options by the Company, if the Company is a surviving corporation; (b) the assumption of the Plan and outstanding Options by the surviving corporation or its parent; (c) the substitution by the surviving corporation or its parent of options with substantially the same terms for such outstanding Options; (d) immediate exercisability of such outstanding Options followed by the cancellation of such Options; or (e) settlement of the intrinsic value of the outstanding Options (whether or not then exercisable) in cash or cash equivalents or equity (including cash or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Options or the underlying Shares) followed by the cancellation of such Options.
Reservation of Rights. Except as provided in this Section 9, an Optionee or offeree shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class. Any issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.
SECTION 10. REPURCHASE RIGHTS.
Company's Right To Repurchase Shares. The Company shall have the right to repurchase Shares that have been acquired through an award or sale of Shares or exercise of an Option upon termination of the Purchaser's or Optionee's Service if provided in the applicable Restricted Share Agreement or Stock Option Agreement. The Board in its sole discretion shall determine when the right to repurchase shall lapse as to all or any portion of the Shares, and may, in its discretion, provide for accelerated vesting in the event of a Change in Control or other events; provided, however, that the right torepurchase shall lapse as to all of the Shares issued to an Outside Director for service as an Outside Director in the event of a Change in Control.
SECTION 11. WITHHOLDING AND OTHER TAXES.
General. An Optionee or Purchaser or his or her successor shall pay, or make arrangements satisfactory to the Board for the satisfaction of, any federal, state, local or foreign withholding tax obligations that may arise in connection with the Plan. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied.
Share Withholding. The Board may permit an Optionee or Purchaser to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Shares that would otherwise be issued to him or her upon exercise of an Option, or by surrendering all or a portion of any Shares that he or she previously acquired; provided, however, that in no event may an Optionee or Purchaser surrender Shares in excess of the legally required withholding amount based on the minimum statutory withholding rates for federal and state tax purposes that apply to supplemental taxable income. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. Any payment of taxes by assigning Shares to the Company may be subject to restrictions, including any restrictions required by rules of any federal or state regulatory body or other authority. All elections by Optionees or Purchasers to have Shares withheld for this purpose shall be made in such form and under such conditions as the Board may deem necessary or advisable.
Cashless Exercise/Pledge. The Board may provide that if Company Shares are publicly traded at the time of exercise, arrangements may be made to meet the Optionee's or Purchaser's withholding obligation by cashless exercise or pledge.
Other Forms of Payment. The Board may permit such other means of tax withholding as it deems appropriate.
Employer Fringe Benefit Taxes. To the extent permitted by applicable federal, state, local and foreign law, an Optionee or Purchaser shall be liable for any fringe benefit tax that may be payable by the Company and/or the Optionee's or Purchaser's employer in connection with any award granted to the Optionee or Purchaser under the Plan, which the Company and/or employer may collect by any reasonable method established by the Company and/or employer.
SECTION 12. SECURITIES LAW REQUIREMENTS.
General. Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirements of law, including (without limitation) the Securities Act, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company's securities may then be listed.
Dividend Rights. A Restricted Share Agreement may require that the holders of Shares invest any cash dividends received in additional Shares. Such additional Shares shall be subject to the same conditions and restrictions as the award with respect to which the dividends were paid.
SECTION 13. NO RETENTION RIGHTS.
No provision of the Plan, or any right or Option granted under the Plan, shall be construed to give any Optionee or Purchaser any right to become an Employee, to be treated as an Employee, or to continue in Service for any period of time, or restrict in any way the rights of the Company (or Parent or subsidiary to whom the Optionee or Purchaser provides Service), which rights are expressly reserved, to terminate the Service of such person at any time and for any reason, with or without cause, without thereby incurring any liability to him or her.
SECTION 14. DURATION AND AMENDMENTS.
Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board, subject to the approval of the Company's stockholders. In the event that the stockholders fail to approve the Plan within 12 months after its adoption by the Board, any grants, exercises or sales that have already occurred under the Plan shall be rescinded, and no additional grants, exercises or sales shall be made under the Plan after such date. The Plan shall terminate automatically ten years after its adoption by the Board. The Plan may be terminated on any earlier date pursuant to Section 14.2 below.
Right to Amend or Terminate the Plan. The Board may amend, suspend, or terminate the Plan at any time and for any reason. An amendment of the Plan shall not be subject to the approval of the Company's stockholders unless it (a) increases the number of Shares available for issuance under the Plan{except as provided in Section 9) or (b) materially
changes the class of persons who are eligible for the grant of Options or the award or sale of Shares.
Effect of Amendment or Termination. No Shares shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not adversely affect any Shares previously issued or any Option previously granted under the Plan without the holder's consent.
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SECTION 15. EXECUTION.
To record the adoption of the Plan by the Board on December 19, 2011, effective on such date, the Company has caused its authorized officer to execute the same.
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SCALYR, INC.
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By:
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Print Name:
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Title:
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EXHIBIT A
NOTICE OF STOCK OPTION GRANT - GLOBAL
No Early Exercise
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE AND APPLICABLE FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL AND STATE AND APPLICABLE FOREIGN SECURITIES LAWS IS NOT REQUIRED.
SCALYR, INC.
2011 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT – GLOBAL
Scalyr, Inc. (the "Company") hereby grants you the following Option to purchase shares of its common stock ("Shares"). The terms and conditions of this Option are set forth in the Stock Option Agreement (including its Annex) and the Scalyr, Inc. 2011 Stock Incentive Plan (the "Plan"), both of which are attached to and made a part of this document.
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Date of Grant:
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See Carta.
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Name of Optionee:
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See Carta.
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Number of Option Shares:
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See Carta.
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Exercise Price per Share:
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See Carta. (The Exercise Price per Share of an Option shall not be less than 100% of the Fair Market Value of a Share on the date of grant. If Optionee is a Ten-Percent Stockholder, the Exercise Price per Share of an ISO (for U.S. tax purposes) must be at least 110% of Fair Market Value.)
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Vesting Start Date:
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See Carta.
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Type of Option for U.S. Tax Purposes:
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See Carta.
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Vesting Schedule:
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See Carta.
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SCALYR, INC.
NOTICE OF STOCK OPTION GRANT
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By signing or accepting this Option, you acknowledge receipt of a copy of the Plan and agree that (a) you have carefully read, fully understand and agree to all of the terms and conditions described in the attached Stock Option Agreement (including its Annex), the Plan and "Notice of Exercise and Common Stock Purchase Agreement" (the "Exercise Notice"); (b) you hereby make the purchaser's investment representations contained in the Exercise Notice with respect to the grant of this Option; (c) you understand and agree that this Stock Option Agreement, including its cover sheet and attachments (including the Annex), constitutes the entire understanding between you and the Company regarding this Option and that any prior agreements, commitments or negotiations concerning this Option are replaced and superseded; and (d) you have been given an opportunity to consult your own legal and tax counsel with respect to all matters relating to this Option prior to accepting this Option and that you have either consulted such counsel or voluntarily declined to consult such counsel.
Execution and Delivery: This Notice of Stock Option Grant may be executed and delivered electronically whether via the Company's intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By your acceptance hereof (whether written, electronic or otherwise), you agree, to the fullest extent permitted by law, that in lieu of receiving documents in paper format, you accept the electronic delivery of any documents that the Company (or any third party the Company may designate), may deliver in connection with this grant (including the Plan, this Notice of Stock Option Grant, the Stock Option Agreement, the information described in Rules 01(e)(2), (3), (4) and (5) under the Securities Act, account statements, or other communications or information) whether via the Company's intranet or the Internet site of such third party or via email or such other means of electronic delivery specified by the Company.
SCALYR, INC.
NOTICE OF STOCK OPTION GRANT
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SCALYR, INC.
2011 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT – GLOBAL
SECTION 1. KIND OF OPTION.
This Option is intended to be either an incentive stock option (an "ISO") for U.S. tax purposes, intended to meet the requirements of Section 422 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), to the extent applicable to you, or a non-statutory option (an "NSO"), which is not intended to meet the requirements of an ISO, to the extent applicable to you, as indicated in the Notice of Stock Option Grant. Even if this Option is designated as an ISO for U.S. tax purposes, it shall be deemed to be an NSO to the extent required by the US$100,000 annual limitation under Section 422(d) of the Code.
SECTION 2. VESTING.
Subject to the terms and conditions of the Plan and this Stock Option Agreement (the "Agreement"), your Option will be exercisable with respect to the Shares that have become vested in accordance with the schedule set forth in the Notice of Stock Option Grant. If your Option is granted in consideration of your Service as an Employee or a Consultant, after your Service as an Employee or a Consultant terminates for any reason, vesting of your Shares subject to such Option immediately stops and such Option expires immediately as to the number of Shares that are not vested as of the date your Service as an Employee or a Consultant terminates. If your Option is granted in consideration of your Service as an Outside Director, after your Service as an Outside Director terminates for any reason, vesting of your Shares subject to such Option immediately stops and such Option expires immediately as to the number of Shares that are not vested as of the date your Service as an Outside Director terminates.
SECTION 3. TERM.
Your Option will expire in any event at the close of business at Company headquarters on the date that is ten years after the Date of Grant; provided, however, that if your Option is an ISO for U.S. tax purposes, it will expire five years after the Date of Grant if you are a Ten-Percent Stockholder of the Company (the "Expiration Date"). Also, your Option will expire earlier if your Service terminates, as described below.
SECTION 4. REGULAR TERMINATION.
(a) If your Service terminates for any reason except death or Disability, the vested portion of your Option will expire at the close of business at Company headquarters on the date three months after your termination of Service. During that three-month period, you may exercise the portion of your Option that was vested on your termination date. Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.
SCALYR, INC.
STOCK OPTION AGREEMENT
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(b) If your Option is an ISO for U.S. tax purposes and you exercise it more than three months after termination of your Service as an Employee for any reason other than death or Disability expected to result in death or to last for a continuous period of at least 12 months, your Option will cease to be eligible for ISO treatment under U.S. tax law, to the extent applicable to you.
(c) Your Option will cease to be eligible for ISO treatment under U.S. tax law, to the extent applicable to you, if you exercise it more than three months after the first day following three months of a bona fide leave of absence approved by the Company, unless you return to employment immediately upon termination of such leave or your right to reemployment after your leave was guaranteed by statute or contract.
SECTION 5. DEATH.
If you die while in Service with the Company, the vested portion of your Option will expire at the close of business at Company headquarters on the date 12 months after the date of your death. During that 12-month period, your estate, legatees or heirs may exercise that portion of your Option that was vested on the date of your death. Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.
SECTION 6. DISABILITY.
(a) If your Service terminates because of a Disability, the vested portion of your Option will expire at the close of business at Company headquarters on the date 12 months after your termination date. During that 12-month period, you may exercise that portion of your Option that was vested on the date of your Disability. "Disability" means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment. Notwithstanding the foregoing, the Option may not be exercised after the Expiration Date determined under Section 3 above.
(b) If your Option is an ISO for U.S. tax purposes and your Disability is not expected to result in death or to last for a continuous period of at least 12 months, your Option will be eligible for ISO treatment under U.S. tax law, to the extent applicable to you, only if it is exercised within three months following the termination of your Service as an Employee.
SECTION 7. EXERCISING YOUR OPTION.
To exercise your Option, you must execute the Notice of Exercise and Common Stock Purchase Agreement (the "Exercise Notice"), attached as Exhibit A. You must submit this form, together with full payment, to the Company. The Company may also require you to make additional representations and warranties to the Company with respect to securities and/or exchange control laws applicable to you. Your exercise will be effective when it is received by the Company, subject to compliance with applicable securities and exchange laws. If someone else wants to exercise your Option after your death, that person must prove to the Company's satisfaction that he or she is entitled to do so.
SCALYR, INC.
STOCK OPTION AGREEMENT
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SECTION 8. PAYMENT FORMS.
When you exercise your Option, you must include payment of the Exercise Price for the Shares you are purchasing in cash or cash equivalents, denominated and payable in U.S. dollars. Alternatively, if permitted under applicable law, you may pay all or part of the Exercise Price by surrendering, or attesting to ownership of, Shares already owned by you, unless such action would cause the Company to recognize any (or additional) compensation expense with respect to the Option for financial reporting purposes or unless otherwise determined by the Company in its sole discretion. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value on the date of Option exercise. To the extent that a public market for the Shares exists and to the extent permitted by applicable law, in each case, as determined by the Company in its sole discretion, you also may exercise your Option by delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price and, if requested, applicable Tax-Related Items (as defined below). The Company will provide the forms necessary to make such a cashless exercise. The Board may permit such other payment forms as it deems appropriate, subject to applicable laws, regulations and rules.
SECTION 9. TAXES AND WITHHOLDING.
(a) You will not be allowed to exercise this Option unless you pay, or make acceptable arrangements to pay (as determined by the Company in its sole discretion), all foreign, federal, state and local income tax, social insurance, payroll tax, fringe benefits tax, payment on account, withholding and other tax-related items related to your participation in the Plan and legally applicable to you, including, as applicable, obligations of the Company or your employer (all the foregoing tax-related items, "Tax-Related Items"), required to be withheld as a result of the Option exercise or the sale of Shares acquired upon exercise of this Option. You hereby authorize withholding from payroll or any other payment due you from the Company or your employer to satisfy all such Tax-Related Items.
(b) If you sell or otherwise dispose of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years after the grant date and (ii) one year after the exercise date, regardless of whether you are then a U.S. taxpayer, you shall immediately notify the Company in writing of such disposition.
(c) Prior to any relevant taxable or tax withholding event ("Tax Date"), as applicable, you will pay or make adequate arrangements satisfactory to the Company and/or your employer to satisfy all Tax-Related Items. In this regard, you authorize the Company and/or your employer or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (A) accept a cash payment in U.S. dollars in the amount of Tax-Related Items, (B) withhold whole Shares which would otherwise be delivered to you having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash from your wages or other cash compensation which would otherwise be payable to you by the Company and/or your employer, equal to the amount necessary to satisfy any such obligations, (C) withhold from proceeds of the sale of Shares acquired upon
SCALYR, INC.
STOCK OPTION AGREEMENT
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exercise of the Option either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization) or (D) accept a cash payment to the Company by a broker-dealer acceptable to the Company to whom you have submitted an irrevocable notice of exercise.
(d) To avoid negative accounting treatment, the Company may withhold or account for Tax-Related Items by considering up to the maximum applicable statutory withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the Option, notwithstanding that a number of shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items. Finally, you will pay to the Company or your employer any amount of Tax-Related Items that the Company or your employer may be required to withhold as a result of your participation in the Plan that cannot be satisfied by the means previously described. The Company will have sole discretion to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section, and you unconditionally consent to and approve any such action taken by the Company. You (or any beneficiary or person entitled to act on your behalf) will provide the Company any forms, documents or other information reasonably required by the Company.
(e) By accepting this Option, you explicitly and unambiguously consent and agree to assume any liability for fringe benefit tax that may be payable by the Company and/or your employer in connection with the Option granted under this Agreement to the extent permitted under applicable law. Further, by accepting this Option, you agree that the Company and/or your employer may collect the fringe benefit tax from you by any reasonable method established by the Company and/or your employer. You further agree to execute any other consents or elections required to accomplish the above, promptly upon request of the Company and/or your employer.
SECTION 10. RIGHT OF FIRST REFUSAL.
In the event that you propose to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have a "Right of First Refusal" with respect to such Shares in accordance with the provisions of the Exercise Notice.
SECTION 11. RESALE RESTRICTIONS/MARKET STAND-OFF.
In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the U.S. Securities Act of 1933, as amended, including the Company's initial public offering, you may be prohibited from engaging in any transaction with respect to any of the Company's common stock without the prior written consent of the Company or its underwriters in accordance with the provisions of the Exercise Notice.
SCALYR, INC.
STOCK OPTION AGREEMENT
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SECTION 12. TRANSFER OF OPTION.
Prior to your death, only you may exercise this Option. This Option and the rights and privileges conferred hereby cannot be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may, however, dispose of this Option in your will. Regardless of any marital property settlement agreement, the Company is not obligated to honor an Exercise Notice from your spouse or former spouse, nor is the Company obligated to recognize such individual's interest in your Option in any other way. Notwithstanding the foregoing, however, to the extent permitted by the Board in its sole discretion, an NSO may be transferred by you to a revocable trust or to one or more family members or to a trust established for your benefit and/or one or more of your family members to the extent permitted by the Plan.
SECTION 13. RETENTION RIGHTS.
This Agreement does not give you the right to be retained by the Company in any capacity. The Company reserves the right to terminate your Service at any time and for any reason without thereby incurring any liability to you.
SECTION 14. STOCKHOLDER RIGHTS.
Neither you nor your estate or heirs have any rights as a stockholder of the Company until a certificate for the Shares acquired upon exercise of this Option has been issued. No adjustments are made for dividends or other rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan.
SECTION 15. ADJUSTMENTS.
In the event of a stock split, a stock dividend or a similar change in the Company's Stock, the number of Shares covered by this Option and the Exercise Price per share may be adjusted pursuant to the Plan. Your Option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity as set forth in the Plan.
SECTION 16. LEGENDS.
All certificates representing the Shares issued upon exercise of this Option shall, where applicable, have endorsed thereon the legends set forth in Section 6 of the Exercise Notice.
SECTION 17. TAX CONSEQUENCES AND DISCLAIMER.
(a) YOU SHOULD CONSULT A TAX ADVISER DULY QUALIFIED IN THE JURISDICTION(S) IN WHICH YOU RESIDE OR ARE SUBJECT TO TAXATION BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
SCALYR, INC.
STOCK OPTION AGREEMENT
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(b) You agree that you are responsible for consulting your own tax advisor as to the tax consequences associated with your Option. The tax rules governing options are complex, change frequently and depend on the individual taxpayer's situation and the jurisdiction(s) in which he or she is subject to taxation. Although the Company will make available to you general tax information about stock options, you agree that the Company shall not be held liable or responsible for making such information available to you or for any tax or financial consequences that you may incur in connection with your Option.
(c) You have obtained any necessary advice from an appropriate independent professional adviser in relation to the Tax-Related Items in connection with the grant, exercise, assignment, release, cancellation or any other disposal of this Option pursuant to the Plan and on any subsequent sale of the Shares. In signing and returning this Agreement, you are confirming that appropriate advice has been sought from an independent adviser. The Company has not made any representation regarding applicable taxation implications.
(d) Regardless of any action the Company or your employer takes with respect to any or all Tax-Related Items, you acknowledge that the ultimate liability for all Tax-Related Items legally due from you is and remains your responsibility and that the Company and/or your employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Option, including the grant, vesting or exercise of this Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends, and (2) do not commit to structure the terms of the grant or any aspect of this Option to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or your employer may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(e) In addition, options granted at a discount from fair market value may be considered "deferred compensation" subject to adverse tax consequences under Section 409A of the Code and analogous provisions of foreign tax law. The Board has made a good faith determination that the exercise price per share of the Option is not less than the fair market value of the Shares underlying your Option on the Date of Grant. It is possible, however, that the U.S. Internal Revenue Service or any foreign tax authority could later challenge that determination and assert that the fair market value of the Shares underlying your Option was greater on the Date of Grant than the exercise price determined by the Board, which, if you are a U.S. taxpayer, could result in immediate income tax upon the vesting of your Option (whether or not exercised) and a 20% tax penalty, as well as the loss of incentive stock option status (if applicable). The Company gives no assurance that such adverse tax consequences will not occur and specifically assumes no responsibility therefor. By accepting this Option, you acknowledge that any tax liability or other adverse tax consequences to you resulting from the grant of the Option will be the responsibility of, and will be borne entirely by, you. YOU ARE THEREFORE ENCOURAGED TO CONSULT YOUR OWN TAX ADVISOR BEFORE ACCEPTING THE GRANT OF THIS OPTION.
SCALYR, INC.
STOCK OPTION AGREEMENT
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SECTION 18. THE PLAN AND OTHER AGREEMENTS.
The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the Plan. The Notice of Stock Option Grant, this Agreement, including its attachments, and the Plan constitute the entire understanding between you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded.
SECTION 19. MISCELLANEOUS PROVISIONS.
The Notice of Stock Option Grant, this Agreement (including the Annex attached hereto) and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof. They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof. Notwithstanding any provisions in this Agreement, the Option grant shall be subject to any special terms and conditions set forth in the Terms and Conditions for Non-U.S. Optionees attached hereto as the Annex if your country of residence is other than the United States, including the special terms and conditions (if any) set forth beneath the name of such country on the Annex. Moreover, if you relocate to a country other than the United States, the special terms and conditions set forth in the Annex, including the special terms and conditions (if any) set forth beneath the name of such country on the Annex, will apply to you to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Annex constitutes an integral part of this Agreement to the extent applicable to you from time to time.
SECTION 20. APPLICABLE LAW.
This Agreement will be interpreted and enforced under the laws of the State of California (without regard to its choice of law provisions).
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SCALYR, INC.
STOCK OPTION AGREEMENT
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ANNEX
TERMS AND CONDITIONS
FOR NON-U.S. OPTIONEES
Terms and Conditions
This Annex includes additional terms and conditions that govern the Option granted to you (the "Optionee") under the Plan if Optionee resides and/or works outside of the United States. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan and/or the Stock Option Agreement to which this Annex is attached.
If Optionee is a citizen or resident of a country other than the one in which he or she is currently working and/or residing, transfers to another country after the Date of Grant, is a consultant, changes employment status to a consultant position or is considered a resident of another country for local law purposes, the Company shall, in its discretion, determine the extent to which the special terms and conditions contained herein shall be applicable to Optionee. References to Optionee's Employer shall include any entity that engages Optionee's services.
In accepting this Option, Optionee acknowledges, understands and agrees to the following:
1. Data Privacy Information and Consent. The Company is located at 101 S. San Mateo Drive, 4th Floor, San Mateo, CA 94401, United States, and grants awards to employees of the Company and its Parent and Subsidiaries, at the Company's sole discretion. If Optionee would like to participate in the Plan, please review the following information about the Company's data processing practices.
1.1 Data Collection and Usage. The Company or, if different, Optionee's employer (either of these, as applicable, the "Employer"), and its Subsidiaries, Parent or affiliates collect, process, transfer and use personal data about Plan participants that is necessary for the purpose of implementing, administering and managing the Plan. This personal data may include Optionee's name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality and citizenship, job title, any shares or directorships held in the Company, details of all awards or other entitlements to Shares, granted, canceled, exercised, vested, unvested or outstanding in Optionee's favor and any other personal information that could identify Optionee (collectively, without limitation, "Data"), which the Company receives from Optionee or the Employer. If the Company offers Optionee an award under the Plan, then the Company will collect Optionee's Data for purposes of allocating stock and implementing, administering and managing the Plan and will process such Data in accordance with the Company's then-current data privacy policies, which are made available to Optionee upon commencing employment and also available upon request.
1.2 Stock Plan Administration Service Providers. The Company transfers Data to an independent stock-plan administrator and other third parties based in the United States, whichassists the Company with the implementation, administration and management of the Plan. In the future, the Company may select a different service provider and share Optionee's Data
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STOCK OPTION AGREEMENT
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with another company that serves in a similar manner. Optionee understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients' country (e.g., the United States) may have different data privacy laws and protections than Optionee's country. The Company's service provider may open an account for Optionee to receive Shares. Optionee will be asked to agree on separate terms and data processing practices with the service provider, which is a condition to Optionee's ability to participate in the Plan. Optionee understands that Optionee may request a list with the names and addresses of any potential recipients of the Data by contacting Optionee's local human resources representative. Optionee authorizes the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing Optionee's participation in the Plan.
1.3 Data Retention. The Company will use Optionee's Data only as long as is necessary to implement, administer and manage Optionee's participation in the Plan or as required to comply with legal or regulatory obligations, including under tax and security laws. When the Company no longer needs Optionee's Data, the Company will remove it from its systems. If the Company keeps Optionee's Data longer, it would be to satisfy legal or regulatory obligations and the Company's legal basis would be relevant laws or regulations. Optionee understands that Optionee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Optionee's local human resources representative.
1.4 Consent; Voluntariness and Consequences of Denial or Withdrawal. Where permitted by applicable local law in the country where Optionee resides, consent is a requirement for participation in the Plan. In such cases, by accepting this grant, Optionee hereby agrees with the data processing practices as described in this notice and grants such consent to the processing and transfer of his or her Data as described in this Agreement and as necessary for the purpose of administering the Plan. Optionee's participation in the Plan and Optionee's grant of consent is purely voluntary. Optionee may deny or withdraw his or her consent at any time; provided that if Optionee does not consent, or if Optionee withdraws his or her consent, Optionee cannot participate in the Plan unless required by applicable law. This would not affect Optionee's salary as an employee or his or her career; Optionee would merely forfeit the opportunities associated with the Plan.
1.5 Data Subject Rights. Optionee has a number of rights under data privacy laws in his or her country. Depending on where Optionee is based, Optionee's rights may include the right to (i) request access or copies of Optionee's Data the Company processes, (ii) have the Company rectify Optionee's incorrect Data and/or delete Optionee's Data, (iv) restrict processing of Optionee's Data, (v) have portability of Optionee's Data, (vi) lodge complaints with the competent tax authorities in Optionee's country and/or (vii) obtain a list with the names and addresses of any potential recipients of Optionee's Data. To receive clarification regarding Optionee's rights or to exercise Optionee's rights please contact the Company at 101 S. San Mateo Drive, 4th Floor, San Mateo, CA 94401, United States, Attn: Stock Administration.
SCALYR, INC.
STOCK OPTION AGREEMENT
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2. Insider Trading Restrictions/Market Abuse Laws. Optionee acknowledges that, if and when the Shares are publicly listed on any stock exchange, depending on his or her country, Optionee may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, which may affect his or her ability to directly or indirectly, accept, acquire, sell or attempt to sell or otherwise dispose of Shares or rights to the Shares, or rights linked to the value of Shares during such times as Optionee is considered to have "inside information" regarding the Company (as defined by the laws and/or regulations in applicable jurisdictions or Optionee's country). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders placed by Optionee before possessing the inside information. Furthermore, Optionee may be prohibited from (i) disclosing inside information to any third party, including fellow employees (other than on a "need to know" basis) and (ii) "tipping" third parties or causing them to otherwise buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Optionee acknowledges that it is Optionee's responsibility to comply with any applicable restrictions, and Optionee is advised to speak to his or her personal advisor on this matter.
3. Language. Optionee acknowledges that he or she is sufficiently proficient in English to understand the terms and conditions of this Agreement. Furthermore, if Optionee has received this Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
4. Foreign Asset/Account Reporting Requirements. Optionee acknowledges that there may be certain foreign asset and/or account reporting requirements which may affect Optionee's ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan in a brokerage account outside his or her country. Optionee may also be required to repatriate sale proceeds or other funds received as a result of participating in the Plan to his or her country through a designated bank or broker within a certain time after receipt. It is Optionee's responsibility to be compliant with such regulations and Optionee should speak with his or her personal advisor on this matter.
5. Extraordinary Compensation. The value of the option is an extraordinary item of compensation outside the scope of Optionee's employment contract, if any, and is not to be considered part of his or her normal or expected compensation for purposes of calculating severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. Optionee acknowledges that the right to be granted options and the right to exercise the option and to continue vesting or to receive further grants of options will terminate effective as of the date upon which Optionee receives notice of termination, regardless of when the termination is effective.
6. Participation Ceases When Employment Ceases. Except in the case of an approved leave of absence (as set forth more fully in the Plan), Optionee understands that he/she shall have terminated employment as of the date he or she ceases to provide services (regardless of whether the termination is in breach of local employment laws or is later found to be invalid)
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STOCK OPTION AGREEMENT
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and employment shall not be extended by any notice period or garden leave mandated by local law, provided however, that a change in status from an employee to a consultant or advisor shall not terminate the Optionee's continuous service, unless determined by the Committee, in its discretion.
7. Additional Acknowledgments and Agreements. In accepting this Option, Optionee also acknowledges, understands and agrees that:
7.1 the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
7.2 the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
7.3 all decisions with respect to future Option or other grants, if any, will be at the sole discretion of the Company;
7.4 the Option grant and Optionee's participation in the Plan shall not create a right to employment or be interpreted as forming an employment or service contract with the Company, Employer, or any Subsidiary or Parent or Affiliate of the Company and shall not interfere with the ability of the Company, the Employer or any Subsidiary or Parent or Affiliate of the Company, as applicable, to Terminate Optionee;
7.5 Optionee is voluntarily participating in the Plan;
7.6 the Option and any Shares acquired under the Plan are not intended to replace any pension rights or compensation;
7.7 the Option and any Shares acquired under the Plan and the income and value of same, are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of- service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
7.8 the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty;
7.9 if the underlying Shares do not increase in value, the Option will have no value;
7.10 if Optionee exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the Exercise Price;
7.11 no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the Termination of Optionee's service (for any reason
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STOCK OPTION AGREEMENT
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whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Optionee is employed or the terms of Optionee's employment agreement, if any), and in consideration of the grant of the Option to which Optionee is otherwise not entitled, Optionee irrevocably agrees never to institute any claim against the Company, any of its Parent, Subsidiaries, Affiliates or the Employer, waives his or her ability, if any, to bring any such claim, and releases the Company, any of its Parent, Subsidiaries, Affiliates and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Optionee shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim;
7.12 for purposes of the Option, Optionee's service will be considered Terminated as of the date Optionee is no longer actively providing services to the Company or any of its Parent, Subsidiaries, the Employer or Affiliates (regardless of the reason for such Termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Optionee is employed or the terms of Optionee's employment agreement, if any), and unless otherwise expressly provided in this Agreement or determined by the Company, (i) Optionee's right to vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., Optionee's period of service would not include any contractual notice period or any period of "garden leave" or similar period mandated under employment laws in the jurisdiction where Optionee is employed or the terms of Optionee's employment agreement, if any); and (ii) the period (if any) during which Optionee may exercise the Option after such termination of Optionee's service will commence on the date Optionee ceases to actively provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Optionee is employed or terms of Optionee's employment agreement, if any; the Committee shall have the exclusive discretion to determine when Optionee is no longer actively providing services for purposes of his or her Option grant (including whether Optionee may still be considered to be providing services while on a leave of absence);
7.13 unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits evidenced by this Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of the Company;
7.14 the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose; and
7.15 neither the Company, the Employer nor any Parent, Subsidiary or Affiliate of the Company shall be liable for any foreign exchange rate fluctuation between Optionee's local currency and the U.S. dollar that may affect the value of the Option or of any amounts due to Optionee pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
SCALYR, INC.
STOCK OPTION AGREEMENT
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Notifications
This Annex also includes information regarding exchange controls and certain other issues of which Optionee should be aware with respect to Optionee's participation in the Plan. The information is provided solely for the convenience of Optionee and is based on the securities, exchange control and other laws in effect in Australia as of November 2018 and in Singapore as of July 2020. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Optionee not rely on the information noted herein as the only source of information relating to the consequences of Optionee's participation in the Plan because the information may be out of date by the time Optionee vests in or exercises this Option or sells any exercised Shares.
In addition, the information contained in this Annex is general in nature and may not apply to Optionee's particular situation, and the Company is not in a position to assure Optionee of any particular result. Accordingly, Optionee is advised to seek appropriate professional advice as to how the applicable laws in his or her country may apply to his or her situation.
Optionee understands that he or she is responsible for complying with all applicable tax, foreign asset reporting and/or exchange control rules that may apply in connection with participation in the Plan and/or the transfer of proceeds acquired thereunder. Prior to the exercise of this Option or transferring funds from or into Optionee's country, Optionee should also consult the local bank and/or Optionee's exchange control advisor, as interpretations of the applicable regulations may vary; additionally, exchange control rules and regulations are subject to change without notice.
Finally, Optionee understands that if he or she is a citizen or resident of a country other than the one in which he or she is currently residing and/or working, transfers to another country after the Date of Grant, or is considered a resident of another country for local law purposes, the notifications contained herein may not be applicable to Optionee in the same manner.
AUSTRALIA
Notifications
Exchange Control. Where funds greater than AUD 10,000 are transferred, a reporting requirement exists to the Reserve Bank of Australia. If an Australian bank is assisting Optionee with the transaction, the bank will file the report on Optionee's behalf. If no Australian bank is involved in the transfer, Optionee will be required to file the report.
Securities Law. No prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (ASIC) in relation to the offer. The Notice of Stock Option Grant and the Stock Option Agreement do not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (Cth) (the "Corporations Act"), and do not purport to include the
SCALYR, INC.
STOCK OPTION AGREEMENT
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information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act. Any offer of the Option in Australia may only be made to, and this document may only be made available in Australia to, persons ("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 Options without disclosure to investors under Chapter 6D of the Corporations Act. The Options applied for by Exempt Investors in Australia and the shares issued upon exercise of the Options must not be offered for sale in Australia in the period of 12 months after the date of allotment or issue, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an 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 Options or Shares must observe such Australian on-sale restrictions. This Agreement contains general information only and does not take account of 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 to their needs, objectives and circumstances and, if necessary, seek expert advice from a person who is licensed by the Australian Securities and Investments Commission to give such advice on those matters.
Currency Exchange Rates. The Australian dollar equivalent of any U.S. dollar price set forth in the Plan or the Option can be calculated by applying the USD/AUD exchange rate published by the Reserve Bank of Australia on the date the Option is granted, which exchange rate is accessible at the following link http://www.rba.gov.au/statistics/frequency/exchange- rates.html. Exchange rates can also be found using the following link https://www.oanda.com/fx- for-business/historical-rates.
Obtaining Plan Rules. The Company undertakes, at Optionee's request, at no charge and within a reasonable time, to provide Optionee a full copy of the rules of the Plan.
Transfer Restrictions. If Optionee acquires Shares pursuant to the Option and offers the Shares for sale to a person or entity resident in Australia in compliance with the terms of the Option and the Plan, such offer may be additionally subject to disclosure requirements under Australian law. Optionee should obtain legal advice as to Optionee's disclosure obligations prior to making any such offer, even if in compliance with the terms of the Option and the Plan.
Risk Warning. The Option carries a risk that the Company's shares may fall as well as rise in value. Market forces will impact the price of the Company's shares, and at their worst, their market value may become zero if adverse market conditions are encountered. In such a scenario, or if the value of the Company's shares falls below the exercise price of an unexercised Option, the value a Participant's awards would be nil.
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STOCK OPTION AGREEMENT
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The Option is also subject to the Plan rules and the terms of the Option, which may provide, among other things, that vesting of the Option is conditional on the satisfaction of one or more conditions linked to performance.
Data Protection. The Company and the Employer expressly inform Optionee that, if he or she participates in the Plan:
(i) Optionee consents to the Company, the Employer, any Parent, Subsidiary or Affiliate and any of their related bodies corporate or any third party collecting the personal information (including Data and other sensitive information) necessary to administer the Plan and disclosing any Data or other personal information necessary to administer the Plan to the Company, the Employer, any Parent, Subsidiary or Affiliate or any of their related bodies corporate or any third party engaged to assist in implementing the Plan, which receiving party may be situated inside or outside Australia, including in jurisdictions that may not afford Optionee's information the same level of protection that Australian laws do.
(ii) The Company and/or the Employer will not be required to take steps to ensure that the Company, the Employer, any Parent, Subsidiary or Affiliate or any of their related bodies corporate or any third party engaged to assist in implementing the Plan do not breach the Australian Privacy Principles.
SINGAPORE
Terms and Conditions
Employment Acknowledgment. By participating in the Plan, Optionee acknowledges and agrees that the Options granted under the Plan shall vest and become exercisable for as long as Optionee continuously provides services for the Company as an employee, officer, director, contractor or consultant subject to the Notice of Stock Option Grant and the provisions of the Plan and the Agreement.
Notifications
Securities Laws. The Shares or Options may not 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 pursuant to, and in accordance with the conditions of, an exemption under any provision of Subdivision (4) of Division 1 of Part XIII of the Securities and Futures Act, Chapter 289 of Singapore.
The Shares and Options are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (asdefined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
SCALYR, INC.
STOCK OPTION AGREEMENT
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EXHIBIT A
SCALYR, INC. 2011 STOCK INCENTIVE PLAN
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
*NOTE: YOU MUST SIGN OR ACCEPT THIS NOTICE ON PAGE A-10 BEFORE SUBMITTING TO SCALYR, INC. (THE “COMPANY”).
PURCHASER INFORMATION: PLEASE PROVIDE THE FOLLOWING INFORMATION ABOUT YOURSELF (“PURCHASER”):
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Name:
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Social Security Number:1
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Address:
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Employee Number:
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Email Address:
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OPTION INFORMATION: PLEASE PROVIDE THIS INFORMATION ON THE OPTION BEING EXERCISED (THE “OPTION”):
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Date of Grant:
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Type of Stock Option:
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Option Price per Share:
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Total number of shares of Common Stock of the Company
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subject to the Option:
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EXERCISE INFORMATION:
Number of shares of Common Stock of the Company for which the Option is now being exercised________________. (These shares are referred to below as the "Purchased Shares.")
Total Exercise Price Being Paid for the Purchased Shares: US$_____________
Form of payment [check all that apply, subject to any restrictions or requirements under applicable law]:
☐ Check for US$___________, denominated in U.S. dollars and payable to "Scalyr, Inc."
☐ Certificate(s) for ________________ shares of Common Stock of the Company. These shares will be valued as of the date this notice is received by the Company. [Requires Company consent.]
1 If you are not a U.S. taxpayer and have no Social Security Number or Taxpayer Identification Number, please use your taxpayer or national identification in the country or countries in which you are a resident or subject to taxation.
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-1
☐ Automated Clearing House ("ACH") transfer2
AGREEMENTS, REPRESENTATIONS AND ACKNOWLEDGMENTS OF PURCHASER: BY SIGNING OR ACCEPTING THIS NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT, PURCHASER HEREBY AGREES WITH, AND REPRESENTS TO, THE COMPANY AS FOLLOWS:
SECTION 1. PURCHASE OF SHARES.
(a) Pursuant to the terms of the Stock Option Agreement governing the Option (the "Option Agreement"), Purchaser hereby agrees to purchase from the Company and the Company agrees to sell and issue to Purchaser the Purchased Shares for the Exercise Price per share specified in the Notice of Stock Option Grant payable by personal check, cashier's check, money order or otherwise, in any case, denominated and payable in U.S. dollars, as permitted by the Option Agreement and the Company's 2011 Stock Incentive Plan (the "Plan"). Payment shall be delivered at the Closing, as such term is defined below. Certain capitalized terms used in this agreement and not otherwise defined herein are defined in the Plan.
(b) The closing (the "Closing") under this Agreement shall occur at the offices of the Company as of the date hereof, or such other time and place as may be designated by the Company (the "Closing Date").
SECTION 2. ADJUSTMENT OF SHARES.
Subject to the provisions of the Certificate of Incorporation of the Company, if (a) there is any stock dividend or liquidating dividend of cash and/or property, stock split or other change in the character or amount of any of the outstanding securities of the Company, or (b) there is any consolidation, merger or sale of all or substantially all of the assets of the Company, then, in such event, any and all new, substituted or additional securities or other cash or property to which Purchaser is entitled by reason of Purchaser's ownership of the shares shall be immediately subject to the Right of First Refusal, as defined below, with the same force and effect as the shares subject to the Right of First Refusal. Appropriate adjustments shall be made to the number and/or class of shares subject to the Right of First Refusal to reflect the exchange or distribution of such securities. In the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Right of First Refusal may be exercised by the Company's successor.
2 Any ACH transfer ultimately received by the Company shall be deemed to have been effected for purpose of your Option exercise when initiated and made irrevocable by you.
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-2
SECTION 3. THE COMPANY'S RIGHT OF FIRST REFUSAL.
Before any shares of Company's Common Stock (the "Common Stock") registered in the name of Purchaser may be sold or transferred, such shares shall first be offered to the Company as follows (the "Right of First Refusal"):
(a) Purchaser shall promptly deliver a notice ("Notice") to the Company stating (i) Purchaser's bona fide intention to sell or transfer such shares, (ii) the number of such shares to be sold or transferred, and the basic terms and conditions of such sale or transfer, (iii) the price (denominated in U.S. dollars) for which Purchaser proposes to sell or transfer such shares, (iv) the name of the proposed purchaser or transferee, and (v) proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable U.S. or foreign securities or exchange control laws. The Notice shall be signed by both Purchaser and the proposed purchaser or transferee and must constitute a binding commitment subject to the Company's Right of First Refusal as set forth herein.
(b) Within 30 days after receipt of the Notice, the Company may elect to purchase all or any portion of the shares to which the Notice refers, at the price per share (in U.S. dollars) specified in the Notice. If the Company elects not to purchase all or any portion of the shares, the Company may assign its right to purchase all or any portion of the shares. The assignees may elect within 30 days after receipt by the Company of the Notice to purchase all or any portion of the shares to which the Notice refers, at the price per share (in U.S. dollars) specified in the Notice. An election to purchase shall be made by written notice to Purchaser. Payment for shares purchased pursuant to this Section 3 shall be made within 30 days after receipt of the Notice by the Company and, at the option of the Company, may be made by cancellation of all or a portion of outstanding indebtedness, if any, or in cash or both.
(c) If all or any portion of the shares to which the Notice refers are not elected to be purchased, as provided in Section 3(b), Purchaser may sell those shares to any person named in the Notice at the price specified in the Notice; provided, that such sale or transfer is consummated within 60 days of the date of said Notice to the Company; and provided, further, that any such sale is made in compliance with applicable U.S. and foreign securities and exchange control laws and not in violation of any other contractual restrictions to which Purchaser is bound. The third-party purchaser shall be bound by, and shall acquire the shares of stock subject to, the provisions of this Agreement, including the Company's Right of First Refusal.
(d) Any proposed transfer on terms and conditions different from those set forth in the Notice, as well as any subsequent proposed transfer shall again be subject to the Company's Right of First Refusal and shall require compliance with the procedures described in this Section 3.
(e) Purchaser agrees to cooperate affirmatively with the Company, to the extent reasonably requested by the Company, to enforce rights and obligations pursuant to this Agreement.
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-3
(f) Notwithstanding the above, neither the Company nor any assignee of the Company under this Section 3 shall have any right under this Section 3 at any time subsequent to the closing of a public offering of the common stock of the Company pursuant to a registration statement declared effective under the U.S. Securities Act of 1933, as amended (the "Securities Act").
(g) This Section 3 shall not apply to (i) a transfer by will or intestate succession, or (ii) a transfer to one or more members of Purchaser's Immediate Family (as defined below) or to a trust established by Purchaser for the benefit of Purchaser and/or one or more members of Purchaser's Immediate Family; provided, that the transferee agrees in writing on a form prescribed by the Company to be bound by all of the provisions of this Agreement to the same extent as they apply to Purchaser. The transferee shall execute a copy of the attached Annex I and file the same with the Secretary of the Company. For purposes of this Agreement, "Immediate Family" means any 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, and shall include adoptive relationships.
SECTION 4. PURCHASER'S RIGHTS AFTER EXERCISE OF RIGHT OF FIRST REFUSAL.
If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Common Stock to be repurchased in accordance with the provisions of Section 3 of this Agreement, then from and after such time the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such shares shall be deemed to have been repurchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.
SECTION 5. TRANSFER BY PURCHASER TO CERTAIN PEOPLE.
Notwithstanding anything herein to the contrary, Purchaser may not transfer, assign, encumber or otherwise dispose of any Shares without the Company's written consent, including, but not limited to, one or more members of Purchaser's Immediate Family, or to a trust established by Purchaser for the benefit of Purchaser and/or one or more members of Purchaser's Immediate Family. In the event the Company approves of any such transfer to Immediate Family, such transfer may be made only if the transferee agrees in writing on a form prescribed by the Company to be bound by all of the provisions of this Agreement to the same extent as they apply to Purchaser. In connection with any such transfer, and as a pre-condition thereto, the transferee shall execute a copy of Annex I and file the same with the Secretary of the Company.
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-4
SECTION 6. LEGEND OF SHARES.
(a) All certificates representing the Common Stock purchased under this Agreement shall, where applicable, have endorsed thereon the following legends and any other legends required by applicable U.S. and/or foreign securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF U.S. FEDERAL AND STATE AND APPLICABLE FOREIGN SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION UNDER U.S. FEDERAL AND STATE AND APPLICABLE FOREIGN SECURITIES LAWS IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER HEREOF. SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(b) If the Option is an ISO for U.S. tax purposes, then the following legend should also be included:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED UPON EXERCISE OF A U.S. INCENTIVE STOCK OPTION, AND THE COMPANY MUST BE NOTIFIED IF THE SHARES SHALL BE TRANSFERRED BEFORE THE LATER OF THE TWO-YEAR ANNIVERSARY OF THE DATE OF GRANT OF THE OPTION AND THE ONE YEAR ANNIVERSARY OF THE DATE ON WHICH THE OPTION WAS EXERCISED. THE REGISTERED HOLDER MAY RECOGNIZE ORDINARY INCOME IN THE UNITED STATES IF THE SHARES ARE TRANSFERRED BEFORE SUCH DATE.
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-5
(c) If the Purchase is not a U.S. Person (within the meaning of Rule 902(k) of Regulation S under the Securities Act), then the following legend, along with any other legend required under applicable foreign law, should also be included:
PRIOR TO A DATE THAT IS ONE YEAR STARTING FROM THE DATE OF SALE OF THE STOCK, THE SHARES MAY NOT BE OFFERED OR SOLD (INCLUDING OPENING A SHORT POSITION IN SUCH SECURITIES) IN THE UNITED STATES OR TO U.S. PERSONS, AS DEFINED BY RULE 902(K) ADOPTED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OTHER THAN TO DISTRIBUTORS, UNLESS THE SHARES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. HOLDERS OF SHARES PRIOR TO ONE YEAR STARTING FROM THE DATE OF SALE OF THE STOCK MAY RESELL SUCH SECURITIES ONLY PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACTOR OTHERWISE IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S OF THE ACT, OR IN TRANSACTIONS EFFECTED OUTSIDE OF THE UNITED STATES, PROVIDED THEY DO NOT SOLICIT (AND NO ONE ACTING ON THEIR BEHALF SOLICITS) PARTICIPANTS IN THE UNITED STATES OR OTHERWISE ENGAGE(S) IN SELLING EFFORTS IN THE UNITED STATES AND PROVIDED THAT HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.
A HOLDER OF THE SECURITIES WHO IS A DISTRIBUTOR, DEALER, SUB- UNDERWRITER OR OTHER SECURITIES PROFESSIONAL, IN ADDITION, CANNOT, PRIOR TO ONE YEAR STARTING FROM THE DATE OF SALE OF THE STOCK, RESELL THE SECURITIES TO A U.S. PERSON AS DEFINED BY RULE 902(K) OF REGULATION S UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
SECTION 7. PURCHASER'S INVESTMENT REPRESENTATIONS.
(a) This Agreement is made with Purchaser in reliance upon Purchaser's representation to the Company, which by Purchaser's acceptance hereof Purchaser confirms, that the Common Stock which Purchaser will receive will be acquired with Purchaser's own funds for investment for an indefinite period for Purchaser's own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting participation in, or otherwise distributing the same, but subject, nevertheless, to any requirement of law that the disposition of Purchaser's property shall at all times be within Purchaser's control. By executing this Agreement, Purchaser further represents that Purchaser does not have any contract, understanding or agreement with any person to sell,
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-6
transfer, or grant participation to such person or to any third person, with respect to any of the Common Stock.
(b) Purchaser understands that the Common Stock will not be registered or qualified under applicable U.S. or foreign securities laws on the ground that the sale provided for in this Agreement is exempt from registration or qualification under applicable U.S. and foreign securities laws and that the Company's reliance on such exemption is predicated on Purchaser's representations set forth herein.
(c) Purchaser agrees that in no event shall Purchaser make a disposition of any of the Common Stock (including a disposition under Section 3 and/or Section 5 of this Agreement), unless and until (i) Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition and (ii) Purchaser shall have furnished the Company with an opinion of counsel satisfactory to the Company to the effect that (A) such disposition will not require registration or qualification of such Common Stock under applicable U.S. and foreign securities laws or (B) appropriate action necessary for compliance with the applicable U.S. and foreign securities laws has been taken or (iii) the Company shall have waived, expressly and in writing, its rights under clauses (i) and (ii) of this Section 7(c).
(d) With respect to a transaction occurring prior to such date as the Plan and Common Stock thereunder are covered by a valid Form S-8 or similar U.S. federal registration statement, this Section 7(d) shall apply unless the transaction is covered by the exemption in California Corporations Code Section 25102(o) or a similar broad-based exemption. In connection with the investment representations made herein, Purchaser represents that Purchaser is able to fend for himself or herself in the transactions contemplated by this Agreement, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Purchaser's investment, has the ability to bear the economic risks of Purchaser's investment and has been furnished with and has had access to such information as would be made available in the form of a registration statement together with such additional information as is necessary to verify the accuracy of the information supplied and to have all questions answered by the Company.
(e) Purchaser understands that if the Company does not register with the U.S. Securities and Exchange Commission pursuant to Section 12 of the U.S. Securities Exchange Act of 1934, as amended, or if a registration statement covering the Common Stock (or a filing pursuant to the exemption from registration under Regulation A of the Securities Act) under the Securities Act is not in effect when Purchaser desires to sell the Common Stock, Purchaser may be required to hold the Common Stock for an indeterminate period. Purchaser also acknowledges that Purchaser understands that any sale of the Common Stock which might be made by Purchaser in reliance upon Rule 144 under the Securities Act may be made only in limited amounts in accordance with the terms and conditions of that Rule.
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-7
(f) If Purchaser's country of residence is other than the United States, Purchaser makes the following additional representations, warranties and agreements:
(A) Purchaser is not a U.S. Person, as defined in Rule 902(k) of Regulation S under the Securities Act. The offer and sale of the Shares to Purchaser was made in an offshore transaction (as defined in Rule 902(h) of Regulation S), no directed selling efforts (as defined in Rule 902(c) of Regulation S) were made in the United States and Purchaser is not acquiring the Shares for the account or benefit of any U.S. Person.
(B) Purchaser will not, during the Restricted Period applicable to the Shares included in the legend set forth in the legends in Section 6(c) above (the "Restricted Period") and on any certificate representing the Shares, offer or sell any of the foregoing securities (or create or maintain any derivative position equivalent thereto) in the United States, to or for the account or benefit of a U.S. Person or other than in accordance with Regulation S.
(C) Purchaser will, after the expiration of the applicable Restricted Period, offer, sell, pledge or otherwise transfer the Shares (or create or maintain any derivative position equivalent thereto) only pursuant to registration under the Securities Act or any available exemption therefrom and, in any case, in accordance with applicable state securities laws.
(D) Purchaser acknowledges and agrees that the Company shall not register the transfer of the Shares in violation of this Agreement, the Plan or any of the restrictions set forth herein or therein.
SECTION 8. NO DUTY TO TRANSFER IN VIOLATION OF THIS AGREEMENT.
The Company shall not be required (a) to transfer on its books any shares of Common Stock of the Company which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.
SECTION 9. RIGHTS OF PURCHASER.
(a) Except as otherwise provided herein, Purchaser shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Company with respect to the Common Stock.
(b) Nothing in this Agreement shall be construed as a right by Purchaser to be retained by the Company, or a parent or subsidiary of the Company in any capacity. The Company reserves the right to terminate Purchaser's Service at any time and for any reason without thereby incurring any liability to Purchaser.
SECTION 10. RESALE RESTRICTIONS/MARKET STAND-OFF.
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-8
Purchaser hereby agrees that in connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, Purchaser shall not, directly or indirectly, engage in any transaction prohibited by the underwriter, or sell, make any short sale of, contract to sell, transfer the economic risk of ownership in, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any Common Stock without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or such underwriters. Such period of time shall not exceed 180 days (or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto) and may be required by the underwriter as a market condition of the offering; provided, that in the event the Company or the underwriter requests that the 180- day period be extended or modified pursuant to then-applicable law, rules, regulations or trading policies, the restrictions imposed during the 180-day period shall continue to apply to the extent requested by the Company or the underwriter to comply with such law, rules, regulations or trading policies. Purchaser hereby agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter that are consistent with the foregoing or that are necessary to give further effect thereto. To enforce the provisions of this Section 10, the Company may impose stop-transfer instructions with respect to the Common Stock until the end of the applicable stand-off period.
SECTION 11. OTHER NECESSARY ACTIONS.
The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
SECTION 12. NOTICE.
Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon the earliest of personal delivery, receipt or the third full day following deposit in the United States Post Office mail or international air mail with postage and fees prepaid, addressed to the other party hereto at the address last known or at such other address as such party may designate by ten days' advance written notice to the other party hereto.
SECTION 13. SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser and Purchaser's heirs, executors, administrators, successors and assigns. The failure of the Company in any instance to exercise the Right of First Refusal described herein shall not constitute a waiver of any other Right of First Refusal that may subsequently arise under the provisions of
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-9
this Agreement. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of a like or different nature.
SECTION 14. APPLICABLE LAW.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, as such laws are applied to contracts entered into and performed in such state (without regard to its choice of law provisions).
SECTION 15. NO STATE QUALIFICATION.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
SECTION 16. NO ORAL MODIFICATION.
No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto.
SECTION 17. ENTIRE AGREEMENT.
This Agreement, the Option Agreement and the Plan constitute the entire complete and final agreement between the parties hereto with regard to the subject matter hereof and no party shall be liable or bound to the other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled and superseded by this Agreement, the Option Agreement and the Plan.
[Remainder of this page intentionally left blank.]
SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-10
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
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SCALYR, INC.
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PURCHASER:
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By:
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Print Name:
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Title:
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Print Name:
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SCALYR, INC.
EXHIBIT A TO STOCK OPTION AGREEMENT
NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
A-11
ANNEX I
ACKNOWLEDGMENT OF AND AGREEMENT TO BE BOUND
BY THE NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
OF
SCALYR, INC.
The undersigned, as transferee of shares of Scalyr, Inc. (the "Company") hereby acknowledges that he or she has read and reviewed the terms of the Notice of Exercise and Common Stock Purchase Agreement by and between the transferor and the Company, as the same has been amended to date and may be further amended from time to time (the "Agreement"), and hereby agrees to be bound by the terms and conditions thereof, as if the undersigned had executed said Agreement as an original party thereto.
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Dated:
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(Signature of Transferee)
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(Printed Name of Transferee)
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SCALYR, INC.
ANNEX I TO STOCK OPTION AGREEMENT
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Sentinel Labs, Inc. 2013 Equity Incentive Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company's stockholders.
SECTION 2. DEFINITIONS
Certain capitalized terms used in the Plan have the meanings set forth in Appendix A.
SECTION 3. ADMINISTRATION
3.1 Administration of the Plan
The Plan shall be administered by the Board. All references in the Plan to the "Plan Administrator" shall be to the Board.
3.2 Administration and Interpretation by Plan Administrator
(a) Except for the terms and conditions explicitly set forth in the Plan, and to the extent permitted by applicable law, the Plan Administrator shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) interpret and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (viii) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (ix) delegate ministerial duties to such of the Company's employees as it so determines; and (x) make any other determination and take any other action that the Plan Administrator deems necessary or desirable for administration of the Plan.
(b) The effect on the vesting of an Award of a Company-approved leave of absence or a Participant's reduction in hours of employment or service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Board, whose determination shall be final.
(c) Decisions of the Plan Administrator shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person. A majority of the members of the Plan Administrator may determine its actions.
SECTION 4. SHARES SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 14.1, a maximum of 14,345,139 shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.
4.2 Share Usage
(a) Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. Any shares of Common Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding obligations in connection with an Award, or (ii) covered by an Award that is settled in cash or in a manner such that some or all of the shares covered by the Award are not issued, shall be available for Awards under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Common Stock subject or paid with respect to an Award.
(b) The Plan Administrator shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.
(c) Notwithstanding any other provision of the Plan to the contrary, the Plan Administrator may grant Substitute Awards under the Plan. In the event that a written agreement between the Company and an Acquired Entity pursuant to which merger or consolidation is completed is approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, and the persons holding such awards shall be deemed to be Participants.
(d) Notwithstanding any other provisions in this Section 4.2 to the contrary, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1, subject to adjustment as provided in Section 14.1.
SECTION 5. ELIGIBILITY
An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Plan Administrator from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer
and sale of the Company's securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company's securities.
SECTION 6. AWARDS
6.1 Form, Grant and Settlement of Awards
The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone or in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Plan Administrator shall determine.
6.2 Evidence of Awards
Awards granted under the Plan shall be evidenced by a written, including an electronic, instrument that shall contain such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable and that are not inconsistent with the Plan.
6.3 Dividends and Distributions
Participants may, if the Plan Administrator so determines, be credited with dividends or dividend equivalents paid with respect to shares of Common Stock underlying an Award in a manner determined by the Plan Administrator in its sole discretion. The Plan Administrator may apply any restrictions to the dividends or dividend equivalents that the Plan Administrator deems appropriate. The Plan Administrator, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units. Notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on the number of shares underlying an Option or Stock Appreciation Right may not be contingent, directly or indirectly, on the exercise of the Option or Stock Appreciation Right, and must comply with or qualify for an exemption under Section 409A. Also notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on Restricted Stock must (a) be paid at the same time they are paid to other stockholders and (b) comply with or qualify for an exemption under Section 409A.
SECTION 7. OPTIONS
7.1 Grant of Options
The Plan Administrator may grant Options designated as Incentive Stock Options or Nonqualified Stock Options.
7.2 Option Exercise Price
Options shall be granted with an exercise price per share not less than 100% of the Fair Market Value of the Common Stock on the Grant Date (and not less than the minimum exercise price required by Section 422 of the Code with respect to Incentive Stock Options), except in the case of Substitute Awards.
7.3 Term of Options
Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option (the "Option Term") shall be ten years from the Grant Date. For Incentive Stock Options, the Option Term shall be as specified in Section 8.4.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall vest and become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:
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Period of Participant's Continuous Employment or Service With the Company or Its Related Companies From the Vesting Commencement Date
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Portion of Total Option That Is Vested and Exercisable
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After 1 year
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1/4th
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After each additional one-month period of continuous service completed thereafter
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An additional 1/48 th
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After 4 years
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100%
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To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to or as directed or approved by the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement or notice, if any, and such representations and agreements as may be required by the Plan Administrator, accompanied by payment in full as described in Section 7.5. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Plan Administrator.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Plan Administrator for that purchase, which forms may include:
(a) cash;
(b) check or wire transfer;
(c) having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;
(d) tendering (either actually or, if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;
(e) if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any tax withholding obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or
(f) such other consideration as the Plan Administrator may permit.
In addition, to assist a Participant (including directors and executive officers) in acquiring shares of Common Stock pursuant to an Option granted under the Plan, the Plan Administrator, in its sole discretion and to the extent permitted by applicable law, may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Option, (i) the payment by a Participant of the purchase price of the Common Stock by a promissory note or (ii) the guarantee by the Company of a loan obtained by the Participant from a third party. Such notes or loans must be full recourse to the extent necessary to avoid adverse accounting charges to the Company's earnings for financial reporting purposes. Subject to the foregoing, the Plan Administrator shall in its sole discretion specify the terms of any loans or loan guarantees, including the interest rate and terms of and security for repayment.
7.6 Effect of Termination of Service
The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the date of a Participant's Termination of Service shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the date of a Participant's Termination of Service shall expire on the earliest to occur of:
(i) if the Participant's Termination of Service occurs for reasons other than Cause, Retirement, Disability or death, the date that is three months after such Termination of Service;
(ii) if the Participant's Termination of Service occurs by reason of Retirement, Disability or death, the one-year anniversary of such Termination of Service; and
(iii) the Option Expiration Date.
Notwithstanding the foregoing, if a Participant dies after the Participant's Termination of Service but while an Option is otherwise exercisable, the portion of the Option that is vested and exercisable on the date of such Termination of Service shall expire upon the earlier to occur of (y) the Option Expiration Date and (z) the one-year anniversary of the date of death, unless the Plan Administrator determines otherwise.
Notwithstanding the foregoing, to the extent required by applicable law, unless employment or services are terminated for Cause, the right to exercise an Option in the event of Termination of Service, to the extent that the Participant is otherwise entitled to exercise an Option on the date of Termination of Service, shall be
a. at least six months from the date of a Participant's Termination of Service if termination was caused by death or Disability; and
b. at least 30 days from the date of a Participant's Termination of Service if termination was caused by other than death or Disability;
c. but in no event later than the Option Expiration Date.
Also notwithstanding the foregoing, in case a Participant's Termination of Service occurs for Cause, all Options granted to the Participant shall automatically expire upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise. If a Participant's employment or service relationship with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant's rights under any Option shall likewise be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after a Participant's Termination of Service, any Option then held by the Participant may be immediately terminated by the Plan Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
Notwithstanding any other provisions of the Plan to the contrary, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code or any successor provision, and any applicable regulations thereunder, including, to the extent required thereunder, the following:
8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which a Participant's Incentive Stock Options become exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two
or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted.
8.2 Eligible Employees
Individuals who are not employees of the Company or one of its parent or subsidiary corporations may not be granted Incentive Stock Options.
8.3 Exercise Price
Incentive Stock Options shall be granted with an exercise price per share not less than 100% of the Fair Market Value of the Common Stock on the Grant Date and, in the case of an Incentive Stock Option granted to a Participant who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a "Ten Percent Stockholder"), shall be granted with an exercise price per share not less than 110% of the Fair Market Value of the Common Stock on the Grant Date. The determination of more than 10% ownership shall be made in accordance with Section 422 of the Code.
8.4 Option Term
Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Incentive Stock Option shall not exceed ten years, and in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, shall not exceed five years.
8.5 Exercisability
An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than three months after the date of a Participant's termination of employment if termination was for reasons other than death or disability, (b) more than one year after the date of a Participant's termination of employment if termination was by reason of disability, or (c) more than six months following the first day of a Participant's leave of absence that exceeds three months, unless the Participant's reemployment rights are guaranteed by statute or contract.
8.6 Taxation of Incentive Stock Options
In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year after the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Participant shall give the Company prompt notice of any disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such holding periods.
8.7 Code Definitions
For the purposes of this Section 8, "disability," "parent corporation" and "subsidiary corporation" shall have the meanings attributed to those terms for purposes of Section 422 of the Code.
8.8 Promissory Notes
The amount of any promissory note delivered pursuant to Section 7.5 in connection with an Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in no case less than the rate required to avoid imputation of interest (taking into account any exceptions to the imputed interest rules) for federal income tax purposes.
SECTION 9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights
The Plan Administrator may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Plan Administrator shall determine in its sole discretion. An SAR may be granted in tandem with an Option or alone ("freestanding"). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. An SAR may be exercised upon such terms and conditions and for the term as the Plan Administrator determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term of a freestanding SAR shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.
9.2 Payment of SAR Amount
Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock on the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Plan Administrator as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Plan Administrator in its sole discretion.
9.3 Waiver of Restrictions
The Plan Administrator, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.
SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS
10.1 Grant of Stock Awards, Restricted Stock and Stock Units
The Plan Administrator may grant Stock Awards, Restricted Stock and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Plan Administrator shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.
10.2 Vesting of Restricted Stock and Stock Units
Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant's release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Plan Administrator (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become freely transferable by the Participant subject to the terms and conditions of the Plan, the instrument evidencing the Award, and applicable securities laws, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.
10.3 Waiver of Restrictions
The Plan Administrator, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.
SECTION 11. OTHER STOCK OR CASH-BASED AWARDS
Subject to the terms of the Plan and such other terms and conditions as the Plan Administrator deems appropriate, the Plan Administrator may grant other incentives payable in cash or in shares of Common Stock under the Plan.
SECTION 12. WITHHOLDING
The Company may require the Participant to pay to the Company the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award ("tax withholding obligations") and (b) any amounts due from the Participant to the Company or to any Related Company ("other obligations"). Notwithstanding any other provision of the Plan to the contrary, the Company shall not be required to issue any shares of Common Stock or otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.
The Plan Administrator may permit or require a Participant to satisfy all or part of the Participant's tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become due from the Company to the Participant, (c) having the Company withhold a number
of shares of Common Stock that would otherwise be issued to the Participant (or become vested, in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, or (d) surrendering a number of shares of Common Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations. The value of the shares so withheld or tendered may not exceed the employer's minimum required tax withholding rate.
SECTION 13. ASSIGNABILITY
No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent the Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant's death. During a Participant's lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit a Participant to assign or transfer an Award, subject to such terms and conditions as the Plan Administrator shall specify.
SECTION 14. ADJUSTMENTS
14.1 Adjustment of Shares
In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or any other company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2(d); and (iii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Change of Control shall not be governed by this Section 14.1 but shall be governed by Sections 14.2 and 14.3, respectively.
14.2 Dissolution or Liquidation
To the extent not previously exercised or settled, and unless otherwise determined by the Plan Administrator in its sole discretion, Awards shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Plan Administrator, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.
14.3 Change of Control
(a) Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control, each outstanding Award shall be treated as the Plan Administrator shall determine (subject to the provisions of this Section 14.3) without a Participant's consent, including, without limitation, that (i) Awards shall be converted, assumed, substituted for or replaced by the Successor Company; (ii) Awards shall terminate upon or immediately prior to the Change of Control; (iii) Awards shall become vested and exercisable or payable, and all applicable restrictions or forfeiture provisions shall lapse, in whole or in part, as determined by the Plan Administrator, upon or immediately prior the Change of Control, and, to the extent the Plan Administrator determines, such Awards shall terminate upon or immediately prior to such Change of Control; (iv) Awards shall terminate upon or immediately prior to the Change of Control in exchange for a cash payment equal to the amount (if any) by which (x) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Awards (either to the extent then vested and exercisable, or subject to restrictions and/or forfeiture provisions, or whether or not then vested and exercisable, or subject to restrictions and/or forfeiture provisions, as determined by the Plan Administrator in its sole discretion) exceeds (y) if applicable, the respective aggregate exercise, grant or purchase price payable with respect to shares of Common Stock subject to such Awards; or (v) any combination of the foregoing.
(b) For the purposes of Section 14.3(a), an Award shall be considered converted, assumed, substituted for or replaced by the Successor Company if following the Change of Control the Award confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Change of Control is not solely common stock of the Successor Company, the Plan Administrator may, with the consent of the Successor Company, provide for the consideration to be received pursuant to the Award, for each share of Common Stock subject thereto, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Change of Control. The determination of such substantial equality of value of consideration shall be made by the Plan Administrator, and its determination shall be conclusive and binding.
(c) For the avoidance of doubt, nothing in this Section 14.3 requires all Awards to be treated similarly.
14.4 Further Adjustment of Awards
Subject to Sections 14.2 and 14.3, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change of control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change of control that is the reason for such action.
14.5 No Limitations
The grant of Awards shall in no way affect the Company's right 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.
14.6 Fractional Shares
In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.
14.7 Section 409A
Subject to Section 18.5, but notwithstanding any other provision of the Plan to the contrary, (a) any adjustments made pursuant to this Section 14 to Awards that are considered "deferred compensation" within the meaning of Section 409A shall be made in compliance with the requirements of Section 409A and (b) any adjustments made pursuant to this Section 14 to Awards that are not considered "deferred compensation" subject to Section 409A shall be made in such a manner as to ensure that after such adjustment the Awards either (i) continue not to be subject to Section 409A or (ii) comply with the requirements of Section 409A.
SECTION 15. FIRST REFUSAL; VOTING RESTRICTIONS
15.1 First Refusal Rights
Until the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the Company shall have the right of first refusal with respect to any proposed sale or other disposition by a Participant of any shares of Common Stock issued pursuant to an Award. Such right of first refusal shall be exercisable in accordance with the terms and conditions established by the Plan Administrator and set forth in the agreement evidencing the Participant's receipt of the shares or, if applicable, in a shareholders agreement or other similar agreement.
15.2 Other Rights and Voting Restrictions
Until the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the Plan Administrator may require a Participant, as a condition to receiving shares under the Plan, to become a party to a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which Participant grants to the Company and/or its other shareholders certain rights, including but not limited to co-sale rights, and agrees to certain voting restrictions with respect to the Shares acquired by Participant under the Plan.
15.3 General
The Company's rights under this Section 15 are assignable by the Company at any time.
SECTION 16. MARKET STANDOFF
In the event of an underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, no person may sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any shares issued pursuant to an Award granted under the Plan without the prior written consent of the Company or its underwriters. Such limitations shall be in effect for such period of time as may be requested by the Company or such underwriters; provided, however, that in no event shall such period exceed (a) 180 days after the effective date of the registration statement for such public offering or (b) such longer period requested by the underwriters as is necessary to comply with regulatory restrictions on the publication of research reports (including, but not limited to, NYSE Rule 472 or NASD Conduct Rule 2711, or any successor rules). The limitations of this Section 16 shall in all events terminate two years after the effective date of the Company's initial public offering.
In the event of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company's outstanding Common Stock effected as a class without the Company's receipt of consideration, any new, substituted or additional securities distributed with respect to the shares issued under the Plan shall be immediately subject to the provisions of this Section 16, to the same extent the shares issued under the Plan are at such time covered by such provisions.
In order to enforce the limitations of this Section 16, the Company may impose stop-transfer instructions with respect to the shares until the end of the applicable standoff period.
SECTION 17. AMENDMENT AND TERMINATION
17.1 Amendment, Suspension or Termination
The Board may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any
amendment to the Plan. Subject to Section 17.3, the Board may amend the terms of any outstanding Award, prospectively or retroactively.
17.2 Term of the Plan
The Plan shall have no fixed expiration date. After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan's terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten years after the later of (a) the adoption of the Plan by the Board and (b) the adoption by the Board of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code. Also notwithstanding the foregoing, no Award may be granted to a resident of California more than ten years after the earlier of the date of adoption of the Plan and the date the Plan is approved by the stockholders.
17.3 Consent of Participant
The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant's consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 14 shall not be subject to these restrictions.
Subject to Section 18.5, but notwithstanding any other provision of the Plan to the contrary, the Board shall have broad authority to amend the Plan or any outstanding Award without the consent of the Participant to the extent the Board deems necessary or advisable to comply with, or take into account, changes in applicable tax laws, securities laws, accounting rules or other applicable law, rule or regulation.
SECTION 18. GENERAL
18.1 No Individual Rights
No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.
Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant's employment or other relationship at any time, with or without cause.
18.2 Issuance of Shares
Notwithstanding any other provision of the Plan to the contrary, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other
distribution of benefits under the Plan unless, in the opinion of the Company's counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.
The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.
As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant's own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Plan Administrator may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.
To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
18.3 Indemnification
Each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person, unless such loss, cost, liability or expense is a result of such person's own willful misconduct or except as expressly provided by statute; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf.
The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company's certificate of incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.
18.4 No Rights as a Stockholder
Unless otherwise provided by the Plan Administrator or in the instrument evidencing the Award or in a written employment, services or other agreement, no Award, other than a Stock Award, shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.
18.5 Compliance with Laws and Regulations
In interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code.
The Plan and Awards granted under the Plan are intended to be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the exclusion applicable to stock options, stock appreciation rights and certain other equity-based compensation under Treasury Regulation Section 1.409A-1(b)(5), or otherwise. To the extent Section 409A is applicable to the Plan or any Award granted under the Plan, it is intended that the Plan and any Awards granted under the Plan comply with the deferral, payout, plan termination and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with such intentions; provided, however, that the Plan Administrator makes no representations that Awards granted under the Plan shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to Awards granted under the Plan. Without limiting the generality of the foregoing, and notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, with respect to any payments and benefits under the Plan or any Award granted under the Plan to which Section 409A applies, all references in the Plan or any Award granted under the Plan to the termination of the Participant's employment or service are intended to mean the Participant's "separation from service," within the meaning of Section 409A(a)(2)(A)(i) to the extent necessary to avoid subjecting the Participant to the imposition of any additional tax under Section 409A. In addition, if the Participant is a "specified employee," within the meaning of Section 409A, then to the extent necessary to avoid subjecting the Participant to the imposition of any additional tax under Section 409A, amounts that would otherwise be payable under the Plan or any Award granted under the Plan during the six-month period immediately following the Participant's "separation from service," within the meaning of Section 409A(a)(2)(A)(i), shall not be paid to the Participant during such period, but shall instead be accumulated and paid to the Participant (or, in the event of the Participant's death, the Participant's estate) in a lump sum on the first business day after the earlier of the date that is six months following the Participant's separation from service or the Participant's death. Notwithstanding any other provision of the Plan to the
contrary, the Plan Administrator, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A.
18.6 Participants in Other Countries or Jurisdictions
Without amending the Plan, the Plan Administrator may grant Awards to Eligible Persons who are foreign nationals on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Plan Administrator, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.
18.7 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.
18.8 Successors
All obligations of the Company under the Plan with respect to Awards 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 the business and/or assets of the Company.
18.9 Severability
If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
18.10 Choice of Law and Venue
The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of California without giving effect to principles of conflicts of law.
Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of California.
18.11 Financial Reports
To the extent required by applicable law, the Company shall provide annual financial statements of the Company to each Participant. Such financial statements need not be audited and need not be issued to key persons whose duties within the Company assure them access to equivalent information.
18.12 Legal Requirements
The granting of Awards and the issuance of shares of Common Stock under the Plan is subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
SECTION 19. EFFECTIVE DATE
The effective date (the "Effective Date") is the date on which the Plan is adopted by the Board. If the stockholders of the Company do not approve the Plan within 12 months after the Board's adoption of the Plan, any Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options. To the extent required under applicable law, any Award exercised before the stockholders of the Company approve the Plan shall be rescinded if the stockholders of the Company do not approve the Plan by the later of (a) within 12 months before or after the date on which the Board adopts the Plan and (b) prior to or within 12 months of the date on which any Award under the Plan is granted in California.
PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
SUMMARY PAGE
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Date of
Board Action
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Action
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Section/Effect of
Amendment
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Date of Stockholder
Approval
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July 22, 2013
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Initial Plan Adoption
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July 22, 2013
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September 21, 2015
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Plan increased by 1,001,378 to 3,251,062
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Section 4.1
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September 21, 2015
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January 11, 2017
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Plan increased by 3,416,366 to 6,667,428
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Section 4.1
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January 11, 2017
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July 13, 2018
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Plan increased by 1,600,000 to 8,267,428
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Section 4.1
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July 13, 2018
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December 9, 2018
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Plan increased by 2,277,711 to 10,545,139
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Section 4.1
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December 9, 2018
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December 5, 2019
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Plan increased by 3,800,000 to 14,345,139
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Section 4.1
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December 5, 2019
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APPENDIX A
DEFINITIONS
As used in the Plan:
"Acquired Entity" means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines.
"Acquisition Price" means the fair market value of the securities, cash or other property, or any combination thereof, receivable or deemed receivable upon a Change of Control in respect of a share of Common Stock, as determined by the Plan Administrator in its sole discretion.
"Award" means any Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit or cash-based award or other incentive payable in cash or in shares of Common Stock, as may be designated by the Plan Administrator from time to time.
"Board" means the Board of Directors of the Company.
"Cause," unless otherwise defined in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means dishonesty, fraud, serious or willful misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited by law (except minor violations), in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, whose determination shall be conclusive and binding.
"Change of Control," unless the Plan Administrator determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means consummation of:
(a) a merger or consolidation of the Company with or into any other company or other entity;
(b) a sale, in one transaction or a series of transactions undertaken with a common purpose, of all of the Company's outstanding voting securities; or
(c) a sale, lease, exchange or other transfer, in one transaction or a series of related transactions, undertaken with a common purpose of all or substantially all of the Company's assets.
Notwithstanding the foregoing, a Change of Control shall not include (i) a merger or consolidation of the Company in which the holders of the outstanding voting securities of the Company immediately prior to the merger or consolidation hold at least a majority of the outstanding voting securities of the Successor Company immediately after the merger or consolidation; (ii) a sale, lease, exchange or other transfer of all or substantially all of the Company's assets to a majority-owned subsidiary company; (iii) a transaction undertaken for the principal purpose of restructuring the capital of the Company, including, but not limited to, reincorporating the Company in a different jurisdiction, converting the Company to a limited
liability company or creating a holding company; or (iv) any transaction that the Board determines is not a Change of Control for purposes of the Plan.
Where a series of transactions undertaken with a common purpose is deemed to be a Change of Control, the date of such Change of Control shall be the date on which the last of such transactions is consummated.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Common Stock" means the common stock, par value $0.0001 per share, of the Company.
"Company" means Sentinel Labs, Inc., a Delaware corporation.
"Disability," unless otherwise defined by the Plan Administrator for purposes of the Plan or in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, each of whose determination shall be conclusive and binding.
"Effective Date" has the meaning set forth in Section 19.
"Eligible Person" means any person eligible to receive an Award as set forth in Section 5.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time.
"Fair Market Value" means the per share fair market value of the Common Stock as established in good faith by the Plan Administrator or, if the Common Stock is publicly traded, the closing price for the Common Stock on any given date during regular trading, or if not trading on that date, such price on the last preceding date on which the Common Stock was traded, unless determined otherwise by the Plan Administrator using such methods or procedures as it may establish.
"Grant Date" means the later of (a) the date on which the Plan Administrator completes the corporate action authorizing the grant of an Award or such later date specified by the Plan Administrator and (b) the date on which all conditions precedent to an Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.
"Incentive Stock Option" means an Option granted with the intention that it qualify as an "incentive stock option" as that term is defined for purposes of Section 422 of the Code or any successor provision.
"Nonqualified Stock Option" means an Option other than an Incentive Stock Option.
"Option" means a right to purchase Common Stock granted under Section 7.
"Option Expiration Date" means the last day of the maximum term of an Option.
"Option Term" means the maximum term of an Option as set forth in Section 7.3.
"Participant" means any Eligible Person to whom an Award is granted.
"Plan" means the Sentinel Labs, Inc. 2013 Equity Incentive Plan.
"Plan Administrator" has the meaning set forth in Section 3.1.
"Related Company" means any entity that, directly or indirectly, is in control of, is controlled by or is under common control with the Company.
"Restricted Stock" means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Plan Administrator.
"Retirement," unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means "Retirement" as defined for purposes of the Plan by the Plan Administrator or the Company's chief human resources officer or other person performing that function or, if not so defined, means Termination of Service on or after the date the Participant reaches "normal retirement age," as that term is defined in Section 411(a)(8) of the Code.
"Section 409A" means Section 409A of the Code.
"Securities Act" means the Securities Act of 1933, as amended from time to time.
"Stock Appreciation Right" or "SAR" means a right granted under Section 9.1 to receive the excess of the Fair Market Value of a specified number of shares of Common Stock over the grant price.
"Stock Award" means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Plan Administrator.
"Stock Unit" means an Award denominated in units of Common Stock granted under Section 10.
"Substitute Awards" means Awards granted or shares of Common Stock issued by the Company in substitution or exchange for awards previously granted by an Acquired Entity.
"Successor Company" means the surviving company, the successor company, the acquiring company or its parent, as applicable, in connection with a Change of Control.
"Termination of Service" means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors and executive officers, by the Board, whose determination shall be conclusive and binding. Transfer of a Participant's employment or service relationship between the Company and any Related Company shall not be considered a
Termination of Service for purposes of an Award. Unless the Board determines otherwise, a Termination of Service shall be deemed to occur if the Participant's employment or service relationship is with an entity that has ceased to be a Related Company. A Participant's change in status from an employee of the Company or a Related Company to a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company, or a change in status from a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company, shall not be considered a Termination of Service.
"Vesting Commencement Date" means the Grant Date or such other date selected by the Plan Administrator as the date from which an Award begins to vest.
SENTINEL LABS, INC.
APPENDIX B – ISRAEL 2013
TO THE 2013 EQUITY INCENTIVE PLAN
Notwithstanding any other provision of the Sentinel Labs, Inc. 2013 Equity Inventive Plan (respectively, the “the Company” and “the Plan”) to the contrary, the provisions of this Appendix B to the Plan shall be applicable to Awards granted under the Plan to Participants who are residents of the state of Israel or those who are deemed to be residents of the state of Israel for the payment of tax. For purposes of Awards granted under the Plan to Participants described in the preceding sentence, in the case of any conflict between the terms of this Appendix B and those of the remainder of the Plan, the terms of this Appendix B shall control.
ARTICLE A - DEFINITIONS
In this Appendix B, the following capitalized terms shall have the meaning indicated below. Capitalized words and terms defined in the Plan and not otherwise defined in this Appendix B, shall have the same meaning ascribed to them in the Plan.
“Approved 102 Option” means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Participants.
“CGO” as defined in Paragraph 4 of Article B below.
“ITA” means the Israeli Tax Authorities.
“OIO” as defined in Paragraph 5 of Article B below.
“102 Option” means any Option granted to a Participant pursuant to Section 102 of the Ordinance.
“Ordinance” means the Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended.
“Section 102” means Section 102 of the Ordinance and any regulations, rules, orders or procedures promulgated thereunder, as now in effect or as hereafter amended.
“Stock Option Agreement” means the written instrument evidencing the grant of one or more Awards under the Plan and which shall contain the terms and conditions applicable to such Award.
“Trustee” means any Person appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance.
“Unapproved 102 Option” means an Award granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee.
ARTICLE B - DESIGNATION OF OPTIONS PURSUANT TO SECTION 102
1. The Company may designate Options granted to its employees pursuant to Section 102 as Unapproved 102 Options or Approved 102 Options.
2. The grant of Approved 102 Options shall be granted under the Plan adopted by the Board and shall be conditioned upon the approval of the Plan by the ITA.
3. Approved 102 Option may either be classified as CGO or OIO (defined below).
4. Approved 102 Option elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as Capital Gain Option (“CGO”).
5. Approved 102 Option elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) shall be referred to herein as Ordinary Income Option (“OIO”).
6. The Company’s election of the type of Approved 102 Option as CGO or OIO granted to Employees (the “Election”), shall be appropriately filed with the ITA before the date of grant of an Approved 102 Option. Such Election shall become effective beginning the first date of grant of an Approved 102 Option under the Plan and shall remain in effect at least until the end of the year following the year during which the Company first granted Approved 102 Options. The Election shall obligate the Company to grant only the type of Approved 102 Option it has elected, and shall apply to all Participants who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Options simultaneously. In addition, it is hereby clarified that the Company may change the Election in accordance with the provisions of Section 102, and the Participants, or any of them, shall not be deemed to have acquired or otherwise be vested with any rights in respect of any Election made by the Company and/or the change thereof.
7. All Approved 102 Options must be held in trust by a Trustee, as described below.
8. For the avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102.
9. With regards to Approved 102 Options, the provisions of the Plan and/or the Stock Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the Plan and of the Stock Option Agreement. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan or the Stock Option Agreement, shall be considered binding upon the Company and the Participant. In this respect, and without derogating from any other authority conferred upon the Committee, the Committee may amend any provision of the Plan such that it will comply with Section 102 and/or the said permit, to the extent the Committee deems necessary in
order to receive and/or to keep in effect any tax benefit pursuant to Section 102. The Committee shall be entitled, but not obligated, to determine, in its absolute discretion, that such an amendment shall be considered binding upon the Company and the Participants retroactively, from the date in which it is required in order to receive and/or to keep in effect any tax benefit pursuant to Section 102.
ARTICLE C - TRUSTEE
1. Approved 102 Options which shall be granted under the Plan and/or any shares allocated or issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights, including without limitation bonus shares, shall be allocated or issued to the Trustee and held for the benefit of the Participants for such period of time as required by Section 102 (the “Holding Period”). In case the requirements for Approved 102 Options are not met, then the Approved 102 Options may be treated as Unapproved 102 Options, all in accordance with the provisions of Section 102.
2. Notwithstanding anything to the contrary, the Trustee shall not release any shares allocated or issued upon exercise of Approved 102 Options prior to the full payment of the Participant’s tax liabilities arising from Approved 102 Options which were granted to him and/or any shares allocated or issued upon exercise of such awards.
3. With respect to any Approved 102 Option, subject to the provisions of Section 102, a Participant shall not sell or release from trust any share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance. Notwithstanding the above, if any such sale or release occurs during the Holding Period, the sanctions under Section 102 of the Ordinance shall apply to and shall be borne by such Participant.
4. By receiving of an Approved 102 Option, the Participant will be deemed to have undertaken to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the Plan, or any Approved 102 Option or share granted to him or her thereunder.
ARTICLE D - GENERAL PROVISIONS
1. Solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the date of grant the shares of Sentinel Labs, Inc. are listed on any established stock exchange or a national market system or if such shares will be registered for trading within ninety (90) days following the date of grant, the Fair Market Value of a share at the date of grant shall be determined in accordance with the average value of the shares of Sentinel Labs, Inc. on the thirty (30) trading days preceding the date of grant or on the thirty (30) trading days following the date of registration for trading, as the case may be.
2. Each Participant, by receiving an Award, shall be deemed to have been representing that he or she is familiar with the provisions of Section 102 and that he is aware of the
Election that applies to him or her, and that he or she is agreeing to the terms and conditions of the trust agreement between the Company and the Trustee and undertakes not to sell the shares prior to the end of the term, as defined in Section 102.
3. The provisions of last sentence of Section 13 (Assignability) of the Plan shall not apply with respect to Awards granted under the Plan which are subject to this Appendix B.
4. The income attributed to a Participant as a result of a grant of an Option and/or the exercise of Options which is subject to this Annex B, their transfer in his or her name or their sale and in all respects relating thereto, shall not be taken into account when computing the basis of the Participant’s entitlement to any social benefits. Without derogating from the generality of the above, that income shall not be taken into account in computing mangers insurance, vocational studies fund, provident funds, severance pay, holiday pay and the like. If the Company or one of its parent or subsidiary corporations is legally obliged to take any of the above into account, as income which is to be attributed to the Participant, the Participant will indemnify the Company or such parent or subsidiary corporations in respect of any expense sustained by them in such respect.
APPENDIX C
FRENCH SUB-PLAN
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
FRENCH SUB-PLAN
Options to purchase common shares of the Company
This French sub-plan (the “Sub-Plan”) provides for a certain number of conditions or definitions which will apply to the Options to purchase shares of Sentinel Labs, Inc. non listed company (the “Company”) granted to Eligible Person under the Company’s 2013 Equity Incentive Plan (the “Plan”) and the Sub-Plan.
The additional terms and conditions provided for by the Sub-Plan are specific to the Eligible Persons only and do not affect the rights afforded to any other Participant who is granted Options under the Plan. The additional terms and conditions provided for by the Sub-Plan also do not affect the terms of Plan itself for purposes of compliance with US tax and securities laws.
In compliance with the Article 18.6 of the Plan, the purpose of this present French Sub-Plan is to bring the Options into compliance with French tax, social and commercial rules, in order to allow the Eligible Persons mentioned above to benefit from the favorable tax and social regime set out in Article 80 bis of the French Tax Code and article L.242-1 paragraph 2, L 136-6, L 137-13 and L 137-14 of the French Social Security Code with respect to Options granted under the Plan, provided, however, that, nothing in this French Sub-Plan shall be construed as a guarantee or an undertaking by Sentinel Labs, Inc. or EPP Sentinel Labs France SAS (“Sentinel Labs France”) that such regime will effectively apply.
Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meaning in the Sub-Plan.
It is intended that the Sub-Plan complies with French law and, in particular, with Articles L.225-177 to L225-186 of the French Commercial Code, and its terms, together with the terms of the Plan, are to be construed accordingly.
The provisions of this Sub-Plan shall form an integral part of the Plan and the Options granted to the Eligible Persons shall consequently be governed by the provisions of the Plan and of this Sub-Plan. The provisions of the Plan shall remain applicable insofar as they do not contradict the provisions of the Sub-Plan. In the event of conflict between the Plan and the French Sub-Plan, the provisions of the French Sub-Plan shall prevail.
Notwithstanding any other provision of the Plan, the authorization to grant Options under this Sub-Plan shall be for a limited period of [38] months from the signature date of the Addendum.
1. SPECIFIC DEFINED TERMS
Eligible Person. It means any person employed by Sentinel Labs, Inc. or Sentinel Labs France under the terms of a written or oral employment agreement and/or any person holding an executive office (e.g., Président, Président du Conseil d’administration, Directeur Général, Directeur Général Délégué, Membre du Directoire, Gérant de société par actions) and who may be granted Options under the law. Notwithstanding any other provision of the Plan, Options, granted to any Eligible Person who are directors, consultants, agents, advisors and independent contractors of the Company and/or its Related Companies or as a rule to any other persons who do not have an employment relationship with the Company and/or its Related Companies on the Grant Date, shall not be deemed to have been granted pursuant to the French Sub-Plan and shall be governed by the Plan.
An Eligible Person means also any person who does not own, on the applicable Grant Date, shares representing more than 10% of the issued share capital of the Company. The official place of residence of the Eligible Persons shall be located in France for French tax purposes (i.e., income tax and/or social security tax) on the Grant Date.
Disability. It means disability as determined in categories 2 and 3 under Article L. 341-4 of the French Social Security Code.
2. SPECIFIC CONDITIONS APPLYING TO OPTIONS GRANTED TO ELIGIBLE PERSONS
Notwithstanding any other provision of the Plan,
2.1 The Options may only be granted to Eligible Persons and Eligible Persons can only be granted Options under the Plan.
2.2 The Options cannot give rise to more than one third of the share capital of Sentinel Labs, Inc.
2.3 The Options must be granted over registered shares of Sentinel Labs, Inc. (as opposed to bearer shares).
2.4 The exercise price of the Option shall be equal to the Fair Market Value of the Shares on the Grant Date as determined under (i) the terms of the Plan and (ii) by the methods defined in the fourth paragraph of Article L. 225-177 of the French Commercial Code, ie according to multi-criteria method or, alternatively, that of the net asset value calculated from the most recent balance sheet (pursuant to Articles L. 225-177 and Article L. 225-179 of the French Commercial Code). Hence, no discount can be granted on the exercise price of the Options relative to the share value determined under the rules mentioned above.
2.5 The Option Exercise Price of the Option shall be determined on the Grant Date of the Option to the Eligible Person and cannot be modified in any way. Any adjustment made to the Option Exercise Price and/or the number of Options awarded under this Sub-Plan, shall not provide more advantages to the Eligible Person than those which would result from any adjustments that would be made in accordance with the provisions of Article L 225-181 of the French business code (Code de Commerce) (i.e. amortization or reduction of the share capital, modification of the sharing profits, allotment of free shares, capitalization of premiums or retained earnings or issuing premiums, issuance of share or securities giving a right to the allotment of shares, distribution of retained earnings). In the case of an adjustment of the Option Exercise Price, its amount cannot be inferior to the nominal value of the Shares. Any reduction by the Company, to the exercise price of an outstanding and unexercised Option previously issued under this Sub-Plan, to the current fair market value of the underlying share shall be deemed to not have been an option granted under this Sub-Plan.
2.6 The consideration to be paid for the Shares to be issued upon exercise of an Option shall consist of only cash or its equivalent.
2.7 The Options may neither be assigned nor transferred. The Options may nevertheless be transferred to the heirs of the Eligible Person and exercised by them within a period of six months following the death of such Eligible Person (including death during/after Disability). Thereafter the Option will lapse and be null and void.
ANNEX A
RESTRICTED STOCK PURCHASE AGREEMENT
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
This Restricted Stock Purchase Agreement (the “Agreement”) is made and entered into as specified on Carta1 (the “Effective Date”) by and between Sentinel Labs, Inc., a Delaware corporation (the “Company”), and the Purchaser indicated on Carta (“Purchaser”). Capitalized terms not defined herein shall have the meanings ascribed to them in the Company’s 2013 Equity Incentive Plan, as amended from time to time (the “Plan”).
1. PURCHASE OF SHARES.
1.1 Agreement to Purchase and Sell Shares. On the Effective Date and subject to the terms and conditions of this Agreement and the Plan, Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the number of shares of the Company’s Common Stock provided in Purchaser’s statement specified on Carta (the “Shares”), at the purchase price per share (the “Purchase Price Per Share”) and Total Purchase Price as specified on Carta (the “Purchase Price”). As used in this Agreement, the term “Shares” includes the Shares purchased under this Agreement and all securities received (a) in replacement of the Shares, (b) as a result of stock dividends or stock splits with respect to the Shares, and (c) in replacement of the Shares in a merger, recapitalization, reorganization or similar corporate transaction.
1.2 Payment. Purchaser hereby delivers payment of the Purchase Price as follows (check and complete as appropriate):
[ ] in cash (by check) in the amount of $[See Carta], receipt of which is acknowledged by the Company.
[ ] by Automated Clearing House (“ACH”) transfer in the amount of $[See Carta], receipt of which is acknowledged by the Company.
For avoidance of uncertainty: ACH transfers that have been successfully received by the Company into its bank account designated via Carta for receipt of such transfers shall be deemed to have been received for all purposes of this Agreement as of the date on which such transfers were initiated from the Purchaser’s account and made irrevocable by Purchaser.
[ ] by cancellation of indebtedness of the Company owed to Purchaser in the amount of $[See Carta].
[ ] by the waiver hereby of compensation due or accrued for services rendered in the amount of $[See Carta].
[ ] by delivery of [See Carta] fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Purchaser free and clear of all liens, claims, encumbrances or security interests, valued at the current Fair Market Value of $[See Carta] per share (a) for which the Company has received “full payment of the purchase price” within the meaning of SEC Rule 144, (if purchased by use of a promissory note, such note has been fully paid with respect to such vested shares), or (b) that were obtained by Purchaser in the open public market.
1 All references to Carta shall be interpreted as the Equity Management Software currently in use by the Company.
2. DELIVERIES.
2.1 Deliveries by the Purchaser. Purchaser hereby delivers (via Carta, if applicable) to the Company at its principal executive offices: (a) this completed and signed Agreement, and (b) the Purchase Price, paid by delivery of the form of payment specified in Section 1.2.
2.2 Deliveries by the Company. Upon its receipt of the Purchase Price, payment or other provision for any applicable tax obligations, if any, and all the documents to be executed and delivered by Purchaser to the Company as provided herein, the Company will issue an electronic certificate via Carta evidencing the Shares in the name of Purchaser with the appropriate legends affixed thereto, to be placed in escrow as provided in Section 7.2 to secure performance of Purchaser’s obligations under Sections 5 and 6 until expiration or termination of the Company’s Repurchase Option and Right of First Refusal (as such terms are defined in Sections 5 and 6, respectively).
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to the Company as follows.
3.1 Agrees to Terms of the Plan. Purchaser has received a copy of the Plan, has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their terms and conditions.
3.2 Acknowledgment of Tax Risks. Purchaser acknowledges that there may be adverse tax consequences upon the purchase and the disposition of the Shares, and that Purchaser has been advised by the Company to consult a tax adviser prior to such purchase or disposition. Purchaser further acknowledges that Purchaser is not relying on the Company or its counsel for tax advice regarding Purchaser’s purchaser or disposition of the Shares or the tax consequences to Purchaser of this Agreement.
3.3 Shares Not Registered or Qualified. Purchaser understands and acknowledges that the Shares have not been registered with the SEC under the Securities Act, or with any securities regulatory agency administering any state securities laws, and that, notwithstanding any other provision of this Agreement to the contrary, the purchase of any Shares is expressly conditioned upon compliance with the Securities Act and all applicable state securities laws. Purchaser agrees to cooperate with the Company to ensure compliance with such laws.
3.4 No Transfer Unless Registered or Exempt; Contractual Restrictions on Transfers. Purchaser understands that Purchaser may not transfer any Shares unless such Shares are registered under the Securities Act or qualified under applicable state securities laws or unless, in the opinion of counsel to the Company, exemptions from such registration and qualification requirements are available. Purchaser understands that only the Company may file a registration statement with the SEC and that the Company is under no obligation to do so with respect to the Shares. Purchaser has also been advised that exemptions from registration and qualification may not be available or may not permit Purchaser to transfer all or any of the Shares in the amounts or at the times proposed by Purchaser. Purchaser further acknowledges that this Agreement imposes additional restrictions on transfer of the Shares.
3.5 SEC Rule 701. Shares that are issued pursuant to SEC Rule 701 promulgated under the Securities Act may become freely tradable by non-affiliates (under limited conditions regarding the method of sale) ninety (90) days after the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the SEC, subject to the lengthier market standoff agreement contained in Section 4 of this Agreement or any other agreement
entered into by Purchaser. Affiliates must comply with the provisions (other than the holding period requirements) of Rule 144 which permits certain limited sales of unregistered securities. Rule 144 is not presently available with respect to the Shares and, in any event, requires that the Shares be held for a minimum of six (6) months, and in certain cases one (1) year, after they have been purchased and paid for (within the meaning of Rule 144). Purchaser understands that use of a promissory note as payment for the Shares may not be deemed to be “full payment of the purchase price” within the meaning of Rule 144 unless certain conditions are met and that, accordingly, the Rule 144 holding period of such Shares may not begin to run until such Shares are fully paid for within the meaning of Rule 144. Purchaser understands that Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser remains an “affiliate” of the Company or if “current public information” about the Company (as defined in Rule 144) is not publicly available.
3.6 Access to Information. Purchaser has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Purchaser reasonably considers important in making the decision to purchase the Shares, and Purchaser has had ample opportunity to ask questions of the Company’s representatives concerning such matters and this investment.
3.7 Understanding of Risks. Purchaser is fully aware of: (a) the highly speculative nature of the investment in the Shares; (b) the financial hazards involved; (c) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Purchaser may not be able to sell or dispose of the Shares or use them as collateral for loans); (d) the qualifications and backgrounds of the management of the Company; and (e) the tax consequences of investment in, and disposition of, the Shares.
3.8 Purchase for Own Account for Investment. Purchaser is purchasing the Shares for Purchaser’s own account for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Securities Act. Purchaser has no present intention of selling or otherwise disposing of all or any portion of the Shares and no one other than Purchaser has any beneficial ownership of any of the Shares.
3.9 No General Solicitation. At no time was Purchaser presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Shares.
3.10 SEC Rule 144. Purchaser has been advised that SEC Rule 144 promulgated under the Securities Act, which permits certain limited sales of unregistered securities, is not presently available with respect to the Shares and, in any event, requires that the Shares be held for a minimum of six (6) months, and in certain cases one (1) year, after they have been purchased and paid for (within the meaning of Rule 144), subject to the lengthier market standoff agreement contained in Section 4 of this Agreement or any other agreement entered into by Purchaser. Purchaser understands that Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser remains an “affiliate” of the Company or if “current public information” about the Company (as defined in Rule 144) is not publicly available.
4. MARKET STANDOFF AGREEMENT. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, Purchaser or any transferee (either being referred to herein as the “Purchaser”) agrees not to sell, make any short sale of, loan, hypothecate, pledge, assign, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to, any Shares without the prior written consent of the Company or such underwriters. Such limitations shall be in effect for such period of time as may be
requested by the Company or such underwriters; provided, however, that in no event shall such period exceed (a) 180 days after the effective date of the registration statement for such public offering or (b) such longer period requested by the underwriters as is necessary to comply with regulatory restrictions on the publication of research reports (including, but not limited to, NYSE Rule 472 or NASD Conduct Rule2711). This market standoff provision will be in effect no longer than two years after the effective date of the Company's initial public offering.
5. COMPANY’S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or (subject to Section 5.6) its assignee, shall have the option to repurchase all or a portion of the Purchaser’s Shares that are Unvested Shares (as defined below) on the Termination Date on the terms and conditions set forth in this Section (the “Repurchase Option”) if there has been a Termination of Service (as defined in the Plan) of Purchaser for any reason, or no reason, including without limitation, Purchaser’s death, Disability (as defined in the Plan), voluntary resignation or termination by the Company with or without Cause.
5.1 Termination and Termination Date. In case of any dispute as to whether there has been a Termination of Service of Purchaser, the Board shall have discretion to determine in good faith whether there has been a Termination of Service of Purchaser and the effective date of such Termination of Service (the “Termination Date”).
5.2 Vested and Unvested Shares Shares that are vested pursuant to the schedule set forth in this Section 5.2 are “Vested Shares.” Shares that are not vested pursuant to such schedule are “Unvested Shares.” On the Effective Date, the number of Shares reflected on Carta will be Unvested Shares (the “Initial Unvested Shares”). Provided Purchaser continues to provide services to the Company or any parent or subsidiary corporation of the Company at all times from the Effective Date until the date as reflected on Carta (the “First Vesting Date”), Unvested Shares shall vest in accordance with the vesting schedule set forth on Carta until the earliest to occur of (a) the date all of the Shares are Vested Shares, (b) the Termination Date or (c) the date vesting otherwise terminates pursuant to this Agreement or the Plan. No fractional Shares shall be issued. No Shares will become Vested Shares after the Termination Date. The number of the Shares that are Vested Shares or Unvested Shares will be proportionally adjusted to reflect any stock split, reverse stock split or similar change in the capital structure of the Company as set forth in Section 14.1 of the Plan occurring after the Effective Date.
5.3 Exercise of Repurchase Option. At any time within ninety (90) days after the Purchaser’s Termination Date, the Company, or its assignee, may, at its option, elect to repurchase any or all the Purchaser’s Shares that are Unvested Shares on the Termination Date by giving Purchaser written notice of exercise of the Repurchase Option, specifying the number of Unvested Shares to be repurchased. Such Unvested Shares shall be repurchased at the Purchase Price Per Share, proportionately adjusted for any stock split, reverse stock split or similar change in the capital structure of the Company as set forth in Section 14.1 of the Plan occurring after the Effective Date (the “Repurchase Price”). The Repurchase Price shall be payable, at the option of the Company or its assignee, by check or by cancellation of all or a portion of any outstanding indebtedness owed by Purchaser to the Company and/or such assignee, or by any combination thereof. The Repurchase Price shall be paid without interest within the term of the Repurchase Option as described in the first sentence of this Section 5.3. The Company may, at its option, decline to exercise its Repurchase Option or may exercise its Repurchase Option only with respect to a portion of the Unvested Shares.
5.4 Right of Termination Unaffected. Nothing in this Agreement shall be construed to limit or otherwise affect in any manner whatsoever the right or power of the Company (or any parent or subsidiary corporation of the Company) to terminate Purchaser’s employment or other
relationship with Company (or any parent or subsidiary corporation of the Company) at any time, for any reason or no reason, with or without Cause.
5.5 Additional or Exchanged Securities and Property. Subject to the provisions of Section 5.2 above, in the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed or issued with respect to, any Unvested Shares shall immediately be subject to the Repurchase Option. Appropriate adjustments shall be made to the price per share to be paid for Unvested Shares upon the exercise of the Repurchase Option (by allocating such price among the Unvested Shares and such other securities or property), provided that the aggregate purchase price payable for the Unvested Shares and all such other securities and property shall remain the same price that was original payable under the Repurchase Option to repurchase such Unvested Shares. Subject to the provisions of Section 5.2 above, in the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Repurchase Option may be exercised by the Company’s successor.
5.6 Assignment of Repurchase Right. The Company may freely assign the Company’s Repurchase Option, in whole or in part, provided that any person who accepts an assignment of the Repurchase Option from the Company shall assume all of the Company’s rights and obligations with respect to the Repurchase Option (to the extent so assigned) under this Agreement.
6. COMPANY’S RIGHT OF FIRST REFUSAL. Unvested Shares shall be subject to the restrictions on transfer and the granting of encumbrances thereon as provided in Section 7 hereof. Before any Vested Shares held by Purchaser may be sold or otherwise transferred (including any assignment, pledge, encumbrance or other disposition of the Vested Shares, but not a transfer to the Company in pledge as security for any purchasemoney indebtedness incurred by Purchaser in connection with the acquisition of the Vested Shares), the Company will have a right of first refusal to purchase the Vested Shares on the terms and conditions set forth in this Section 6 (the “Right of First Refusal”). The Company shall have the right to assign all or any portion of its Right of First Refusal to any current stockholder of the Company, any other third party or any combination of any of the foregoing, in its sole discretion. Such Right of First Refusal will terminate on the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act
6.1 In the event Purchaser desires to accept a bona fide third-party offer for the sale or transfer of any or all of the Vested Shares, Purchaser will promptly deliver to the Company a written notice (the “Notice”) stating the terms and conditions of any proposed sale or transfer, including (a) Purchaser’s bona fide intention to sell or otherwise transfer such Vested Shares, (b) the name of each proposed purchaser or other transferee (the "Proposed Transferee"), (c) the number of Vested Shares to be transferred to each Proposed Transferee, and (d) the bona fide cash price or other consideration for which Purchaser proposes to transfer the Vested Shares (the "Offered Price"). Purchaser will provide satisfactory proof that the disposition of such Vested Shares to such Proposed Transferee would not be in contravention of the provisions of Section 7 and Purchaser will offer to sell the Vested Shares at the Offered Price to the Company or its assignee(s), as the case may be.
6.2 At any time within 120 days after receipt of the Notice, the Company or one or more of its assignees or both, as the case may be, may, by giving written notice to Purchaser, elect to purchase all or any portion of the Vested Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with Section 6.3.
6.3 The purchase price for the Vested Shares purchased under this Section 6 will be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the noncash consideration will be determined by the Board in good faith.
6.4 Payment of the purchase price will be made, in the discretion of the Plan Administrator, either (a) in cash (by check), by cancellation of all or a portion of any of Purchaser’s outstanding indebtedness to the Company or such assignee, or by any combination thereof, within 120 days after receipt of the Notice or (b) in the manner and at the time(s) set forth in the Notice.
6.5 If any of the Vested Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or one or more of its assignees as provided in this Section 6, subject to the terms and conditions of Section 7, then Purchaser may sell or otherwise transfer such Vested Shares to that Proposed Transferee at the Offered Price or at a higher price; provided that such sale or other transfer is consummated within 150 days after the date of the Notice; and provided, further, that any such sale or other transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that the provisions of this Agreement, including without limitation, this Section 6 will continue to apply to the Vested Shares in the hands of such Proposed Transferee. If the Vested Shares described in the Notice are not transferred to the Proposed Transferee within such period, or if Purchaser proposes to change the price or other terms to make them more favorable to the Proposed Transferee, a new Notice will be given to the Company, and the Company or its assignee will again be offered the Right of First Refusal before any Vested Shares held by Purchaser may be sold or otherwise transferred.
6.6 Notwithstanding the foregoing, the Right of First Refusal shall not apply to the transfer of any or all of the Vested Shares during Purchaser’s lifetime by gift or on Purchaser’s death by will or intestacy to Purchaser’s “Immediate Family” (as defined below) or to a trust for the benefit of Purchaser or Purchaser’s Immediate Family, provided that each transferee agrees in a writing satisfactory to the Company that the provisions of this Section will continue to apply to the transferred Vested Shares in the hands of such transferee. As used herein, the term “Immediate Family” will mean Purchaser’s spouse, the lineal descendant or antecedent, father, mother, brother or sister, child, adopted child, grandchild or adopted grandchild of Purchaser or Purchaser’s spouse, or the spouse of any of the above or Spousal Equivalent, as defined herein. As used herein, a person is deemed to be a “Spousal Equivalent” provided the following circumstances are true: (i) irrespective of whether or not the Purchaser and the Spousal Equivalent are the same sex, they are the sole spousal equivalent of the other for the last twelve (12) months, (ii) they intend to remain so indefinitely, (iii) neither are married to anyone else, (iv) both are at least 18 years of age and mentally competent to consent to contract, (v) they are not related by blood to a degree of closeness that which would prohibit legal marriage in the state in which they legally reside, (vi) they are jointly responsible for each other’s common welfare and financial obligations, and (vii) they reside together in the same residence for the last twelve (12) months and intend to do so indefinitely.
7. ADDITIONAL RESTRICTIONS UPON SHARE OWNERSHIP OR TRANSFER.
7.1 Rights as a Stockholder. Subject to the terms and conditions of this Agreement, Purchaser will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to Purchaser until such time as Purchaser disposes of the Shares or the Company and/or its assignee(s) exercise(s) the Right of First Refusal or the Repurchase Option. Upon an exercise of the Right of First Refusal or the Repurchase Option, Purchaser will have no further rights as a holder of the Shares so purchased upon such exercise, other than the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement, and Purchaser
will promptly surrender the stock certificate(s) evidencing the Shares so purchased to the Company for transfer or cancellation.
7.2 Escrow. As security for Purchaser’s faithful performance of this Agreement, Purchaser agrees, immediately upon receipt of the stock certificate(s) evidencing the Shares via Carta, to deliver such certificate(s) to the Secretary of the Company or other designee of the Company (the “Escrow Holder”), who is hereby appointed to hold such certificate(s) in escrow and to take all such actions and to effectuate all such transfers and/or releases of such Shares as are in accordance with theterms of this Agreement. Purchaser and the Company agree that Escrow Holder will not be liable to any party to this Agreement (or to any other person or entity) for any actions or omissions unless Escrow Holder is grossly negligent or intentionally fraudulent in carrying out the duties of Escrow Holder under this Agreement. Escrow Holder may rely upon any letter, notice or other document executed with any signature purported to be genuine and may rely on the advice of counsel and obey any order of any court with respect to the transactions contemplated by this Agreement. The Shares will be released from escrow upon termination of both the Right of First Refusal and the Repurchase Option.
7.3 Encumbrances on Shares. Without the Company’s prior written consent given with the approval of the Company’s Board of Directors, Purchaser may not grant a lien or security interest in, or pledge, hypothecate or encumber, any Unvested Shares.
7.4 Restrictions on Transfers. Shares may not be sold, transferred, assigned, pledged, encumbered or otherwise disposed of in contravention of the provisions of this Agreement.
(a) Except as otherwise provided in this Agreement, the Shares may not be sold, transferred, assigned, pledged, encumbered or otherwise disposed of without the prior consent of the Plan Administrator. If the Plan Administrator consents to such sale, transfer, assignment, pledge, encumbrance or other disposal of the Shares, Purchaser agrees to (a) pay the Company a transfer processing fee of $3,500 per transaction (whereby transfers to separate transferees shall be deemed to be separate transactions); and (b) provide an opinion of Purchaser’s legal counsel and the counsel of the transferee (concurred in by legal counsel for the Company) stating that such transaction is exempt from registration under applicable securities laws or, in the Company's sole discretion, the Company otherwise satisfies itself that such transaction is exempt from registration under applicable securities laws. Such restrictions on transfer, however, will not apply to a transfer to the Company in pledge as security for any purchase money indebtedness incurred by Purchaser in connection with the acquisition of the Shares.
(b) Purchaser hereby agrees that Purchaser shall make no disposition of the Shares (other than as permitted by this Agreement) unless and until: (1) Purchaser shall have notified the Company of the proposed disposition and provided a written summary of the terms and conditions of the proposed disposition; (2) Purchaser shall have complied with all requirements of this Agreement applicable to the disposition of the Shares, including but not limited to the Right of First Refusal, the Market Standoff, the Repurchase Option and this Section 7.4.
(c) Each person (other than the Company) to whom the Shares are transferred by means of one of the permitted transfers specified in this Agreement must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Company that such person is bound by the provisions of this Agreement and that the transferred Shares are subject to the Company’s Right of First Refusal or the Repurchase Option granted hereunder and the market stand-off provisions of Section 4 hereof, to the same extent such Shares would be so subject if retained by the Purchaser. In addition, Purchaser acknowledges and agrees that the Shares shall be subject to the restrictions on transferability and resale set forth in the Company’s Bylaws.
7.5 Restrictive Legends and Stop-transfer Orders. Purchaser understands and agrees that the Company will place the legends set forth below or similar legends on any stock certificate(s) evidencing the Shares, together with any other legends that may be required by applicable laws, the Company’s Certificate of Incorporation or Bylaws, any other agreement between Purchaser and the Company or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER, INCLUDING THE RIGHT OF FIRST REFUSAL AND THE REPURCHASE OPTION HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S), AND A MARKET STANDOFF AGREEMENT, AS SET FORTH IN A RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS INCLUDING THE RIGHT OF FIRST REFUSAL, THE REPURCHASE OPTION AND THE MARKET STANDOFF ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE CORPORATION.
Purchaser also agrees that, to ensure compliance with the restrictions imposed by this Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent, if any, and if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. The Company will not be required (a) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (b) to treat as owner of such Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.
8. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER’S PURCHASE OR DISPOSITION OF THE SHARES. PURCHASER REPRESENTS (a) THAT PURCHASER HAS CONSULTED WITH ANY TAX ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (b) THAT PURCHASER IS NOT
RELYING ON THE COMPANY FOR ANY TAX ADVICE. Purchaser hereby acknowledges that Purchaser has been informed that, with respect to Unvested Shares, unless an election is filed by Purchaser with the Internal Revenue Service (and, if necessary, the proper state taxing authorities) within 30 days after the purchase of the Shares electing, pursuant to Section 83(b) of the Internal Revenue Code (and similar state tax provisions, if applicable), to be taxed currently on any difference between the Purchase Price of the Unvested Shares and their Fair Market Value on the date of purchase, there will be a recognition of taxable income to Purchaser, measured by the excess, if any, of the Fair Market Value of the Unvested Shares, at the time they cease to be Unvested Shares, over the Purchase Price for such Shares. Purchaser represents that Purchaser has consulted any tax advisers Purchaser deems advisable in connection with Purchaser’s purchase of the Shares and the filing of the election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) is attached hereto as Exhibit 1 for reference. BY PROVIDING THE FORM OF ELECTION, NEITHER THE COMPANY NOR ITS LEGAL COUNSEL IS THEREBY UNDERTAKING TO FILE THE ELECTION FOR PURCHASER, WHICH OBLIGATION TO FILE SHALL REMAIN SOLELY WITH PURCHASER.
9. GENERAL PROVISIONS.
9.1 Successors and Assigns. The Company may assign any of its rights under this Agreement, including its rights to purchase Shares under the Right of First Refusal or the Repurchase Option. Neither Purchaser, nor any of Purchaser’s successors and assigns, may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement will be binding upon Purchaser and Purchaser’s heirs, executors, administrators, legal representatives, successors and assigns.
9.2 Notices. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) at the time an electronic confirmation of receipt is received, if delivery is by email; (iii) at the time of transmission by facsimile, addressed to the other party at its facsimile number specified herein (or hereafter modified by subsequent notice to the parties hereto), with confirmation of receipt made by both telephone and printed confirmation sheet verifying successful transmission of the facsimile; (iv) one (1) business day after deposit with an express overnight courier for United States deliveries, or two (2) business days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; or (v) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries. Any notice for delivery outside the United States will be sent by email, facsimile or by express courier. Any notice not delivered personally or by email will be sent with postage and/or other charges prepaid and properly addressed to Purchaser at the last known address or facsimile number on the books of the Company, or at such other address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto or, in the case of the Company, to it at its principal place of business. Notices to the Company will be marked “Attention: Chief Financial Officer.” Notices by facsimile shall be machine verified as received.
9.3 Further Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.
9.4 Entire Agreement. The Plan is incorporated herein by reference. The Plan and this Agreement, together with all Exhibits hereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede all prior understandings and agreements, between the parties hereto with respect to the specific subject matter hereof.
9.5 Severability. If any provision of this Agreement is determined by any court orarbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the forgoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.
9.6 Execution. This Agreement may be entered into in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement. This Agreement may be executed and delivered by facsimile (or electronic via Carta) and, upon such delivery, the facsimile or electronic signature will be deemed to have the same effect as if the original signature had been delivered to the other party.
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IN WITNESS WHEREOF, the Company has caused this Restricted Stock Purchase Agreement to be executed by its duly authorized representative, and Purchaser has executed this Restricted Stock Purchase Agreement, as of the date first set forth above.
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SENTINEL LABS, INC.
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PURCHASER
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By:
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Its:
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Address:
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Exhibit
Exhibit 1: Form of Election Pursuant to Section 83(b)
ANNEX B
STOCK OPTION GRANT NOTICES
(UNITED STATES)
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
Sentinel Labs, Inc. (the "Company") hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), in the Stock Option Agreement and in the Plan, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Grant Date:
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[date of Board approval of grant]
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Vesting Commencement Date:
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[typically grant date or promotion date]
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Number of Shares Subject to Option:
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Exercise Price (per Share):
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Option Expiration Date:
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(subject to earlier termination in accordance with the terms of the Plan and the Stock Option Agreement) [option expiration date is typically 10 years from Grant Date]
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Type of Option1*:
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⬜ Incentive Stock Option
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⬜ Nonqualified Stock Option
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Vesting and Exercisability Schedule:
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1/48th of the shares subject to this Option will vest and become exercisable monthly over four years following the Vesting Commencement Date during continuous employment or service with the Company or a Related Company.
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Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement and the Plan. You further acknowledge and agree that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan constitute the entire agreement between you and the Company regarding the Option and expressly supersede any and all prior representations, undertakings and/or agreements on the subject, even if inconsistent, whether oral or written, including without limitation, in any side letter, employment agreement and/or offer letter for your employment, any other refresh/promotion letter that may have been provided to you, or any conversations related to your employment or its terms.
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SENTINEL LABS, INC.
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PARTICIPANT
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By:
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Signature
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Its:
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Date:
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Attachments:
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Address:
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1.
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Stock Option Agreement
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2.
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2013 Equity Incentive Plan
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Personal email:
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Taxpayer ID:
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__________________________________________________________
1* See Sections 3 and 4 of the Stock Option Agreement
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan have the same definitions as in the Plan.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Incentive Stock Option Qualification. If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.
If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options. A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.
4. Notice of Disqualifying Disposition. To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise. By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.
5. Alternative Minimum Tax. You may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing. You may make this payment in any combination of the following: (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator for Nonqualified Stock Options, by having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option; (d) if permitted by the Plan Administrator, by using shares of Common Stock you already own; (e) if the Common Stock is registered under the Exchange Act and to the extent permitted by law, by instructing a broker to deliver to the Company the total payment required, all in accordance with the regulations of the Federal Reserve Board; or (f) by any other method permitted by the Plan Administrator.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment or Service Relationship. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. In the event of your Termination of Service due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date. If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one year after the date of death and (y) the Option Expiration Date.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
The Option must be exercised within three months after termination of employment for reasons other than death or disability and one year after termination of employment due to disability to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "disability" has the meaning attributed to that term for purposes of Section 422 of the Code.
It is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution. The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate. Notwithstanding the foregoing and to the extent permitted by the Plan and Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit you to assign or transfer the Option, subject to such terms and conditions as specified by the Plan Administrator.
12. Withholding Taxes. As a condition to the exercise of any portion of the Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.
13. Option Not an Employment or Service Contract. Nothing in the Plan or this Agreement will be deemed to constitute an employment contract or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Section 409A Compliance. Notwithstanding any provision in the Plan or this Agreement to the contrary, the Plan Administrator may, at any time and without your consent, modify the terms of the Option as it determines appropriate to avoid the imposition of interest or penalties under Section 409A of the Code; provided, however, that the Plan Administrator makes no representations that the Option shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the Option.
17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation
which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; and (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of any of your personal data that is necessary to facilitate the implementation, administration and management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient's country may have different data privacy laws and protections than your country; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store and transmit such information in electronic form.
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
Sentinel Labs, Inc. (the "Company") hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), in the Stock Option Agreement and in the Plan, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Grant Date:
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[date of Board approval of grant]
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Vesting Commencement Date:
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[typically grant date or date of hire]
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Number of Shares Subject to Option:
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Exercise Price (per Share):
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Option Expiration Date:
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(subject to earlier termination in accordance with the terms of the Plan and the Stock Option Agreement) [option expiration date is typically 10 years from Grant Date]
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Type of Option1*:
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⬜ Incentive Stock Option
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⬜ Nonqualified Stock Option
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Vesting and Exercisability Schedule:
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1/4th of the shares subject to the Option will vest and become exercisable on the one-year anniversary of the VCD, and the remaining ¾ of the shares subject to the Option will vest and become exercisable in equal parts monthly thereafter over the next three years, in each case during continuous employment or service with the Company or a Related Company.
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Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement and the Plan. You further acknowledge and agree that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan constitute the entire agreement between you and the Company regarding the Option and expressly supersede any and all prior representations, undertakings and/or agreements on the subject, even if inconsistent, whether oral or written, including without limitation, in any side letter, employment agreement and/or offer letter for your employment, any other refresh/promotion letter that may have been provided to you, or any conversations related to your employment or its terms.
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SENTINEL LABS, INC. By:
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PARTICIPANT
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By:
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Signature
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Its:
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Date:
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Attachments:
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Address:
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1.
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Stock Option Agreement
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2.
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2013 Equity Incentive Plan
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Personal email:
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Taxpayer ID:
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__________________________________________________________
1*See Sections 3 and 4 of the Stock Option Agreement
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan have the same definitions as in the Plan.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Incentive Stock Option Qualification. If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.
If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options. A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.
4. Notice of Disqualifying Disposition. To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise. By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.
5. Alternative Minimum Tax. You may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise
the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing. You may make this payment in any combination of the following: (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator for Nonqualified Stock Options, by having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option; (d) if permitted by the Plan Administrator, by using shares of Common Stock you already own; (e) if the Common Stock is registered under the Exchange Act and to the extent permitted by law, by instructing a broker to deliver to the Company the total payment required, all in accordance with the regulations of the Federal Reserve Board; or (f) by any other method permitted by the Plan Administrator.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment or Service Relationship. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. In the event of your Termination of Service due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date. If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one year after the date of death and (y) the Option Expiration Date.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
The Option must be exercised within three months after termination of employment for reasons other than death or disability and one year after termination of employment due to disability to qualify for
the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "disability" has the meaning attributed to that term for purposes of Section 422 of the Code.
It is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution. The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate. Notwithstanding the foregoing and to the extent permitted by the Plan and Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit you to assign or transfer the Option, subject to such terms and conditions as specified by the Plan Administrator.
12. Withholding Taxes. As a condition to the exercise of any portion of the Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.
13. Option Not an Employment or Service Contract. Nothing in the Plan or this Agreement will be deemed to constitute an employment contract or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Section 409A Compliance. Notwithstanding any provision in the Plan or this Agreement to the contrary, the Plan Administrator may, at any time and without your consent, modify the terms of the Option as it determines appropriate to avoid the imposition of interest or penalties under Section 409A of the Code; provided, however, that the Plan Administrator makes no representations that the Option shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the Option.
[Insert these sections for non-US Residents only: 17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards,
pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; and (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of any of your personal data that is necessary to facilitate the implementation, administration and management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient's country may have different data privacy laws and protections than your country; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store and transmit such information in electronic form.
EXHIBIT 1
FORM OF SECTION 83(B) ELECTION
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in gross income for the Taxpayer’s current taxable year the excess, if any, of the fair market value of the property described below at the time of transfer over the amount paid for such property, as compensation for services.
1. TAXPAYER’S NAME:
TAXPAYER’S ADDRESS:
SOCIAL SECURITY NUMBER:
TAXABLE YEAR: Calendar Year ________
2. The property with respect to which the election is made is described as follows: _______ shares of Common Stock, par value $0.0001 per share, of Sentinel Labs, Inc., a Delaware corporation (the “Company”), which is Taxpayer’s employer or the corporation for whom the Taxpayer performs services.
3. The date on which the shares were transferred was ____________________, _______.
4. The shares are subject to the following restrictions: The shares are subject to a Right of Forfeiture in favor of the Company under certain conditions at the time of Taxpayer’s termination of employment or services.
5. The fair market value of the shares at the time of transfer (without regard to restrictions other than a nonlapse restriction as defined in § 1.83-3(h) of the Income Tax Regulations) was $_____ per share x ___________ shares = $___________.
6. The amount paid for such shares was $____ per share x __________ shares = $___________.
7. The amount to include in the Taxpayer’s gross income for the Taxpayer’s current taxable year is $_________.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE (“IRS”), AT THE OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER’S INCOME TAX RETURNS FOR THE CALENDAR YEAR. A COPY OF THE ELECTION HAS ALSO BEEN FURNISHED TO THE COMPANY. THE ELECTION CANNOT BE REVOKED WITHOUT THE CONSENT OF THE IRS.
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Dated:
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Taxpayer’s Signature
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ANNEX C
STOCK OPTION GRANT NOTICES
(FRANCE)
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN - STOCK OPTION GRANT NOTICE
Sentinel Labs, Inc. (the "Company") hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan") as completed by the French Sub-Plan (the “Sub-Plan”). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), in the Stock Option Agreement, in the Plan and in the Sub-Plan, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Grant Date:
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[date of Board approval of grant]
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Vesting Commencement Date:
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[typically grant date or date of hire]
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Number of Shares Subject to Option:
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Exercise Price (per Share):
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Total Exercise Price :
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Option Expiration Date:
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(subject to earlier termination in accordance with the terms of the Plan, the Sub Plan and the Stock Option Agreement)
[option expiration date is typically 10 years from Grant Date]
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Type of Option:
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☐ Incentive Stock Option1*
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☐ Nonqualified Stock Option
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Vesting and Exercisability Schedule:
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1/48th of the shares subject to the Option will vest and become exercisable following the VCD nonthly in equal parts over four years of continuous employment or service
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Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement, the Plan and the Sub-Plan, as provided in English language2. You further acknowledge and agree that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan constitute the entire agreement between you and the Company regarding the Option and expressly supersede any and all prior representations, undertakings and/or agreements on the subject, even if inconsistent, whether oral or written, including without limitation, in any side letter, employment agreement and/or offer letter for your employment, any other refresh/promotion letter that may have been provided to you, or any conversations related to your employment or its terms.
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SENTINEL LABS, INC.
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PARTICIPANT
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By:
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Signature preceded form the handwriteen mention “good for approval”
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Its:
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Date:
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Attachments:
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Address:
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1. Stock Option Agreement
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2. 2013 Equity Incentive Plan
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Personal email:
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3. French Sub-Plan
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Taxpayer ID:
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____________________________________
1* See Sections 3 and 4 of the Stock Option Agreement.
2 a freelance translation in French has been provided for information only
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") as completed by the French Sub-Plan (the “Sub-Plan”) to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan have the same definitions as in the Plan, unless otherwise defined in the Sub-Plan.
In the event of a conflict between the terms and conditions of the Plan and the Sub Plan with the terms and conditions of this Agreement, the terms and conditions of the Plan and the Sub Plan will prevail.
This Option is intended to qualify for favorable tax and social regime applicable to stock options set out in Article 80 bis of the French Tax Code and Article L.242-1 paragraph 2, L. 136-6, L. 137-13 and L. 137-14 of the French Social Security Code. Certain events may affect the status of the Option as a French-qualified Option and the Option may be disqualified in the future. The Company does not make any undertaking or representation to maintain the qualified status of the Option. If the Option is modified, adjusted, or administered in a manner in keeping with the terms of the Plan or as mandated as a matter of law, including laws relating to obligations for tax benefits, and the modification or adjustment is contrary to the terms and conditions of the Sub Plan, the Option may no longer qualify as a French-qualified Option. The Participant understands and agrees that, in the event the Option loses qualified status, the Participant will be responsible for paying personal income tax and the Participant’s portion of social security contributions resulting from the exercise of the Option, the issuance of Shares and the sale of Shares and the Participant will not be entitled to any damages.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice (except in event of death or Disability (as defined in the Sub Plan).
This Option is exercisable during its term as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Incentive Stock Option Qualification. If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.
If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options. A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.
4. Notice of Disqualifying Disposition. To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise. By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.
5. Alternative Minimum Tax. You may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant ’s participation in the Plan, or the Participant ’s acquisition or sale of the underlying Shares. The Participant is therefore advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
Regardless of any action the Company or EPP Sentinel Labs France SAS ( “Sentinel Labs France”) takes with respect to any or all income tax (including U.S. federal, state, local and/or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax matters related to the Participant’s participation in the Plan and legally applicable to the Participant, the Participant acknowledges that the ultimate liability for all tax matters is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or Sentinel Labs France. The Participant further acknowledges that the Company and/or Sentinel Labs France (i) make no representations or undertakings regarding the treatment of any tax matters in connection with any aspect of the Option, including, but not limited to, the grant, vesting or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Participant’s liability for tax matters or achieve any particular tax result. Further, if the Participant has become subject to tax in more than one jurisdiction between the date of grant and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Company and/or Sentinel Labs France (or former employer, as applicable) may be required to withhold or account for tax-matters in more than one jurisdiction.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the aggregate Exercise Price for the number of Shares you are purchasing (together with any applicable Alternative Minimum Tax). This Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise notice accompanied by such aggregate Exercice Price. You may make this payment in any of the following or a combination of the following at your election: (a) by cash; (b) by check or wire transfer acceptable to the Company; (c) if
permitted by the Plan Administrator by consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. Upon your death, the vested portion of this Option shall become immediately exercisable by your heirs within a period of six months following the date of death (including death during/after Disability). Any outstanding vested Options which remain unexercised shall expire six months following the date of death.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
The Option must be exercised within three months after termination of employment for reasons other than death or Disability and one year after termination of employment due to Disability to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "Disability" has the meaning attributed to that term by the Sub Plan.
It is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime, only you can exercise the Option. The Option is not transferable in any manner except by will or by the applicable laws of descent and distribution, as set forth in paragraph 10 (c) above.
12. Withholding Taxes. As a condition to the exercise of any portion of the Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.
13. Option Not an Employment or Service Contract. Nothing in the Plan or this Agreement will be deemed to constitute an employment contract or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (except in the case of Retirement, Disability or 6 months in the case of death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Section 409A Compliance. Notwithstanding any provision in the Plan or this Agreement to the contrary, the Plan Administrator may, at any time and without your consent, modify the terms of the Option as it determines appropriate to avoid the imposition of interest or penalties under Section 409A of the Code; provided, however, that the Plan Administrator makes no representations that the Option shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the Option.
[Sections for non-US Residents only: 17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; and (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of
any of your personal data that is necessary to facilitate the implementation, administration and management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections than France; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store as long as is necessary and transmit such information in electronic form.]
19. Governing Law. The Option grant and the provisions of this Option Agreement are governed by, and subject to, the laws of the State of California, without regard to the conflict of law provisions.
20. Language. If the Participant has received this Option Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
21. Consent to Receive Information in English. By accepting the Option, the Participant confirms having read and understood the U.S. Plan, the Sub Plan and this Agreement, including all terms and conditions included therein, which were provided in the English language. The Participant accepts the terms of those documents accordingly.
En acceptant cette attribution d’Options, le Participant confirme avoir lu et compris le Plan Américain, le Sous-Plan Français et la Convention, incluant tous leurs termes et conditions, qui ont été transmis en langue anglaise. Le Participant accepte les dispositions de ces documents en connaissance de cause.
22. Severability. The provisions of this Option Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN - STOCK OPTION GRANT NOTICE
Sentinel Labs, Inc. (the "Company") hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan") as completed by the French Sub-Plan (the “Sub-Plan”).. The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), in the Stock Option Agreement and in the Sub-Plan, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Name
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Grant Date:
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Grant date
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Vesting Commencement Date:
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Vesting Start Date
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Number of Shares Subject to Option:
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Quantity
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Exercise Price (per Share):
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Exercise price
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Total Exercise Price :
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Option Expiration Date:
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Expiration date (subject to earlier termination in accordance with the terms of the Plan and the Stock Option Agreement)
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Type of Option:
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☐ Incentive Stock Option1*
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x Nonqualified Stock Option
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Vesting and Exercisability Schedule:
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Schedule
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Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement, the Plan and the Sub-Plan, which were provided in English language 2 . You further acknowledge that as of the Grant Date, this Grant Notice, the Stock Option Agreement, the Plan and the Sub-Plan set forth the entire understanding between you and the Company regarding the Option and supersede all prior oral and written agreements on the subject.
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SENTINEL LABS, INC.
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PARTICIPANT
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By:
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Its:
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Signature preceded form the handwriteen mention “good for approval”
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Date:
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Attachments:
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Address:
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1. Stock Option Agreement
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2. 2013 Equity Incentive Plan
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Taxpayer ID:
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3. French Sub-Plan
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____________________________________
1* See Sections 3 and 4 of the Stock Option Agreement.
2 a freelance translation in French has been provided for information only
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") as completed by the French Sub-Plan (the “Sub-Plan”) to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan have the same definitions as in the Plan, unless otherwise defined in the Sub-Plan.
In the event of a conflict between the terms and conditions of the Plan and the Sub Plan with the terms and conditions of this Agreement, the terms and conditions of the Plan and the Sub Plan will prevail.
This Option is intended to qualify for favorable tax and social regime applicable to stock options set out in Article 80 bis of the French Tax Code and Article L.242-1 paragraph 2, L. 136-6, L. 137-13 and L. 137-14 of the French Social Security Code. Certain events may affect the status of the Option as a French-qualified Option and the Option may be disqualified in the future. The Company does not make any undertaking or representation to maintain the qualified status of the Option. If the Option is modified, adjusted, or administered in a manner in keeping with the terms of the Plan or as mandated as a matter of law, including laws relating to obligations for tax benefits, and the modification or adjustment is contrary to the terms and conditions of the Sub Plan, the Option may no longer qualify as a French-qualified Option. The Participant understands and agrees that, in the event the Option loses qualified status, the Participant will be responsible for paying personal income tax and the Participant’s portion of social security contributions resulting from the exercise of the Option, the issuance of Shares and the sale of Shares and the Participant will not be entitled to any damages.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice (except in event of death or Disability (as defined in the Sub Plan).
This Option is exercisable during its term as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Incentive Stock Option Qualification. If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.
If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options. A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.
4. Notice of Disqualifying Disposition. To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise. By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.
5. Alternative Minimum Tax. You may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant ’s participation in the Plan, or the Participant ’s acquisition or sale of the underlying Shares. The Participant is therefore advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
Regardless of any action the Company or EPP Sentinel Labs France SAS ( “Sentinel Labs France”) takes with respect to any or all income tax (including U.S. federal, state, local and/or non-U.S. taxes), social insurance, payroll tax, payment on account or other tax matters related to the Participant’s participation in the Plan and legally applicable to the Participant, the Participant acknowledges that the ultimate liability for all tax matters is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or Sentinel Labs France. The Participant further acknowledges that the Company and/or Sentinel Labs France (i) make no representations or undertakings regarding the treatment of any tax matters in connection with any aspect of the Option, including, but not limited to, the grant, vesting or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Participant’s liability for tax matters or achieve any particular tax result. Further, if the Participant has become subject to tax in more than one jurisdiction between the date of grant and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Company and/or Sentinel Labs France (or former employer, as applicable) may be required to withhold or account for tax- matters in more than one jurisdiction.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the aggregate Exercise Price for the number of Shares you are purchasing (together with any applicable Alternative Minimum Tax). This Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise notice accompanied by such aggregate Exercice Price. You may make this payment in any of the following or a combination of the following at your election: (a) by cash; (b) by check or wire transfer acceptable to the Company; (c) if
permitted by the Plan Administrator by consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. Upon your death, the vested portion of this Option shall become immediately exercisable by your heirs within a period of six months following the date of death (including death during/after Disability). Any outstanding vested Options which remain unexercised shall expire six months following the date of death.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
The Option must be exercised within three months after termination of employment for reasons other than death or Disability and one year after termination of employment due to Disability to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "Disability" has the meaning attributed to that term by the Sub Plan.
It is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime, only you can exercise the Option. The Option is not transferable in any manner except by will or by the applicable laws of descent and distribution, as set forth in paragraph 10 (c) above.
12. Withholding Taxes. As a condition to the exercise of any portion of the Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.
13. Option Not an Employment or Service Contract. Nothing in the Plan or this Agreement will be deemed to constitute an employment contract or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (except in the case of Retirement, Disability or 6 months in the case of death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Section 409A Compliance. Notwithstanding any provision in the Plan or this Agreement to the contrary, the Plan Administrator may, at any time and without your consent, modify the terms of the Option as it determines appropriate to avoid the imposition of interest or penalties under Section 409A of the Code; provided, however, that the Plan Administrator makes no representations that the Option shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the Option.
17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; and (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of any of your personal data that is necessary to facilitate the implementation, administration and
management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient's country may have different data privacy laws and protections than your country; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store and transmit such information in electronic form.
19. Governing Law. The Option grant and the provisions of this Option Agreement are governed by, and subject to, the laws of the State of California, without regard to the conflict of law provisions.
20. Language. If the Participant has received this Option Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
21. Consent to Receive Information in English. By accepting the Option, the Participant confirms having read and understood the U.S. Plan, the Sub Plan and this Agreement, including all terms and conditions included therein, which were provided in the English language. The Participant accepts the terms of those documents accordingly.
En acceptant cette attribution d’Options, le Participant confirme avoir lu et compris le Plan Américain, le Sous-Plan Français et la Convention, incluant tous leurs termes et conditions, qui ont été transmis en langue anglaise. Le Participant accepte les dispositions de ces documents en connaissance de cause.
22. Severability. The provisions of this Option Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
ANNEX D
STOCK OPTION GRANT NOTICE (GERMANY)
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
As a current employee of the German wholly-owned subsidiary (“SentinelOne GmbH”) of Sentinel Labs, Inc. (the "Company"), the Company hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), in the Stock Option Agreement and in the Plan, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Grant Date:
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[date of Board approval of grant]
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Vesting Commencement Date:
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[typically grant date or date of hire]
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Number of Shares Subject to Option:
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Exercise Price (per Share):
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Total Exercise Price :
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Option Expiration Date:
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(subject to earlier termination in accordance with the terms of the Plan, the Sub Plan and the Stock Option Agreement)
[option expiration date is typically 10 years from Grant Date]
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Type of Option:
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☐ Incentive Stock Option1*
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☐ Nonqualified Stock Option
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Vesting and Exercisability Schedule:
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1/4th of the shares subject to the Option will vest and become exercisable on the one-year anniversary of the Vesting Commencement Date, and 1/48th of the shares subject to the Option will vest and become exercisable monthly thereafter over the next three years, subject in each case to your continuous employment or service with the Company or a Related Company through each date.
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____________________________________
1* See Sections 3 and 4 of the Stock Option Agreement.
Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement and the Plan. You further acknowledge that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between you and the Company regarding the Option and supersede all prior oral and written agreements on the subject [with the exception of the following agreements:_________________].
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SENTINEL LABS, INC.
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PARTICIPANT
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By:
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Its:
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Signature
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Date:
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Address:
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Personal email:
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Taxpayer ID:
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Appendices:
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1. Stock Option Agreement
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2. 2013 Equity Incentive Plan
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APPENDIX 1
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan have the same definitions as in the Plan.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Incentive Stock Option Qualification. If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.
If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options. A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.
4. Notice of Disqualifying Disposition. To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise. By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.
5. Alternative Minimum Tax. You may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing. You may make this payment in any combination of the following: (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator for Nonqualified Stock Options, by having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option; (d) if permitted by the Plan Administrator, by using shares of Common Stock you already own; (e) if the Common Stock is registered under the Exchange Act and to the extent permitted by law, by instructing a broker to deliver to the Company the total payment required, all in accordance with the regulations of the Federal Reserve Board; or (f) by any other method permitted by the Plan Administrator.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment or Service Relationship. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. In the event of your Termination of Service due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date. If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one year after the date of death and (y) the Option Expiration Date.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
The Option must be exercised within three months after termination of employment for reasons other than death or disability and one year after termination of employment due to disability to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "disability" has the meaning attributed to that term for purposes of Section 422 of the Code.
It is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution. The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate. Notwithstanding the foregoing and to the extent permitted by the Plan and Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit you to assign or transfer the Option, subject to such terms and conditions as specified by the Plan Administrator.
12. Withholding Taxes. As a condition to the exercise of any portion of the Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.
13. Option Not an Employment or Service Contract. Nothing in the Plan or this Agreement will be deemed to constitute an employment contract or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Section 409A Compliance. Notwithstanding any provision in the Plan or this Agreement to the contrary, the Plan Administrator may, at any time and without your consent, modify the terms of the Option as it determines appropriate to avoid the imposition of interest or penalties under Section 409A of the Code; provided, however, that the Plan Administrator makes no representations that the Option shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the Option.
17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or
expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; and (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of any of your personal data that is necessary to facilitate the implementation, administration and management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient's country may have different data privacy laws and protections than your country; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store and transmit such information in electronic form.
ANNEX E
STOCK OPTION GRANT NOTICES
(INTERNATIONAL)
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
As a current employee of a wholly-owned subsidiary of Sentinel Labs, Inc. (the "Company" and such subsidiary, “Related Company” as defined in the Plan), the Company hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), in the Stock Option Agreement and in the Plan, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Grant Date:
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[date of Board approval of grant]
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Vesting Commencement Date:
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[typically grant date or date of hire]
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Number of Shares Subject to Option:
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Exercise Price (per Share):
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Option Expiration Date:
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(subject to earlier termination in accordance with the terms of the Plan and the Stock Option Agreement) [option expiration date is typically 10 years from Grant Date]
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Type of Option1*:
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☐ Incentive Stock Option
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☐ Nonqualified Stock Option
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Vesting and Exercisability Schedule:
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1/48th of the shares subject to the Option will vest and become exercisable monthly over four years, subject in each case to your continuous employment or service with the Company or a Related Company through each date.
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Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement and the Plan. You further acknowledge and agree that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan constitute the entire agreement between you and the Company regarding the Option and expressly supersede any and all prior representations, undertakings and/or agreements on the subject, even if inconsistent, whether oral or written, including without limitation, in any side letter, employment agreement and/or offer letter for your employment, any other refresh/promotion letter that may have been provided to you, or any conversations related to your employment or its terms.
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SENTINEL LABS, INC.
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PARTICIPANT
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By:
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Its:
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Signature
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Date:
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Address:
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Personal email:
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Appendices:
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1. Stock Option Agreement
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Taxpayer ID:
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2. 2013 Equity Incentive Plan
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_____________________________________
1* See Sections 3 and 4 of the Stock Option Agreement.
APPENDIX 1
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan have the same definitions as in the Plan.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Incentive Stock Option Qualification. If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.
If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options. A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.
4. Notice of Disqualifying Disposition. To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise. By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.
5. Alternative Minimum Tax. You may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing. You may make this payment in any combination of the following: (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator for Nonqualified Stock Options, by having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option; (d) if permitted by the Plan Administrator, by using shares of Common Stock you already own; (e) if the Common Stock is registered under the Exchange Act and to the extent permitted by law, by instructing a broker to deliver to the Company the total payment required, all in accordance with the regulations of the Federal Reserve Board; or (f) by any other method permitted by the Plan Administrator.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment or Service Relationship. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. In the event of your Termination of Service due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date. If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one year after the date of death and (y) the Option Expiration Date.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
The Option must be exercised within three months after termination of employment for reasons other than death or disability and one year after termination of employment due to disability to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "disability" has the meaning attributed to that term for purposes of Section 422 of the Code.
It is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution. The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate. Notwithstanding the foregoing and to the extent permitted by the Plan and Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit you to assign or transfer the Option, subject to such terms and conditions as specified by the Plan Administrator.
12. Withholding Taxes. As a condition to the exercise of any portion of the Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.
13. Option Not an Employment or Service Contract. Nothing in the Plan or this Agreement will be deemed to constitute an employment contract, employment relations, or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause. The grant of this Option expressly does not constitute any form of employment salary or similar employment benefit.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Section 409A Compliance. Notwithstanding any provision in the Plan or this Agreement to the contrary, the Plan Administrator may, at any time and without your consent, modify the terms of the Option as it determines appropriate to avoid the imposition of interest or penalties under Section 409A of the Code; provided, however, that the Plan Administrator makes no representations that the Option shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the Option.
17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your
participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; and (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of any of your personal data that is necessary to facilitate the implementation, administration and management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient's country may have different data privacy laws and protections than your country; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store and transmit such information in electronic form.
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
As a current employee of a wholly-owned subsidiary of Sentinel Labs, Inc. (the "Company" and such subsidiary, “Related Company” as defined in the Plan), the Company hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), in the Stock Option Agreement and in the Plan, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Grant Date:
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[date of Board approval of grant]
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Vesting Commencement Date:
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[typically grant date or date of hire]
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Number of Shares Subject to Option:
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Exercise Price (per Share):
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Option Expiration Date:
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(subject to earlier termination in accordance with the terms of the Plan and the Stock Option Agreement) [option expiration date is typically 10 years from Grant Date]
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Type of Option1*:
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☐ Incentive Stock Option
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☐ Nonqualified Stock Option
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Vesting and Exercisability Schedule:
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1/4th of the shares subject to the Option will vest and become exercisable on the one-year anniversary of the Vesting Commencement Date, and 1/48th of the shares subject to the Option will vest and become exercisable monthly thereafter over the next three years, subject in each case to your continuous employment or service with the Company or a Related Company through each date.
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Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement and the Plan. You further acknowledge and agree that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan constitute the entire agreement between you and the Company regarding the Option and expressly supersede any and all prior representations, undertakings and/or agreements on the subject, even if inconsistent, whether oral or written, including without limitation, in any side letter, employment agreement and/or offer letter for your employment, any other refresh/promotion letter that may have been provided to you, or any conversations related to your employment or its terms.
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SENTINEL LABS, INC.
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PARTICIPANT
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By:
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Its:
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Signature
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Date:
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Address:
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Appendices:
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Personal email:
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1. Stock Option Agreement
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Taxpayer ID:
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2. 2013 Equity Incentive Plan
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_____________________________________
1* See Sections 3 and 4 of the Stock Option Agreement.
APPENDIX 1
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan have the same definitions as in the Plan.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Incentive Stock Option Qualification. If so designated in your Grant Notice, all or a portion of the Option is intended to qualify as an Incentive Stock Option under federal income tax law, but the Company does not represent or guarantee that the Option qualifies as such.
If the Option has been designated as an Incentive Stock Option and the aggregate Fair Market Value (determined as of the grant date) of the shares of Common Stock subject to the portions of the Option and all other Incentive Stock Options you hold that first become exercisable during any calendar year exceeds $100,000, any excess portion will be treated as a Nonqualified Stock Option, unless the Internal Revenue Service changes the rules and regulations governing the $100,000 limit for Incentive Stock Options. A portion of the Option may be treated as a Nonqualified Stock Option if certain events cause exercisability of the Option to accelerate.
4. Notice of Disqualifying Disposition. To the extent the Option has been designated as an Incentive Stock Option, to obtain certain tax benefits afforded to Incentive Stock Options, you must hold the Shares issued upon the exercise of the Option for two years after the Grant Date and one year after the date of exercise. By accepting the Option, you agree to promptly notify the Company if you dispose of any of the Shares within one year from the date you exercise all or part of the Option or within two years from the Grant Date.
5. Alternative Minimum Tax. You may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing. You may make this payment in any combination of the following: (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator for Nonqualified Stock Options, by having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option; (d) if permitted by the Plan Administrator, by using shares of Common Stock you already own; (e) if the Common Stock is registered under the Exchange Act and to the extent permitted by law, by instructing a broker to deliver to the Company the total payment required, all in accordance with the regulations of the Federal Reserve Board; or (f) by any other method permitted by the Plan Administrator.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment or Service Relationship. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. In the event of your Termination of Service due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one year after your Termination of Service and (ii) the Option Expiration Date. If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one year after the date of death and (y) the Option Expiration Date.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
The Option must be exercised within three months after termination of employment for reasons other than death or disability and one year after termination of employment due to disability to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "disability" has the meaning attributed to that term for purposes of Section 422 of the Code.
It is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution. The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate. Notwithstanding the foregoing and to the extent permitted by the Plan and Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit you to assign or transfer the Option, subject to such terms and conditions as specified by the Plan Administrator.
12. Withholding Taxes. As a condition to the exercise of any portion of the Option, you must make such arrangements as the Company may require for the satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.
13. Option Not an Employment or Service Contract. Nothing in the Plan or this Agreement will be deemed to constitute an employment contract, employment relations, or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause. The grant of this Option expressly does not constitute any form of employment salary or similar employment benefit.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Section 409A Compliance. Notwithstanding any provision in the Plan or this Agreement to the contrary, the Plan Administrator may, at any time and without your consent, modify the terms of the Option as it determines appropriate to avoid the imposition of interest or penalties under Section 409A of the Code; provided, however, that the Plan Administrator makes no representations that the Option shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to the Option.
17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your
participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; and (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of any of your personal data that is necessary to facilitate the implementation, administration and management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient's country may have different data privacy laws and protections than your country; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store and transmit such information in electronic form.
ANNEX F
STOCK OPTION GRANT NOTICES
(ISRAEL)
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
Sentinel Labs, Inc. (the "Company") hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan") and Appendix B – Israel 2013 to the Plan (the "Israeli Appendix"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), the Israeli Stock Option Agreement, the Plan and in the Israeli Appendix, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Grant Date:
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[date of Board approval of grant]
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Vesting Commencement Date (VCD):
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[typically grant date or date of hire]
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Number of Shares Subject to Option:
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Exercise Price (per Share):
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Option Expiration Date:
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(subject to earlier termination in accordance with the terms of the Plan, the Israeli Appendix and the Stock Option Agreement) [option expiration date is typically 10 years from Grant Date]
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Type of Option:
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☐ Capital Gain Option (CGO)
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☐ Ordinary Income Option (OIO)
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☐ Unapproved 102 Option.
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☐ 3(i) Option
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Vesting and Exercisability Schedule:
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1/48th of the shares subject to this Option will vest and become exercisable monthly over four years following the Vesting Commencement Date during continuous employment or service.
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Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement and the Plan. You further acknowledge and agree that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan constitute the entire agreement between you and the Company regarding the Option and expressly supersede any and all prior representations, undertakings and/or agreements on the subject, even if inconsistent, whether oral or written, including without limitation, in any side letter, employment agreement and/or offer letter for your employment, any other refresh/promotion letter that may have been provided to you, or any conversations related to your employment or its terms..
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SENTINEL LABS, INC.
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PARTICIPANT:
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By:
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Signature
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Its:
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Date:
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Attachments:
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Personal email address:
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1. Stock Option Agreement
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Address:
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2. 2013 Equity Incentive Plan
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3. the Israeli Appendix
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Taxpayer ID:
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SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
ISRAELI STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Israeli Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") and Appendix B – Israel 2013 to the Plan (the "Israeli Appendix") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan or in the Israeli Appendix have the same definitions as in the Plan or the Israeli Appendix, as applicable. In the case of any conflict between the terms of this Agreement and those of Plan, the terms of this Agreement shall control.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Reserved.
4. Reserved.
5. Reserved.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing. You may make this payment in any combination of the following: (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator for Nonqualified Stock Options, by having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option; (d) if permitted by the Plan Administrator, by using shares of Common Stock you already own; (e) if the Common Stock is registered under the Exchange Act and to the extent permitted by law, by instructing a broker to deliver to the Company the total payment required, all in accordance with the regulations of the Federal Reserve Board; or (f) by any other method permitted by the Plan Administrator.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of
exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment or Service Relationship. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one (1) year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. In the event of your Termination of Service due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one (1) year after your Termination of Service and (ii) the Option Expiration Date. If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one (1) year after the date of death and (y) the Option Expiration Date.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
(e) Timing. The Option must be exercised within three (3) months after termination of employment for reasons other than death or disability, and one (1) year after termination of employment due to disability, to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "disability" has the meaning attributed to that term for purposes of Section 102 of the Israeli Income Tax Ordinance (“Section 102”).
Please note that it is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution or is to be given as collateral; any such action made directly or indirectly, for an immediate validation or for a future one, shall be void. The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate. Notwithstanding the foregoing and to the extent permitted by the Plan and Section 102, the Plan Administrator, in its sole discretion, may permit you to assign or transfer the Option, subject to such terms and conditions as specified by the Plan Administrator. As long as Options or Shares purchased or issued hereunder are held by the Trustee on
your behalf, all of your rights over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution.
12. Withholding Taxes. Any tax consequences arising from the grant, exercise or vesting of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company and/or Related Company and/or the Trustee and/or you) hereunder shall be borne solely by you. The Company and/or Related Company and/or the Trustee shall withhold taxes according to the requirements under any applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, you hereby agree to indemnify the Company, Related Company and the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to you.
The Company and/or, when applicable, the Trustee shall not be required to release any share certificate to you until all required payments have been fully made.
With respect to Unapproved 102 Option, if you cease to be employed by the Company or any Related Company, you shall extend to the Company and/or Related Company a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102.
13. Option Not an Employment or Service Contract. Nothing in the Plan, the Israeli Appendix or this Agreement will be deemed to constitute an employment contract or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Reserved.
17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your
forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan, the Israeli Appendix or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company; and (k) with respect to Approved 102 Options, you hereby acknowledges that you are familiar with the provisions of Section 102 and the regulations and rules promulgated thereunder, including without limitations the type of Option granted hereunder and the tax implications applicable to such grant, and you accept the provisions of the trust agreement signed between the Company and the Trustee, attached as Exhibit A hereto, and agree to be bound by its terms.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of any of your personal data that is necessary to facilitate the implementation, administration and management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient's country may have different data privacy laws and protections than your country; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store and transmit such information in electronic form.
SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
Sentinel Labs, Inc. (the "Company") hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's 2013 Equity Incentive Plan (the "Plan") and Appendix B – Israel 2013 to the Plan (the "Israeli Appendix"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), the Israeli Stock Option Agreement, the Plan and in the Israeli Appendix, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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Grant Date:
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[date of Board approval of grant]
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Vesting Commencement Date (VCD):
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[typically grant date or date of hire]
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Number of Shares Subject to Option:
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Exercise Price (per Share):
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Option Expiration Date:
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(subject to earlier termination in accordance with the terms of the Plan, the Israeli Appendix and the Stock Option Agreement) [option expiration date is typically 10 years from Grant Date]
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Type of Option:
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☐ Capital Gain Option (CGO)
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☐ Ordinary Income Option (OIO)
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☐ Unapproved 102 Option.
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☐ 3(i) Option
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Vesting and Exercisability Schedule:
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1/4th of the shares subject to the Option will vest and become exercisable on the one-year anniversary of the VCD, and the remaining ¾ of the shares subject to the Option will vest and become exercisable in equal parts monthly thereafter over the next three years, in each case during continuous employment or service with the Company or a Related Company.
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Additional Terms/Acknowledgement: You acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement, Plan and Israeli Appendix. You further acknowledge and agree that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan constitute the entire agreement between you and the Company regarding the Option and expressly supersede any and all prior representations, undertakings and/or agreements on the subject, even if inconsistent, whether oral or written, including without limitation, in any side letter, employment agreement and/or offer letter for your employment, any other refresh/promotion letter that may have been provided to you, or any conversations related to your employment or its terms.
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SENTINEL LABS, INC.
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PARTICIPANT:
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By:
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Signature
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Its:
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Date:
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Attachments:
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Personal email address:
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1. Stock Option Agreement
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Address:
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2. 2013 Equity Incentive Plan
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3. the Israeli Appendix
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Taxpayer ID:
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SENTINEL LABS, INC.
2013 EQUITY INCENTIVE PLAN
ISRAELI STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice (the "Grant Notice") and this Israeli Stock Option Agreement (this "Agreement"), Sentinel Labs, Inc. (the "Company") has granted you an Option under its 2013 Equity Incentive Plan (the "Plan") and Appendix B – Israel 2013 to the Plan (the "Israeli Appendix") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice (the "Shares") at the exercise price indicated in your Grant Notice. Capitalized terms not defined in this Agreement but defined in the Plan or in the Israeli Appendix have the same definitions as in the Plan or the Israeli Appendix, as applicable. In the case of any conflict between the terms of this Agreement and those of Plan, the terms of this Agreement shall control.
The details of the Option are as follows:
1. Vesting and Exercisability. Subject to the limitations contained herein, the Option will vest and become exercisable as provided in your Grant Notice, provided that vesting will cease upon your Termination of Service and the unvested portion of the Option will terminate.
2. Securities Law Compliance. Notwithstanding any other provision of this Agreement, you may not exercise the Option unless the Shares issuable upon exercise are registered under the Securities Act or, if such Shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of the Option must also comply with other applicable laws and regulations governing the Option, and you may not exercise the Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
3. Reserved.
4. Reserved.
5. Reserved.
6. Independent Tax Advice. You should obtain tax advice when exercising the Option and prior to the disposition of the Shares.
7. Method of Exercise. You may exercise the Option by giving written notice to the Company, in form and substance satisfactory to the Company, which will state your election to exercise the Option and the number of Shares for which you are exercising the Option. The written notice must be accompanied by full payment of the exercise price for the number of Shares you are purchasing. You may make this payment in any combination of the following: (a) by cash; (b) by check acceptable to the Company; (c) if permitted by the Plan Administrator for Nonqualified Stock Options, by having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option; (d) if permitted by the Plan Administrator, by using shares of Common Stock you already own; (e) if the Common Stock is registered under the Exchange Act and to the extent permitted by law, by instructing a broker to deliver to the Company the total payment required, all in accordance with the regulations of the Federal Reserve Board; or (f) by any other method permitted by the Plan Administrator.
8. First Refusal Rights; Voting and Other Restrictions. So long as the Common Stock is not registered under the Exchange Act, the Plan Administrator may, in its sole discretion at the time of
exercise, require you to sign a stock purchase agreement and/or a shareholders agreement or other similar agreement, in the form designated by the Plan Administrator, pursuant to which you will grant to the Company and/or its stockholders certain rights, including, but not limited to, repurchase, co-sale and/or first refusal rights, and agree to certain voting restrictions, with respect to the Shares acquired by you upon exercise of the Option. Upon request to the Company, you may review a current form of any such agreement(s) prior to exercise of the Option.
9. Market Standoff. You agree that any Shares received upon exercise of the Option will be subject to the market standoff restrictions on transfer set forth in the Plan.
10. Treatment Upon Termination of Employment or Service Relationship. The unvested portion of the Option will terminate automatically and without further notice immediately upon your Termination of Service. You may exercise the vested portion of the Option as follows:
(a) General Rule. You must exercise the vested portion of the Option on or before the earlier of (i) three months after your Termination of Service and (ii) the Option Expiration Date.
(b) Retirement or Disability. In the event of your Termination of Service due to Retirement or disability, you must exercise the vested portion of the Option on or before the earlier of (i) one (1) year after your Termination of Service and (ii) the Option Expiration Date.
(c) Death. In the event of your Termination of Service due to your death, the vested portion of the Option must be exercised on or before the earlier of (i) one (1) year after your Termination of Service and (ii) the Option Expiration Date. If you die after your Termination of Service but while the Option is still exercisable, the vested portion of the Option may be exercised until the earlier of (x) one (1) year after the date of death and (y) the Option Expiration Date.
(d) Cause. The vested portion of the Option will automatically expire at the time the Company first notifies you of your Termination of Service for Cause, unless the Plan Administrator determines otherwise. If your employment or service relationship is suspended pending an investigation of whether you will be terminated for Cause, all your rights under the Option likewise will be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after your Termination of Service, any Option you then hold may be immediately terminated by the Plan Administrator.
(e) Timing. The Option must be exercised within three (3) months after termination of employment for reasons other than death or disability, and one (1) year after termination of employment due to disability, to qualify for the beneficial tax treatment afforded Incentive Stock Options. For purposes of the preceding, "disability" has the meaning attributed to that term for purposes of Section 102 of the Israeli Income Tax Ordinance (“Section 102”).
Please note that it is your responsibility to be aware of the date the Option terminates.
11. Limited Transferability. During your lifetime only you can exercise the Option. The Option is not transferable except by will or by the applicable laws of descent and distribution or is to be given as collateral; any such action made directly or indirectly, for an immediate validation or for a future one, shall be void. The Plan provides for exercise of the Option by a beneficiary designated on a Company-approved form or the personal representative of your estate. Notwithstanding the foregoing and to the extent permitted by the Plan and Section 102, the Plan Administrator, in its sole discretion, may permit you to assign or transfer the Option, subject to such terms and conditions as specified by the Plan Administrator. As long as Options or Shares purchased or issued hereunder are held by the Trustee on
your behalf, all of your rights over the Shares are personal, can not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution.
12. Withholding Taxes. Any tax consequences arising from the grant, exercise or vesting of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company and/or Related Company and/or the Trustee and/or you) hereunder shall be borne solely by you. The Company and/or Related Company and/or the Trustee shall withhold taxes according to the requirements under any applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, you hereby agree to indemnify the Company, Related Company and the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to you.
The Company and/or, when applicable, the Trustee shall not be required to release any share certificate to you until all required payments have been fully made.
With respect to Unapproved 102 Option, if you cease to be employed by the Company or any Related Company, you shall extend to the Company and/or Related Company a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102.
13. Option Not an Employment or Service Contract. Nothing in the Plan, the Israeli Appendix or this Agreement will be deemed to constitute an employment contract or confer or be deemed to confer any right for you to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate your employment or other relationship at any time, with or without Cause.
14. No Right to Damages. You will have no right to bring a claim or to receive damages if you are required to exercise the vested portion of the Option within three months (one year in the case of Retirement, Disability or death) of your Termination of Service or if any portion of the Option is cancelled or expires unexercised. The loss of existing or potential profit in the Option will not constitute an element of damages in the event of your Termination of Service for any reason even if the termination is in violation of an obligation of the Company or a Related Company to you.
15. Binding Effect. This Agreement will inure to the benefit of the successors and assigns of the Company and be binding upon you and your heirs, executors, administrators, successors and assigns.
16. Reserved.
17. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation. By entering into this Agreement and accepting the grant of the Option evidenced hereby, you acknowledge that: (a) the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time; (b) the grant of the Option is a one-time benefit which does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (c) all determinations with respect to any such future grants, including, but not limited to, the times when options will be granted, the number of shares subject to each option, the option price, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Option is an extraordinary item of compensation which is outside the scope of your employment contract, if any; (f) the Option is not part of normal or expected compensation for purposes of calculating any benefits, severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you will have no entitlement to compensation or damages as a consequence of your
forfeiture of any unvested portion of the Option as a result of your Termination of Service for any reason; (g) the vesting of the Option ceases upon your Termination of Service for any reason except as may otherwise be explicitly provided in the Plan, the Israeli Appendix or this Agreement or otherwise permitted by the Plan Administrator; (h) the future value of the Shares underlying the Option is unknown and cannot be predicted with certainty; (i) if the Shares underlying the Option do not increase in value, the Option will have no value; (j) in the event that you are not a direct employee of the Company, the grant of the Option will not be interpreted to form an employment or other relationship with the Company; and (k) with respect to Approved 102 Options, you hereby acknowledges that you are familiar with the provisions of Section 102 and the regulations and rules promulgated thereunder, including without limitations the type of Option granted hereunder and the tax implications applicable to such grant, and you accept the provisions of the trust agreement signed between the Company and the Trustee, attached as Exhibit A hereto, and agree to be bound by its terms.
18. Employee Data Privacy. By entering into this Agreement and accepting the Option, you (a) explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of any of your personal data that is necessary to facilitate the implementation, administration and management of the Option and the Plan; (b) understand that the Company and your employer may, for the purpose of implementing, administering and managing the Plan, hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title and details of all awards or entitlement to the Common Stock granted to you under the Plan or otherwise ("Data"); (c) understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, including any broker with whom the Shares issued upon vesting of the Option may be deposited, and that these recipients may be located in your country or elsewhere, and that the recipient's country may have different data privacy laws and protections than your country; (d) waive any data privacy rights you may have with respect to the Data; and (e) authorize the Company, its Related Companies and its agents to store and transmit such information in electronic form.
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain, and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents, Subsidiaries, and Affiliates that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2. SHARES SUBJECT TO THE PLAN.
2.1. Number of Shares Available. Subject to Sections 2.6 and 21 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board, is thirty five million, two hundred and eighty one thousand, five hundred and ninety six (35,281,596) Shares, plus (a) any reserved shares not issued or subject to outstanding awards granted under the Company’s 2013 Equity Incentive Plan, as amended, or the Scalyr, Inc. 2011 Stock Incentive Plan, as amended (together, the “Prior Plans”) that cease to be subject to such awards by forfeiture or otherwise after the Effective Date, (b) shares issued under the Prior Plans before or after the Effective Date pursuant to the exercise of stock options that are, after the Effective Date, forfeited, (c) shares issued under the Prior Plans that are repurchased by the Company at the original purchase price or are otherwise forfeited, and (d) shares that are subject to stock options or other awards under the Prior Plans that are used to pay the exercise price of a stock option or withheld to satisfy the tax withholding obligations related to any award; provided, however, that shares reserved and available for grant and issuance pursuant to subparts (a)–(d) of this Section 2.1 shall be issuable as Common Stock of the Company regardless of their series or class under the Prior Plans.
2.2. Lapsed, Returned Awards. Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR, (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price, (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the exercise price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for grant and issuance in connection with subsequent Awards under this Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 2.2 will not include Shares subject to Awards that initially became available because of the substitution clause in Section 21.2 hereof.
2.3. Minimum Share Reserve. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all outstanding Awards granted under this Plan.
2.4. Automatic Share Reserve Increase. The number of Shares available for grant and issuance under the Plan will be increased on February 1st of each of 2022 through 2031, by the lesser of (a) five percent (5%) of the number of shares of all classes of the Company’s common stock (on an as-converted basis) issued and outstanding on each January 31 immediately prior to the date of increase or (b) such number of Shares determined by the Board.
2.5. ISO Limitation. No more than one hundred and sixty-one million, two hundred and thirty-two thousand, five hundred and eighty eight (161,232,588) Shares will be issued pursuant to the exercise of ISOs granted under the Plan.
2.6. Adjustment of Shares. If the number or class of outstanding Shares is changed by a stock dividend, extraordinary dividend or distribution (whether in cash, shares, or other property, other than a regular cash dividend), recapitalization, stock split, reverse stock split, subdivision, combination, consolidation, reclassification, spin-off, or similar change in the capital structure of the Company, without consideration, then (a) the number and class of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, including Shares reserved under sub-clauses (a)-(e) of Section 2.1, (b) the Exercise Prices of and number and class of Shares subject to outstanding Options and SARs, (c) the number and class of Shares subject to other outstanding Awards and (d) the maximum number and class of Shares that may be issued as ISOs set forth in Section 2.5, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities or other laws, provided that fractions of a Share will not be issued.
If, by reason of an adjustment pursuant to this Section 2.6, a Participant’s Award Agreement or other agreement related to any Award, or the Shares subject to such Award, covers additional or different shares of stock or securities, then such additional or different shares, and the Award Agreement or such other agreement in respect thereof, will be subject to all of the terms, conditions, and restrictions which were applicable to the Award or the Shares subject to such Award prior to such adjustment.
3. ELIGIBILITY. ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors, and Non-Employee Directors, provided that such Consultants, Directors, and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction.
4. ADMINISTRATION.
4.1. Committee Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms, and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board will establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement, and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend, and rescind rules and regulations relating to this Plan or any Award;
(c) identify persons to receive Awards;
(d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Awards may vest and be exercised (which may be based on performance criteria) or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;
(e) determine the number of Shares or other consideration subject to Awards;
(f) determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary;
(g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary, or Affiliate;
(h) grant waivers of Plan or Award conditions;
(i) determine the vesting, exercisability, and payment of Awards;
(j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;
(k) determine whether an Award has been vested and/or earned;
(l) determine the terms and conditions of any, and to institute any Exchange Program;
(m) reduce, waive or modify any criteria with respect to Performance Factors;
(n) adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events, or circumstances to avoid windfalls or hardships;
(o) adopt terms and conditions, rules, and/or procedures (including the adoption of any subplan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States or to qualify Awards for special tax treatment under laws of jurisdictions other than the United States;
(p) exercise discretion with respect to Performance Awards;
(q) make all other determinations necessary or advisable for the administration of this Plan; and
(r) delegate any of the foregoing to a subcommittee or to one or more executive officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law.
4.2. Committee Interpretation and Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination will be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement will be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee will be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution will be final and binding on the Company and the Participant.
4.3. Section 16 of the Exchange Act. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act).
4.4. Documentation. The Award Agreement for a given Award, the Plan, and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.
4.5. Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company, its Subsidiaries, and Affiliates operate or have Employees or other individuals eligible for Awards, the Committee, in its sole discretion, will have the power and authority to: (a) determine which Subsidiaries and Affiliates will be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs, and practices; (d) establish subplans and modify exercise procedures, vesting conditions, and other terms and procedures to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications will be attached to this Plan as appendices, if necessary); and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals, provided, however, that no action taken under this Section 4.5 will increase the Share limitations contained in Section 2.1 hereof. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards will be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
5. OPTIONS. An Option is the right but not the obligation to purchase a Share, subject to certain conditions, if applicable. The Committee may grant Options to eligible Employees, Consultants, and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this section.
5.1. Option Grant. Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length, and starting date of any Performance Period for each Option; and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.
5.2. Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date. The Award Agreement will be delivered to the Participant within a reasonable time after the granting of the Option.
5.3. Exercise Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option, provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary (“Ten Percent Stockholder”) will be exercisable after the
expiration of five (5)years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.
5.4. Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted, provided that: (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant, and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 11 and the Award Agreement and in accordance with any procedures established by the Company.
5.5. Method of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through the authorized third-party administrator), and (b) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 2.6 of the Plan. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
5.6. Termination of Service. If the Participant’s Service terminates for any reason except for Cause or the Participant’s death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates no later than three (3) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise of an ISO beyond three (3) months after the date Participant’s employment terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options.
(a) Death. If the Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after Participant’s Service terminates other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant’s legal representative, or authorized assignee, no later than twelve (12) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options.
(b) Disability. If the Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be
exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond (a) three (3) months after the date Participant’s employment terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code or (b) twelve (12) months after the date Participant’s employment terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options.
(c) Cause. Unless otherwise determined by the Committee, if the Participant’s Service terminates for Cause, then Participant’s Options (whether or not vested) will expire on the date of termination of Participant’s Service if the Committee has reasonably determined in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or such Participant’s Services could have been terminated for Cause (without regard to the lapsing of any required notice or cure periods in connection therewith) at the time such Participant terminated Service), or at such later time and on such conditions as are determined by the Committee, but in any event no later than the expiration date of the Options. Unless otherwise provided in an employment agreement, Award Agreement, or other applicable agreement, Cause will have the meaning set forth in the Plan.
5.7. Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 5.7, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
5.8. Modification, Extension or Renewal. The Committee may modify, extend, or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed, or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 18 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants, provided, however, that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.
5.9. No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended, or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.
6. RESTRICTED STOCK UNITS. A Restricted Stock Unit (“RSU”) is an award to an eligible Employee, Consultant, or Director covering a number of Shares that may be settled by issuance of those
Shares (which may consist of Restricted Stock) or in cash. All RSUs will be made pursuant to an Award Agreement.
6.1. Terms of RSUs. The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU, (b) the time or times during which the RSU may be settled, (c) the consideration to be distributed on settlement, and (d) the effect of the Participant’s termination of Service on each RSU, provided that no RSU will have a term longer than ten (10) years. An RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length, and starting date of any Performance Period for the RSU; (ii) select from among the Performance Factors to be used to measure the performance, if any; and (iii) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and Participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.
6.2. Form and Timing of Settlement. Payment of earned RSUs will be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares, or a combination of both. The Committee may also permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned, provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
6.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
7. RESTRICTED STOCK AWARDS. A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant, or Director Shares that are subject to restrictions (“Restricted Stock”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the Plan.
7.1. Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer to purchase such Restricted Stock Award will terminate, unless the Committee determines otherwise.
7.2. Purchase Price. The Purchase Price for Shares issued pursuant to a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 11 of the Plan, and the Award Agreement and in accordance with any procedures established by the Company.
7.3. Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified period of Service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award
Agreement. Prior to the grant of a Restricted Stock Award, the Committee will: (a) determine the nature, length, and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.
7.4. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
8. STOCK BONUS AWARDS. A Stock Bonus Award is an award to an eligible Employee, Consultant, or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent, Subsidiary, or Affiliate. All Stock Bonus Awards will be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.
8.1. Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified period of Service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee will: (a) determine the restrictions to which the Stock Bonus Award is subject, including the nature, length, and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors, if any, to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.
8.2. Form of Payment to Participant. Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.
8.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
9. STOCK APPRECIATION RIGHTS. A Stock Appreciation Right (“SAR”) is an award to an eligible Employee, Consultant, or Director that may be settled in cash or Shares (which may consist of Restricted Stock) having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs will be made pursuant to an Award Agreement.
9.1. Terms of SARs. The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR, (b) the Exercise Price and the time or times during which the SAR may be exercised and settled, (c) the consideration to be distributed on exercise and settlement of the SAR, and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted and may not be less than Fair Market Value of the Shares on the date of grant. A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the
Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length, and starting date of any Performance Period for each SAR; and (ii) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.
9.2. Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement will set forth the expiration date, provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.
9.3. Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price, by (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
9.4. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee).
10. PERFORMANCE AWARDS.
10.1. Types of Performance Awards. A Performance Award is an award to an eligible Employee, Consultant, or Director that is based upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee, and may be settled in cash, Shares (which may consist of, without limitation, Restricted Stock), other property, or any combination thereof. Grants of Performance Awards will be made pursuant to an Award Agreement that cites Section 10 of the Plan.
(a) Performance Shares. The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded, and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares will consist of a unit valued by reference to a designated number of Shares, the value of which may be paid to the Participant by delivery of Shares or, if set forth in the instrument evidencing the Award, of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee will determine in its sole discretion.
(b) Performance Units. The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded, and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units will consist of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.
(c) Cash-Settled Performance Awards. The Committee may also grant cash-settled Performance Awards to Participants under the terms of this Plan. Such awards will be based on the attainment of performance goals using the Performance Factors within this Plan that are established by the Committee for the relevant performance period.
10.2. Terms of Performance Awards. The Committee will determine, and each Award Agreement will set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus, (b) the number of Shares deemed subject to an award of Performance Shares, (c) the Performance Factors and Performance Period that will determine the time and extent to which each award of Performance Shares will be settled, (d) the consideration to be distributed on settlement, and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (i) determine the nature, length, and starting date of any Performance Period; (ii) select from among the Performance Factors to be used; and (iii) determine the number of Shares deemed subject to the award of Performance Shares. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. Prior to settlement the Committee will determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria.
10.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee).
11. PAYMENT FOR SHARE PURCHASES. Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled;
(c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary;
(d) by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan;
(e) by any combination of the foregoing; or
(f) by any other method of payment as is permitted by applicable law.
The Committee may limit the availability of any method of payment, to the extent the Committee determines, in its discretion, such limitation is necessary or advisable to comply with applicable law or facilitate the administration of the Plan.
12. GRANTS TO NON-EMPLOYEE DIRECTORS.
12.1. General. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Section 12 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined in the discretion of the Board. No Non-Employee Director may receive Awards under the Plan that, when combined with cash compensation received for service as a Non-Employee Director, exceed $750,000 in value (as described below) in any calendar year; provided, however, that a Non-Employee Director may receive Awards under the Plan and cash compensation for service as a Non-Employee Director with a maximum aggregate value of $1,000,000 in such Non-Employee Director’s year of appointment to the Board. The value of Awards for purposes of complying with this maximum will be determined as follows: (a) for Options and SARs, grant date fair value will be calculated using the Company’s regular valuation methodology for determining the grant date fair value of Options for reporting purposes, which may include using an average of the Fair Market Value over 30 trading days, the Black-Scholes value of the Award, and the aggregate number of Shares subject to the Award, and (b) for all other Awards other than Options and SARs, grant date fair value will be determined by either (i) calculating the product of the Fair Market Value per Share on the date of grant and the aggregate number of Shares subject to the Award, or (ii) calculating the product using an average of the Fair Market Value over a number of trading days and the aggregate number of Shares subject to the Award as determined by the Committee. Awards granted to an individual while he or she was serving in the capacity as an Employee or while he or she was a Consultant but not a Non-Employee Director will not count for purposes of the limitations set forth in this Section 12.1.
12.2. Eligibility. Awards pursuant to this Section 12 will be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 12.
12.3. Vesting, Exercisability and Settlement. Except as set forth in Section 21, Awards will vest, become exercisable, and be settled as determined by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors will not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.
12.4. Election to Receive Awards in Lieu of Cash. A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, if permitted, and as determined, by the Committee. Such Awards will be issued under the Plan. An election under this Section 12.4 will be filed with the Company on the form prescribed by the Company.
13. WITHHOLDING TAXES.
13.1. Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or a tax event occurs, the Company may require the Participant to remit to the Company, or to the Parent, Subsidiary, or Affiliate, as applicable, employing the Participant an amount sufficient to satisfy applicable U.S. federal, state, local, and international income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items (the “Tax-Related Items”) legally due from the Participant prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash,
such payment will be net of an amount sufficient to satisfy applicable withholding obligations for Tax-Related Items. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares will be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day.
13.2. Stock Withholding. The Committee, or its delegate(s), as permitted by applicable law, in its sole discretion and pursuant to such procedures as it may specify from time to time and to limitations of local law, may require or permit a Participant to satisfy such Tax Related Items legally due from the Participant, in whole or in part by (without limitation) (a) paying cash, (b) having the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned shares having a Fair Market Value equal to the Tax-Related Items to be withheld, or (d) withholding from the proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company. The Company may withhold or account for these Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory tax rate for the applicable tax jurisdiction, to the extent consistent with applicable laws.
14. TRANSFERABILITY. Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothesized, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate. All Awards will be exercisable: (a) during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees; and (c) in the case of all awards except ISOs, by a Permitted Transferee.
15. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
15.1. Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any Dividend Equivalent Rights permitted by an applicable Award Agreement. Any Dividend Equivalent Rights will be subject to the same vesting or performance conditions as the underlying Award. In addition, the Committee may provide that any Dividend Equivalent Rights permitted by an applicable Award Agreement will be deemed to have been reinvested in additional Shares or otherwise reinvested. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to such stock dividends or stock distributions with respect to Unvested Shares, and any such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. The Committee, in its discretion, may provide in the Award Agreement evidencing any Award that the Participant will be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Shares underlying an Award during the period beginning on the date the Award is granted and ending, with respect to each Share subject to the Award, on the earlier of the
date on which the Award is exercised or settled or the date on which it is forfeited provided, that no Dividend Equivalent Right will be paid with respect to the Unvested Shares, and such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. Such Dividend Equivalent Rights, if any, will be credited to the Participant in the form of additional whole Shares as of the date of payment of such cash dividends on Shares.
15.2. Restrictions on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “Right of Repurchase”) a portion of any or all Unvested Shares held by a Participant following such Participant’s termination of Service at any time within ninety(90) days (or such longer or shorter time determined by the Committee) after the later of the date Participant’s Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.
16. CERTIFICATES. All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends, and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state, or foreign securities law, or any rules, regulations, and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted, and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.
17. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note, provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
18. REPRICING; EXCHANGE AND BUYOUT OF AWARDS. Without prior stockholder approval the Committee may (a) reprice Options or SARs (and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the repricing), and (b) with the consent of the respective Participants (unless not required pursuant to Section 5.8 of the Plan), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.
19. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control and other laws, rules, and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or
other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable and/or (b) completion of any registration or other qualification of such Shares under any state, federal, or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification, or listing requirements of any foreign or state securities laws, exchange control laws, stock exchange, or automated quotation system, and the Company will have no liability for any inability or failure to do so.
20. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent, Subsidiary, or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary, or Affiliate to terminate Participant’s employment or other relationship at any time.
21. CORPORATE TRANSACTIONS.
21.1. Assumption or Replacement of Awards by Successor. In the event that the Company is subject to a Corporate Transaction, outstanding Awards acquired under the Plan shall be subject to the agreement evidencing the Corporate Transaction, which need not treat all outstanding Awards in an identical manner. Such agreement, without the Participant’s consent, shall provide for one or more of the following with respect to all outstanding Awards as of the effective date of such Corporate Transaction:
(a) The continuation of an outstanding Award by the Company (if the Company is the successor entity).
(b) The assumption of an outstanding Award by the successor or acquiring entity (if any) of such Corporate Transaction (or by its parents, if any), which assumption, will be binding on all selected Participants; provided that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable.
(c) The substitution by the successor or acquiring entity in such Corporate Transaction (or by its parents, if any) of equivalent awards with substantially the same terms for such outstanding Awards (except that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable).
(d) The full or partial acceleration of exercisability or vesting and accelerated expiration of an outstanding Award and lapse of the Company’s right to repurchase or re-acquire shares acquired under an Award or lapse of forfeiture rights with respect to shares acquired under an Award.
(e) The settlement of the full value of such outstanding Award (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity (or its parent, if any) with a fair market value equal to the required amount, followed by the cancellation of such Awards; provided however, that such Award may be cancelled if such Award has no value, as determined by the Committee, in its discretion. Subject to Section 409A of the Code, such payment may be made in installments and may be deferred until the date or dates the Award would have become exercisable or
vested. Such payment may be subject to vesting based on the Participant’s continued service, provided that the vesting schedule shall not be less favorable to the Participant than the schedule under which the Award would have become vested or exercisable. For purposes of this Section 21.1(e), the fair market value of any security shall be determined without regard to any vesting conditions that may apply to such security.
(f) The cancellation of outstanding Awards in exchange for no consideration.
The Board shall have full power and authority to assign the Company’s right to repurchase or re-acquire or forfeiture rights to such successor or acquiring corporation. Further, the Committee will notify each Participant in writing or electronically that such Participant’s Award will, if exercisable, be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period. Awards need not be treated similarly in a Corporate Transaction and treatment may vary from Award to Award and/or from Participant to Participant.
21.2. Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either: (a) granting an Award under this Plan in substitution of such other company’s award, or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards will not reduce the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.
21.3. Non-Employee Directors’ Awards. Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors will accelerate and such Awards will become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.
22. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will be submitted for the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.
23. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder will be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of laws rules).
24. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan, provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval, provided further that a Participant’s Award will be governed by the version of this Plan then in effect at the time such Award was granted. No termination or amendment of the Plan will
affect any then-outstanding Award unless expressly provided by the Committee. In any event, no termination or amendment of the Plan or any outstanding Award may adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is necessary to comply with applicable law, regulation, or rule.
25. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
26. INSIDER TRADING POLICY. Each Participant who receives an Award will comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers, and/or Directors of the Company, as well as with any applicable insider trading or market abuse laws to which the Participant may be subject.
27. ALL AWARDS SUBJECT TO COMPANY CLAWBACK OR RECOUPMENT POLICY. All Awards, subject to applicable law, will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other service with the Company that is applicable to officers, Employees, Directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.
28. DEFINITIONS. As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:
28.1. “Affiliate” means (a) any entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Company, and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
28.2. “Award” means any award under the Plan, including any Option, Performance Award, Cash Award, Restricted Stock, Stock Bonus, Stock Appreciation Right, or Restricted Stock Unit.
28.3. “Award Agreement” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which will be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committee’s delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.
28.4. “Board” means the Board of Directors of the Company.
28.5. “Cause” means a determination by the Company that the Participant has committed an act or acts constituting any of the following: (i) dishonesty, fraud, misconduct or negligence in connection with Participant’s duties to the Company, (ii) unauthorized disclosure or use of the Company’s confidential or proprietary information, (iii) misappropriation of a business opportunity of the Company, (iv) materially aiding Company competitor, (v) a felony conviction, (vi) failure or refusal to attend to the duties or obligations of the Participant’s position, (vii) violation or breach of, or failure to comply with, the Company’s code of ethics or conduct, any of the Company’s rules, policies or procedures applicable to the Participant or any agreement in effect between the Company and the Participant or (viii) other
conduct by such Participant that could be expected to be harmful to the business, interests or reputation of the Company; provided that as to sub-subsections (vi) and (viii) of this definition, the Company shall provide the Participant with written notice of such act(s) within 60 days of occurrence or reasonable discovery thereof and of the Company’s intention to terminate the Participant’s employment for Cause, which notice shall provide the Participant with 30 days to cure such conditions to the satisfaction of the Company and require the Participant to provide written notice to the Company of such efforts to cure. The determination as to whether Cause for a Participant’s termination exists will be made in good faith by the Company and will be final and binding on the Participant. This definition does not in any way limit the Company’s or any Parent’s or Subsidiary’s ability to terminate a Participant’s employment or services at any time as provided in Section 20 above. Notwithstanding the foregoing, the foregoing definition of “Cause” may, in part or in whole, be modified or replaced in each individual employment agreement, Award Agreement, or other applicable agreement with any Participant, provided that such document supersedes the definition provided in this Section 28.5.
28.6. “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
28.7. “Committee” means the Compensation Committee delegated powers to administer the Plan by the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.
28.8. “Common Stock” means the Class A common stock of the Company.
28.9. “Company” means SentinelOne, Inc., a Delaware corporation, or any successor corporation.
28.10. “Consultant” means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary, or Affiliate to render services to such entity.
28.11. “Corporate Transaction” means the occurrence of any of the following events: (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities, provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; (d) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of capital stock of the Company), or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same
Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
28.12. “Director” means a member of the Board.
28.13. “Disability” means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable 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 can be expected to last for a continuous period of not less than twelve (12) months.
28.14. “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash, stock, or other property dividends in amounts equal equivalent to cash, stock, or other property dividends for each Share represented by an Award held by such Participant.
28.15. “Effective Date” means the day immediately prior to the Company’s IPO Registration Date, subject to approval of the Plan by the Company’s stockholders.
28.16. “Employee” means any person, including officers and Directors, providing services as an employee to the Company or any Parent, Subsidiary, or Affiliate. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
28.17. “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
28.18. “Exchange Program” means a program pursuant to which (a) outstanding Awards are surrendered, cancelled, or exchanged for cash, the same type of Award, or a different Award (or combination thereof); or (b) the exercise price of an outstanding Award is increased or reduced.
28.19. “Exercise Price” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.
28.20. “Fair Market Value” means, as of any date, the value of a Share, determined as follows:
(a) if such common stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the common stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(b) if such common stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of
determination as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(c) in the case of an Option or SAR grant made on the IPO Registration Date, the price per share at which Shares are initially offered for sale to the public by the Company’s underwriters in the initial public offering of Shares as set forth in the Company’s final prospectus included within the registration statement on Form S-1 filed with the SEC under the Securities Act; or
(d) by the Board or the Committee in good faith.
28.21. “Insider” means an officer or Director of the Company or any other person whose transactions in the Company’s common stock are subject to Section 16 of the Exchange Act.
28.22. “IPO Registration Date” means the date on which the Company’s registration statement on Form S-1 in connection with its initial public offering of common stock is declared effective by the SEC under the Securities Act.
28.23. “IRS” means the United States Internal Revenue Service.
28.24. “Non-Employee Director” means a Director who is not an Employee of the Company or any Parent, Subsidiary, or Affiliate.
28.25. “Option” means an Award of an option to purchase Shares pursuant to Section 5.
28.26. “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
28.27. “Participant” means a person who holds an Award under this Plan.
28.28. “Performance Award” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
28.29. “Performance Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied:
(a) profit before tax;
(b) billings;
(c) revenue;
(d) net revenue;
(e) earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings, stock-based compensation expenses, depreciation, and amortization);
(f) operating income;
(g) operating margin;
(h) operating profit;
(i) controllable operating profit or net operating profit;
(j) net profit;
(k) gross margin;
(l) operating expenses or operating expenses as a percentage of revenue;
(m) net income;
(n) earnings per share;
(o) total stockholder return;
(p) market share;
(q) return on assets or net assets;
(r) the Company’s stock price;
(s) growth in stockholder value relative to a pre-determined index;
(t) return on equity;
(u) return on invested capital;
(v) cash flow (including free cash flow or operating cash flows);
(w) cash conversion cycle;
(x) economic value added;
(y) individual confidential business objectives;
(z) contract awards or backlog;
(aa) overhead or other expense reduction;
(bb) credit rating;
(cc) strategic plan development and implementation;
(dd) succession plan development and implementation;
(ee) improvement in workforce diversity;
(ff) customer indicators and/or satisfaction;
(gg) new product invention or innovation;
(hh) attainment of research and development milestones;
(ii) improvements in productivity;
(jj) bookings;
(kk) attainment of objective operating goals and employee metrics;
(ll) sales;
(mm) expenses;
(nn) balance of cash, cash equivalents, and marketable securities;
(oo) completion of an identified special project;
(pp) completion of a joint venture or other corporate transaction;
(qq) employee satisfaction and/or retention;
(rr) research and development expenses;
(ss) working capital targets and changes in working capital; and
(tt) any other metric that is capable of measurement as determined by the Committee.
1. The Committee may provide for one or more equitable adjustments to the Performance Factors to preserve the Committee’s original intent regarding the Performance Factors at the time of the initial award grant, such as but not limited to, adjustments in recognition of unusual or non-recurring items such as acquisition related activities or changes in applicable accounting rules. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.
28.30. “Performance Period” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Factors will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Award.
28.31. “Performance Share” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
28.32. “Performance Unit” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
28.33. “Permitted Transferee” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.
28.34. “Plan” means this SentinelOne, Inc. 2021 Equity Incentive Plan.
28.35. “Purchase Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.
28.36. “Restricted Stock Award” means an Award as defined in Section 6 and granted under the Plan, or issued pursuant to the early exercise of an Option.
28.37. “Restricted Stock Unit” means an Award as defined in Section 9 and granted under the Plan.
28.38. “SEC” means the United States Securities and Exchange Commission.
28.39. “Securities Act” means the United States Securities Act of 1933, as amended.
28.40. “Service” will mean service as an Employee, Consultant, Director, or Non-Employee Director, to the Company or a Parent, Subsidiary, or Affiliate, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of any leave of absence approved by the Company. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of or modification to vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military or other protected leave, if required by applicable laws, vesting will continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from military leave, he or she will be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide Service to the Company throughout the leave on the same terms as he or she was providing Service immediately prior to such leave. An employee shall have terminated employment as of the date he or she ceases to provide Service (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment shall not be extended by any notice period or garden leave mandated by local law, provided, however, that a change in status between an Employee, Consultant, Director or Non-Employee Director shall not terminate the Participant’s Service, unless determined by the Committee, in its discretion or to the extent set forth in the applicable Award Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide Service and the effective date on which the Participant ceased to provide Service.
28.41. “Shares” means shares of the Common Stock and the common stock of any successor entity of the Company.
28.42. “Stock Appreciation Right” means an Award defined in Section 8 and granted under the Plan.
28.43. “Stock Bonus” means an Award defined in Section 7 and granted under the Plan.
28.44. “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
28.45. “Treasury Regulations” means regulations promulgated by the United States Treasury Department.
28.46. “Unvested Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).
ANNEX A
GLOBAL NOTICE OF STOCK OPTION GRANT
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
GLOBAL NOTICE OF STOCK OPTION GRANT
You (the “Optionee”) have been granted an option to purchase shares of Common Stock of the Company (the “Option”) under the SentinelOne, Inc. (the “Company”) 2021 Equity Incentive Plan (the “Plan”), subject to the terms and conditions of the Plan, this Global Notice of Stock Option Grant (the “Notice”), and the attached Global Stock Option Agreement (the “Option Agreement”), including any applicable country-specific provisions in the appendix attached here (the “Appendix”), which constitutes part of the Option Agreement.
Unless otherwise defined herein, the terms defined in the Plan will have the same meanings in this Notice and the electronic representation of this Notice established and maintained by the Company or a third party designated by the Company.
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Name:
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Address:
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Grant Number:
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Date of Grant:
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Vesting Commencement Date:
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Exercise Price per Share:
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Total Number of Shares:
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Type of Option:
(for U.S. tax purposes)
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_______Non-Qualified Stock Option
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_______Incentive Stock Option
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Expiration Date:
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_______ __, 20__; the Option expires earlier if Optionee’s Service terminates earlier, as described in the Option Agreement.
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Vesting Schedule:
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Subject to the limitations set forth in this Notice, the Plan, and the Agreement, the Option will vest in accordance with the following schedule: [insert applicable vesting schedule, which may include performance metrics]
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By accepting (whether in writing, electronically, or otherwise) the Option, Optionee acknowledges and agrees to the following:
1) Optionee understands that Optionee’s Service is for an unspecified duration, can be terminated at any time (i.e., is “at-will”) except where otherwise prohibited by applicable law, and that nothing in this Notice, the Option Agreement, or the Plan changes the nature of that relationship.
Optionee acknowledges that the vesting of the Option pursuant to this Notice is subject to Optionee’s continuing Service. To the extent permitted by applicable law, Optionee agrees and acknowledges that the Vesting Schedule may change prospectively in the event that Optionee’s Service status changes between full-and part-time and/or in the event the Optionee is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. Optionee
2) This grant is made under and governed by the Plan, the Agreement, and this Notice, and this Notice is subject to the terms and conditions of the Agreement and the Plan, both of which are incorporated herein by reference. Optionee has read the Notice, the Option Agreement and, the Plan.
3) Optionee has read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Optionee acquires or disposes of the Company’s securities.
4) By accepting the Option, Optionee consents to electronic delivery and participation as set forth in the Option Agreement.
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OPTIONEE
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SENTINELONE, INC.
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Signature:
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By:
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Print Name:
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Its:
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SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
GLOBAL STOCK OPTION AGREEMENT
Unless otherwise defined in this Global Stock Option Agreement (this “Option Agreement”), any capitalized terms used herein will have the same meaning ascribed to them in the SentinelOne, Inc. 2021 Equity Incentive Plan (the “Plan”).
Optionee has been granted an option to purchase Shares (the “Option”) of SentinelOne, Inc. (the “Company”), subject to the terms, restrictions, and conditions of the Plan, the Notice of Stock Option Grant (the “Notice”), and this Option Agreement, including any applicable country-specific provisions in the appendix attached hereto (the “Appendix”), which constitutes part of this Option Agreement. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Notice or this Option Agreement, the terms and conditions of the Plan will prevail.
1. Vesting Rights. Subject to the applicable provisions of the Plan and this Option Agreement, the Option may be exercised, in whole or in part, in accordance with the Vesting Schedule set forth in the Notice. Optionee acknowledges and agrees that the Vesting Schedule may change prospectively in the event Optionee’s Service status changes between full and part-time and/or in the event Optionee is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. Optionee acknowledges that the vesting of the Option pursuant to this Notice and Agreement is subject to Optionee’s continuing Service.
2. Grant of Option. Optionee has been granted an Option for the number of Shares set forth in the Notice at the exercise price per Share in U.S. Dollars set forth in the Notice (the “Exercise Price”). If designated in the Notice as an Incentive Stock Option (“ISO”), the Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if the Option is intended to be an ISO, to the extent that it exceeds the U.S. $100,000 rule of Code Section 422(d) it will be treated as a Nonqualified Stock Option (“NSO”).
3. Termination Period.
(a) General Rule. If Optionee’s Service terminates for any reason except death or Disability, and other than for Cause, then the Option will expire at the close of business at Company headquarters on the date three (3) months after Optionee’s Termination Date (as defined below) (with any exercise beyond three (3) months after the date Optionee’s employment terminates deemed to be the exercise of an NSO). The Company determines when Optionee’s Service terminates for all purposes under this Option Agreement.
(b) Death; Disability. If Optionee dies before Optionee’s Service terminates (or Optionee dies within three (3) months of Optionee’s termination of Service other than for Cause), then the Option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of death (subject to the expiration details in Section 7). If Optionee’s Service terminates because of Optionee’s Disability, then the Option will expire at the close of business at Company headquarters on the date twelve (12) months after Optionee’s Termination Date (subject to the expiration details in Section 7).
(c) Cause. Unless otherwise determined by the Committee, the Option (whether or not vested) will terminate immediately upon the Optionee’s cessation of Services if the Company reasonably determines in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or the Optionee’s Services could have been terminated for Cause
(without regard to the lapsing of any required notice or cure periods in connection therewith) at the time the Optionee terminated Services).
(d) No Notification of Exercise Periods. Optionee is responsible for keeping track of these exercise periods following Optionee’s termination of Service for any reason. The Company will not provide further notice of such periods. In no event will the Option be exercised later than the Expiration Date set forth in the Notice.
(e) Termination. For purposes of this Option, Optionee’s Service will be considered terminated as of the date Optionee is no longer providing Service to the Company, its Parent or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Optionee is employed or the terms of Optionee’s employment agreement, if any) (the “Termination Date”). The Committee will have the exclusive discretion to determine when Optionee is no longer actively providing services for purposes of Optionee’s Option (including whether Optionee may still be considered to be providing services while on an approved leave of absence). Unless otherwise provided in this Option Agreement or determined by the Company, Optionee’s right to vest in this Option under the Plan, if any, will terminate as of the Termination Date and will not be extended by any notice period (e.g., Optionee’s period of Service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Optionee is employed or the terms of Optionee’s employment agreement, if any). Following the Termination Date, Optionee may exercise the Option only as set forth in the Notice and this Section, provided that the period (if any) during which Optionee may exercise the Option after the Termination Date, if any, will commence on the date Optionee ceases to provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Optionee is employed or terms of Optionee’s employment agreement, if any. If Optionee does not exercise this Option within the termination period set forth in the Notice or the termination periods set forth above, the Option will terminate in its entirety. In no event, may any Option be exercised after the Expiration Date of the Option as set forth in the Notice.
4. Exercise of Option.
(a) Right to Exercise. The Option is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice and the applicable provisions of the Plan and this Option Agreement. In the event of Optionee’s death, Disability, termination for Cause, or other cessation of Service, the exercisability of the Option is governed by the applicable provisions of the Plan, the Notice, and this Option Agreement. The Option may not be exercised for a fraction of a Share.
(b) Method of Exercise. The Option is exercisable by delivery of an exercise notice in a form specified by the Company (the “Exercise Notice”), which will state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice will be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares together with any applicable Tax-Related Items (as defined in Section 8 below). The Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price and payment of any applicable Tax-Related Items. No Shares will be issued pursuant to the exercise of the Option unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed and any exchange control
requirements. Assuming such compliance, for United States income tax purposes the Exercised Shares will be considered transferred to Optionee on the date the Option is exercised with respect to such Exercised Shares.
(c) Exercise by Another. If another person wants to exercise the Option after it has been transferred to him or her in compliance with this Option Agreement, that person must prove to the Company’s satisfaction that he or she is entitled to exercise the Option. That person must also complete the proper Exercise Notice form (as described above) and pay the Exercise Price (as described below) and any applicable Tax-Related Items (as described below).
5. Method of Payment. Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the election of Optionee:
(a) Optionee’s personal check (or readily available funds), wire transfer, or a cashier’s check;
(b) certificates for shares of Company stock that Optionee owns, along with any forms needed to effect a transfer of those shares to the Company; the value of the shares, determined as of the effective date of the Option exercise, will be applied to the Exercise Price. Instead of surrendering shares of Company stock, Optionee may attest to the ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the Option shares issued to Optionee. However, Optionee may not surrender, or attest to the ownership of, shares of Company stock in payment of the Exercise Price of Optionee’s Option if Optionee’s action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes;
(c) cashless exercise through irrevocable directions to a securities broker approved by the Company to sell all or part of the Shares covered by the Option and to deliver to the Company from the sale proceeds an amount sufficient to pay the Exercise Price and any applicable Tax-Related Items. The balance of the sale proceeds, if any, will be delivered to Optionee. The directions must be given by signing a special notice of exercise form provided by the Company; or
(d) any other method authorized by the Company;
provided, however, that the Company may restrict the available methods of payment to facilitate compliance with applicable law or administration of the Plan. In particular, if Optionee is located outside the United States, Optionee should review the applicable provisions of the Appendix for any such restrictions that may currently apply.
6. Non-Transferability of Option. In general, except as provided below, only Optionee may exercise this Option prior to Optionee’s death. Optionee may not transfer or assign this Option, except as provided below. For instance, Optionee may not sell this Option or use it as security for a loan. If Optionee attempts to do any of these things, this Option will immediately become invalid. However, if Optionee is a U.S. taxpayer, Optionee may dispose of this Option in Optionee’s will. If Optionee is a U.S. taxpayer and this Option is designated as a NSO in the Notice of Grant, then the Committee may, in its sole discretion, allow Optionee to transfer this Option as a gift to one or more family members. For purposes of this Agreement, “family member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in- law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law (including adoptive relationships), any individual sharing Optionee’s household (other than a tenant or employee), a trust in which one or more of these individuals have more than 50% of the beneficial interest, a foundation in which Optionee or one or more of these
persons control the management of assets, and any entity in which Optionee or one or more of these persons own more than 50% of the voting interest. In addition, if Optionee is a U.S. taxpayer and this Option is designated as a NSO in the Notice of Grant, then the Committee may, in its sole discretion, allow Optionee to transfer this Option to Optionee’s spouse or former spouse pursuant to a domestic relations order in settlement of marital property rights. The Committee will allow Optionee to transfer this Option only if both Optionee and the transferee(s) execute the forms prescribed by the Committee, which include the consent of the transferee(s) to be bound by this Agreement. This Option may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during Optionee’s lifetime only by Optionee, Optionee’s guardian, or legal representative, as permitted in the Plan and applicable local laws. The terms of the Plan and this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee. The Committee may permit additional transfers on a case-by-case basis to extent permissible under applicable law. The terms of the Plan and this Option Agreement will be binding upon the executors, administrators, heirs, successors and assigns of Optionee.
7. Term of Option. The Option will in any event expire on the expiration date set forth in the Notice, which date is no more than ten (10) years after the Date of Grant (five (5) years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 5.3 of the Plan applies).
8. Taxes.
(a) Responsibility for Taxes. Optionee acknowledges that, to the extent permitted by applicable law, regardless of any action taken by the Company or, if different, a Parent, Subsidiary, or Affiliate employing or retaining Optionee (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account, or other tax related items related to Optionee’s participation in the Plan and legally applicable to Optionee (“Tax-Related Items”) is and remains Optionee’s responsibility and may exceed the amount actually withheld by the Company or the Employer, if any. Optionee further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Option, including, but not limited to, the grant, vesting, or exercise of this Option; the subsequent sale of Shares acquired pursuant to such exercise; and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of this Option to reduce or eliminate Optionee’s liability for Tax-Related Items or achieve any particular tax result. Further, if Optionee is subject to Tax-Related Items in more than one jurisdiction, Optionee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. OPTIONEE SHOULD CONSULT A TAX ADVISER APPROPRIATELY QUALIFIED IN THE COUNTRY OR COUNTRIES IN WHICH OPTIONEE RESIDES OR IS SUBJECT TO TAXATION PRIOR TO EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
(b) Withholding. Prior to any relevant taxable or tax withholding event, to the extent permitted by applicable law and as applicable, Optionee agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Optionee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any withholding obligations for Tax-Related Items by one or a combination of the following, all under such
rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable:
(i) withholding from Optionee’s wages or other cash compensation paid to Optionee by the Company and/or the Employer; or
(ii) withholding from proceeds of the sale of Shares acquired at exercise of this Option either through a voluntary sale or through a mandatory sale arranged by the Company (on Optionee’s behalf pursuant to this authorization and without further consent);
(iii) withholding Shares to be issued upon exercise of the Option, provided the Company only withholds the number of Shares necessary to satisfy no more than applicable statutory withholding amounts;
(iv) Optionee’s payment of a cash amount (including by check representing readily available funds or a wire transfer); or
(v) any other arrangement approved by the Committee and permitted under applicable law;
provided, however, that if Optionee is a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale (unless the Committee as constituted in accordance with Rule 16b-3 of the Exchange Act shall establish an alternate method from alternatives (i) – (v) above prior to the Tax-Related Items withholding event).
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory rate for Optionee’s tax jurisdiction(s) in which case Optionee will have no entitlement to the equivalent amount in Shares and will receive a refund of any over-withheld amount in cash in accordance with applicable law. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Optionee is deemed to have been issued the full number of Exercised Shares; notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the withholding obligation for Tax-Related Items.
Finally, Optionee agrees to pay to the Company and/or the Employer any amount of Tax-Related Items that the Company and/or the Employer may be required to withhold or account for as a result of Optionee’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Optionee fails to comply with Optionee’s obligations in connection with the Tax-Related Items.
(c) Notice of Disqualifying Disposition of ISO Shares. If Optionee is subject to Tax-Related Items in the United States and sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two (2) years after the grant date, or (ii) one (1) year after the exercise date, Optionee will immediately notify the Company in writing of such disposition. Optionee agrees that he or she may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out any wages or other cash compensation paid to Optionee by the Company and/or the Employer.
9. Nature of Grant. By accepting the Option, Optionee acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the Option is exceptional, voluntary, and occasional, and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(c) all decisions with respect to future options or other grants, if any, will be at the sole discretion of the Company;
(d) Optionee is voluntarily participating in the Plan;
(e) the Option and Optionee’s participation in the Plan will not create a right to employment or be interpreted as forming or amending an employment or service contract with the Company or the Employer, and will not interfere with the ability of the Company or the Employer, as applicable, to terminate Optionee’s employment or service relationship (if any);
(f) the Option and the Shares subject to the Option, and the income and value of same, are not intended to replace any pension rights or compensation;
(g) the Option and the Shares subject to the Option, and the income and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement, or welfare benefits or similar payments;
(h) unless otherwise agreed with the Company, the Option, and the Shares subject to the Option, and the income and value of same, are not granted as consideration for, or in connection with, the service Optionee may provide as a director of a Parent, Subsidiary, or Affiliate;
(i) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty; if the underlying Shares do not increase in value, the Option will have no value; if Optionee exercises the Option and acquires Shares, the value of such Shares may increase or decrease, even below the Exercise Price;
(j) no claim or entitlement to compensation or damages will arise from forfeiture of the Option resulting from Optionee’s termination of Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Optionee is employed or the terms of Optionee’s employment agreement, if any), and in consideration of the grant of the Option to which Optionee is otherwise not entitled, Optionee irrevocably agrees never to institute any claim against the Employer, the Company, and any Parent, Subsidiary, or Affiliate; waives his or her ability, if any, to bring any such claim; and releases the Employer, the Company, and any Parent, Subsidiary, or Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Optionee will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(k) unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits evidenced by this Option Agreement do not create any entitlement to have the
Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares; and
(l) neither the Employer, the Company, or any Parent, Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Optionee’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Optionee pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
(m) the following provisions apply only if Optionee is providing services outside the United States:
(i) the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose; and
(ii) Optionee acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Optionee’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Optionee pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercised
10. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Optionee’s participation in the Plan or Optionee’s acquisition or sale of the underlying Shares. Optionee acknowledges, understands, and agrees that he or she should consult with his or her own personal tax, legal, and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
11. Data Privacy. Optionee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Optionee’s personal data as described in this Option Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and any Parent, Subsidiary or Affiliate for the exclusive purpose of implementing, administering and managing Optionee’s participation in the Plan.
Optionee understands that the Company and the Employer may hold certain personal information about Optionee, including, but not limited to, Optionee’s name, home address, email address and telephone number, date of birth, social insurance number, passport number or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Optionee’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Optionee understands that Data will be transferred to the Company’s broker, or other third party (“Online Administrator”) and its affiliated companies or such other stock plan service provider as may be designated by the Company from time to time that is assisting the Company with the implementation, administration and management of the Plan. Optionee understands that the recipients of Data may be located in the United States or elsewhere, and that the recipients’ country may have different data privacy laws and protections than Optionee’s country. Optionee understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of Data by contacting his or her local human resources representative. Optionee authorizes the Company, the Company’s broker, or such other stock plan service provider as may be designated by the Company from time to time, and any other possible recipients that may assist the
Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Optionee understands that Data will be held only as long as is necessary to implement, administer and manage Optionee’s participation in the Plan. Optionee understands if he or she resides outside the United States, he or she may, at any time, view Data, request information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting his or her local human resources representative. Further, Optionee understands that he or she is providing the consents herein on a purely voluntary basis. If Optionee does not consent, or if Optionee later seeks to revoke his or her consent, his or her employment status or service with the Employer will not be affected; the only consequence of refusing or withdrawing Optionee’s consent is that the Company would not be able to grant Options or other equity awards to Optionee or administer or maintain such awards. Therefore, Optionee understands that refusing or withdrawing his or her consent may affect Optionee’s ability to participate in the Plan. For more information on the consequences of Optionee’s refusal to consent or withdrawal of consent, Optionee understands that he or she may contact his or her local human resources representative.
Finally, upon request of the Company or the Employer, Optionee agrees to provide an executed data privacy consent form (or any other agreements or consents) that the Company or the Employer may deem necessary to obtain from Optionee for the purpose of administering Optionee’s participation in the Plan in compliance with the data privacy laws in Optionee’s country, either now or in the future. Optionee understands and agrees that Optionee will not be able to participate in the Plan if Optionee fails to provide any such consent or agreement requested by the Company and/or the Employer.
12. Language. Optionee acknowledges that he or she is sufficiently proficient in English to understand the terms and conditions of this Option Agreement. Furthermore, if Optionee has received this Option Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
13. Appendix. Notwithstanding any provisions in this Option Agreement, the Option will be subject to any special terms and conditions set forth in any appendix to this Option Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Option Agreement.
14. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Optionee’s participation in the Plan, on the Option, and on any Shares purchased upon exercise of the Option, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Optionee to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
15. Acknowledgement. The Company and Optionee agree that the Option is granted under and governed by the Notice, this Option Agreement and the Plan (incorporated herein by reference). Optionee: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Optionee has carefully read and is familiar with their provisions, and (c) hereby accepts the Option subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
16. Entire Agreement; Enforcement of Rights. This Option Agreement, the Plan, and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter
herein and supersede all prior discussions between them. Any prior agreements, commitments, or negotiations concerning the purchase of the Shares hereunder are superseded. No adverse modification of, or adverse amendment to, this Option Agreement, nor any waiver of any rights under this Option Agreement, will be effective unless in writing and signed by the parties to this Option Agreement (which writing and signing may be electronic). The failure by either party to enforce any rights under this Option Agreement will not be construed as a waiver of any rights of such party.
17. Compliance with Laws and Regulations. The issuance of Shares and the sale of Shares will be subject to and conditioned upon compliance by the Company and Optionee with all applicable state, federal, local and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Shares may be listed or quoted at the time of such issuance or transfer. Optionee understands that the Company is under no obligation to register or qualify the Common Stock with any state, federal, or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, Optionee agrees that the Company will have unilateral authority to amend the Plan and this Option Agreement without Optionee’s consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Option Agreement will be endorsed with appropriate legends, if any, determined by the Company.
18. Severability. If one or more provisions of this Option Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Option Agreement, (b) the balance of this Option Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Option Agreement will be enforceable in accordance with its terms.
19. Governing Law and Venue. This Option Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to such state’s conflict of laws rules.
Any and all disputes relating to, concerning or arising from this Option Agreement, or relating to, concerning or arising from the relationship between the parties evidenced by the Plan or this Option Agreement, will be brought and heard exclusively in the United States District Court for the District of Northern California or the San Francisco Superior Court. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning, or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning, or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
20. No Rights as Employee, Director or Consultant. Nothing in this Option Agreement will affect in any manner whatsoever any right or power of the Employer or the Company to terminate Optionee’s Service, for any reason, with or without Cause.
21. Consent to Electronic Delivery of All Plan Documents and Disclosures. By Optionee’s acceptance of the Notice (whether in writing or electronically), Optionee and the Company agree that the Option is granted under and governed by the terms and conditions of the Plan, the Notice, and this Option Agreement. Optionee has reviewed the Plan, the Notice, and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Notice and
Agreement, and fully understands all provisions of the Plan, the Notice, and this Option Agreement. Optionee hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice, and this Option Agreement. Optionee further agrees to notify the Company upon any change in Optionee’s residence address. By acceptance of the Option, Optionee agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Option Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements), or other communications or information related to the Option and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail, or such other delivery determined at the Company’s discretion. Optionee acknowledges that Optionee may receive from the Company a paper copy of any documents delivered electronically at no cost if Optionee contacts the Company by telephone, through a postal service, or electronic mail to Stock Administration. Optionee further acknowledges that Optionee will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Optionee understands that Optionee must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Optionee understands that Optionee’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Optionee has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service, or electronic mail to Stock Administration. Finally, Optionee understands that Optionee is not required to consent to electronic delivery if local laws prohibit such consent.
22. Insider Trading Restrictions/Market Abuse Laws. Optionee acknowledges that, depending on Optionee’s country, the broker’s country, or the country in which the Shares are listed, Optionee may be subject to insider trading restrictions and/or market abuse laws, which may affect Optionee’s ability to, directly or indirectly, acquire or sell the Shares or rights to Shares under the Plan during such times as Optionee is considered to have “inside information” regarding the Company (as defined by the laws or regulations in the applicable jurisdiction). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders Optionee placed before possessing the inside information. Furthermore, Optionee may be prohibited from (i) disclosing the inside information to any third party, including fellow employees (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them to otherwise buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Optionee acknowledges that it is Optionee’s responsibility to comply with any applicable restrictions and understands that Optionee should consult his or her personal legal advisor on such matters. In addition, Optionee acknowledges that he or she has read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Optionee acquires or disposes of the Company’s securities.
23. Foreign Asset/Account, Exchange Control and Tax Reporting. Optionee may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the acquisition, holding and/or transfer of Shares or cash resulting from his or her participation in the Plan. Optionee may be required to report such accounts, assets, the balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in Optionee’s country and/or repatriate funds received in connection with the Plan within certain time limits or according to specified procedures. Optionee acknowledges that he or she is responsible for ensuring compliance with any applicable foreign
asset/account, exchange control and tax reporting requirements and should consult his or her personal legal and tax advisors on such matters.
24. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the Option will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Optionee’s employment or other Service that is applicable to Optionee. In addition to any other remedies available under such policy and applicable law, the Company may require the cancellation of Optionee’s Option (whether vested or unvested) and the recoupment of any gains realized with respect to Optionee’s Option.
25. Lock-Up Agreement. In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing any underwritten offering of the Company’s securities, Optionee hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however and whenever acquired (other than those included in the registration), except pursuant to a transfer for no consideration in accordance with Section 6 above, without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the public offering; provided however that, if during the last seventeen (17) days of the restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs, or prior to the expiration of the restricted period the Company announces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the restricted period, then, upon the request of the managing underwriter, to the extent required by any Financial Industry Regulatory Authority rules, the restrictions imposed by this Section shall continue to apply until the end of the third trading day following the expiration of the fifteen (15)-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In no event will the restricted period extend beyond two hundred sixteen (216) days after the effective date of the registration statement.
BY ACCEPTING THIS OPTION, OPTIONEE AGREES TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
APPENDIX
SENTINELONE, INC,
2021 EQUITY INCENTIVE PLAN
GLOBAL STOCK OPTION AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
Terms and Conditions
At such time as the Committee issues an Option under the Plan to an Optionee who resides and/or works outside of the United States, the Committee may adopt and include in this Appendix additional terms and conditions that govern such Option. This Appendix forms part of the Option Agreement. Any capitalized term used in this Appendix without definition will have the meaning ascribed to it in the Notice, the Option Agreement or the Plan, as applicable.
If Optionee is a citizen or resident of a country, or is considered resident of a country, other than the one in which Optionee is currently working, or Optionee transfers employment and/or residency between countries after the Date of Grant, the Company will, in its sole discretion, determine to what extent the additional terms and conditions included herein will apply to Optionee under these circumstances.
Notifications
This Appendix also includes information relating to exchange control, securities laws, foreign asset/account reporting and other issues of which Optionee should be aware with respect to Optionee’s participation in the Plan. The information is based on the securities, exchange control, foreign asset/account reporting and other laws in effect in the respective countries as of [▪]. Such laws are complex and change frequently. As a result, Optionee should not rely on the information herein as the only source of information relating to the consequences of Optionee’s participation in the Plan because the information may be out of date at the time that Optionee exercises the Option, sells Shares acquired under the Plan or takes any other action in connection with the Plan.
In addition, the information is general in nature and may not apply to Optionee’s particular situation, and the Company is not in a position to assure Optionee of any particular result. Accordingly, Optionee should seek appropriate professional advice as to how the relevant laws in Optionee’s country may apply to Optionee’s situation.
Finally, if Optionee is a citizen or resident of a country, or is considered resident of a country, other than the one in which Optionee is currently working and/or residing, or Optionee transfers employment and/or residency after the Date of Grant, the information contained herein may not apply to Optionee in the same manner.
Country-Specific Terms
[To be provided by international counsel]
ANNEX B
GLOBAL NOTICE OF RESTRICTED STOCK UNIT AWARD
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
GLOBAL NOTICE OF RESTRICTED STOCK UNIT AWARD
You (the “Participant”) have been granted an award of Restricted Stock Units (“RSUs”) under the SentinelOne, Inc. (the “Company”) 2021 Equity Incentive Plan (the “Plan”) subject to the terms and conditions of the Plan, this Global Notice of Restricted Stock Unit Award (this “Notice”), and the attached Global Restricted Stock Unit Award Agreement (the “Agreement”), including any applicable country-specific provisions in the appendix attached hereto (the “Appendix”), which constitutes part of the Agreement.
Unless otherwise defined herein, the terms defined in the Plan will have the same meanings in this Notice and the electronic representation of this Notice established and maintained by the Company or a third party designated by the Company.
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Name:
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Address:
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Grant Number:
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Number of RSUs:
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Date of Grant:
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Vesting Commencement Date:
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Expiration Date:
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The earlier to occur of: (a) the date on which settlement of all RSUs granted hereunder occurs, and (b) the tenth anniversary of the Date of Grant. This RSU expires earlier if Participant’s Service terminates earlier, as described in the Agreement.
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Vesting Schedule:
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Subject to the limitations set forth in this Notice, the Plan, and the Agreement, the RSUs will vest in accordance with the following schedule: [insert applicable vesting schedule]
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By accepting (whether in writing, electronically or otherwise) the RSUs, Participant acknowledges and agrees to the following:
1) Participant understands that Participant’s Service is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), except where otherwise prohibited by applicable law, and that nothing in this Notice, the Agreement, or the Plan changes the nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice is subject to Participant’s continuing Service. To the extent permitted by applicable law, Participant agrees and acknowledges that the Vesting Schedule may change prospectively in the event that Participant’s Service status changes between full- and part-time and/or in the event
the Participant is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee.
2) This grant is made under and governed by the Plan, the Agreement, and this Notice, and this Notice is subject to the terms and conditions of the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read the Notice, the Agreement, and the Plan.
3) Participant has read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Company’s securities.
4) By accepting the RSUs, Participant consents to electronic delivery and participation as set forth in the Agreement.
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PARTICIPANT SENTINELONE, INC.
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Signature:
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By:
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Print Name:
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Its:
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SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
GLOBAL RESTRICTED STOCK UNIT AWARD AGREEMENT
Unless otherwise defined in this Global Restricted Stock Unit Award Agreement (this “Agreement”), any capitalized terms used herein will have the same meaning ascribed to them in the SentinelOne, Inc. 2021 Equity Incentive Plan (the “Plan”).
Participant has been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions, and conditions of the Plan, the Notice of Restricted Stock Unit Award (the “Notice”), and this Agreement, including any applicable country-specific provisions in the appendix attached hereto (the “Appendix”), which constitutes part of this Agreement. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Notice or this Agreement, the terms and conditions of the Plan will prevail.
1. Settlement. Settlement of RSUs shall be made in the same calendar year as the applicable date of vesting under the vesting schedule set forth in the Notice; provided, however, that if a vesting date under the vesting schedule set forth in the Notice occurs in December, then settlement of any RSUs that vest in December shall be made within 30 days of vesting. Settlement of RSUs shall be in Shares. Settlement means the delivery to Participant of the Shares vested under the RSUs. No fractional RSUs or rights for fractional Shares will be created pursuant to this Agreement.
2. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant will have no ownership of the Shares allocated to the RSUs and will have no rights to dividends or to vote such Shares.
3. Dividend Equivalents. Dividend equivalents, if any (whether in cash or Shares), will not be credited to Participant, except as permitted by the Committee.
4. Non-Transferability of RSUs. The RSUs and any interest therein will not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the Committee on a case-by-case basis.
5. Termination; Leave of Absence; Change in Status. If Participant’s Service terminates for any reason, all unvested RSUs will be forfeited to the Company immediately, and all rights of Participant to such RSUs automatically terminate without payment of any consideration to Participant. Participant’s Service will be considered terminated as of the date Participant is no longer providing services (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any) and will not, subject to the laws applicable to Participant’s Award, be extended by any notice period mandated under local laws (e.g., Service would not include a period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any). Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event Participant’s service status changes between full- and part-time status and/or in the event Participant is on an approved leave of absence in accordance the Company’s policies relating to work schedules and vesting of awards or as determined by the Committee. Participant acknowledges that the vesting of the Shares pursuant to this Notice and Agreement is subject to Participant’s continued Service. In case of any dispute as to whether termination of Service has occurred, the Committee will have sole discretion to determine whether such
termination of Service has occurred and the effective date of such termination (including whether Participant may still be considered to be providing services while on an approved leave of absence).
6. Taxes.
(a) Responsibility for Taxes. Participant acknowledges that, to the extent permitted by applicable law, regardless of any action taken by the Company or, if different, a Parent, Subsidiary or Affiliate employing or retaining Participant (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”) is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer, if any. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant, vesting or settlement of the RSUs and the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. PARTICIPANT SHOULD CONSULT A TAX ADVISER APPROPRIATELY QUALIFIED IN THE COUNTRY OR COUNTRIES IN WHICH PARTICIPANT RESIDES OR IS SUBJECT TO TAXATION.
(b) Withholding. Prior to any relevant taxable or tax withholding event, to the extent permitted by applicable law and as applicable, Participant agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any withholding obligations for Tax-Related Items by one or a combination of the following:
(i) withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or
(ii) withholding from proceeds of the sale of Shares acquired upon settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization and without further consent);
(iii) withholding Shares to be issued upon settlement of the RSUs, provided the Company only withholds the number of Shares necessary to satisfy no more than the maximum applicable statutory withholding amounts;
(iv) Participant’s payment of a cash amount (including by check representing readily available funds or a wire transfer); or
(v) any other arrangement approved by the Committee and permitted under applicable law;
all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale (unless the Committee (as constituted in accordance with Rule
16b-3 under the Exchange Act) shall establish an alternate method prior to the taxable or withholding event).
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory rate for Participant’s tax jurisdiction(s) in which case Participant will have no entitlement to the equivalent amount in Shares and will receive a refund of any over-withheld amount in cash in accordance with applicable law. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the withholding obligation for Tax-Related Items.
Finally, Participant agrees to pay to the Company and/or the Employer any amount of Tax-Related Items that the Company and/or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company has no obligation to deliver Shares or proceeds from the sale of Shares to Participant until Participant has satisfied the obligations in connection with the Tax-Related Items as described in this Section.
7. Nature of Grant. By accepting the RSUs, Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the RSUs is exceptional, voluntary, and occasional, and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;
(c) all decisions with respect to future RSUs or other grants, if any, will be at the sole discretion of the Company;
(d) Participant is voluntarily participating in the Plan;
(e) the RSUs and Participant’s participation in the Plan will not create a right to employment or be interpreted as forming or amending an employment or service contract with the Company or the Employer and will not interfere with the ability of the Company or the Employer, as applicable, to terminate Participant’s employment or service relationship (if any);
(f) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not intended to replace any pension rights or compensation;
(g) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement, or welfare benefits or similar payments;
(h) unless otherwise agreed with the Company, the RSUs, and the Shares subject to the RSUs, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Parent, Subsidiary, or Affiliate;
(i) the future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty;
(j) no claim or entitlement to compensation or damages will arise from forfeiture of the RSUs resulting from Participant’s termination of Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), and in consideration of the grant of the RSUs to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Employer, the Company, and any Parent, Subsidiary or Affiliate; waives his or her ability, if any, to bring any such claim; and releases the Employer, the Company, and any Parent, Subsidiary, or Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(k) unless otherwise provided in the Plan or by the Company in its discretion, the RSUs and the benefits evidenced by this Agreement do not create any entitlement to have the RSUs or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares; and
(l) the following provisions apply only if Participant is providing services outside the United States:
(i) the RSUs and the Shares subject to the RSUs are not part of normal or expected compensation or salary for any purpose;
(ii) Participant acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement.
8. No Advice Regarding Grant. The Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant acknowledges, understands and agrees he or she should consult with his or her own personal tax, legal, and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
9. Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other RSU grant materials by and among, as applicable, the Employer, the Company and any Parent, Subsidiary or Affiliate for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address, email address and telephone number, date of birth, social insurance number, passport number or other identification number (e.g., resident registration number), salary, nationality, job title, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to the Company’s broker, or other third party (“Online Administrator”) and its affiliated companies or such other stock plan service provider as may be designated by the Company from time to time that is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of Data may be located in the United States or elsewhere, and that the recipients’ country may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of Data by contacting his or her local human resources representative. Participant authorizes the Company, the Company’s broker, or such other stock plan service provider as may be designated by the Company from time to time, and any other possible recipients that may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands if he or she resides outside the United States, he or she may, at any time, view Data, request information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service with the Employer will not be affected; the only consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant RSUs or other equity awards to Participant or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
Finally, upon request of the Company or the Employer, Participant agrees to provide an executed data privacy consent form (or any other agreements or consents) that the Company or the Employer may deem necessary to obtain from Participant for the purpose of administering Participant’s participation in the Plan in compliance with the data privacy laws in Participant’s country, either now or in the future. Participant understands and agrees that Participant will not be able to participate in the Plan if Participant fails to provide any such consent or agreement requested by the Company and/or the Employer.
10. Language. Participant acknowledges that he or she is sufficiently proficient in English to understand the terms and conditions of this Agreement. Furthermore, if Participant has received this Agreement or any other document related to the RSU and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
11. Appendix. Notwithstanding any provisions in this Agreement, the RSUs will be subject to any special terms and conditions set forth in any appendix to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
12. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
13. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by the Notice, this Agreement, and the Plan (incorporated herein by reference). Participant: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Participant has carefully read and is familiar with their provisions, and (c) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
14. Entire Agreement; Enforcement of Rights. This Agreement, the Plan, and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments, or negotiations concerning the purchase of the Shares hereunder are superseded. No adverse modification of or adverse amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the parties to this Agreement (which writing and signing may be electronic). The failure by either party to enforce any rights under this Agreement will not be construed as a waiver of any rights of such party.
15. Compliance with Laws and Regulations. The issuance of Shares and the sale of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state, federal, local and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Shares may be listed or quoted at the time of such issuance or transfer. Participant understands that the Company is under no obligation to register or qualify the Common Stock with any state, federal, or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, Participant agrees that the Company will have unilateral authority to amend the Plan and this RSU Agreement without Participant’s consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this RSU Agreement will be endorsed with appropriate legends, if any, determined by the Company.
16. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Agreement, (b) the balance of this Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Agreement will be enforceable in accordance with its terms.
17. Governing Law and Venue. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed, and interpreted in accordance with the laws of the State of Delaware, without giving effect to such state’s conflict of laws rules.
Any and all disputes relating to, concerning or arising from this Option Agreement, or relating to, concerning or arising from the relationship between the parties evidenced by the Plan or this Option Agreement, will be brought and heard exclusively in the United States District Court for the District of Northern California or the San Francisco Superior Court. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning, or arising
from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning, or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
18. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall create a right to employment or other Service or be interpreted as forming or amending an employment, service contract or relationship with the Company and this Agreement shall not affect in any manner whatsoever any right or power of the Company, or a Parent, Subsidiary or Affiliate, to terminate Participant’s Service, for any reason, with or without Cause.
19. Consent to Electronic Delivery of All Plan Documents and Disclosures. By Participant’s acceptance of the Notice (whether in writing or electronically), Participant and the Company agree that the RSUs are granted under and governed by the terms and conditions of the Plan, the Notice, and this Agreement. Participant has reviewed the Plan, the Notice, and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and Agreement, and fully understands all provisions of the Plan, the Notice, and this Agreement. Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice, and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address. By acceptance of the RSUs, Participant agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements), or other communications or information related to the RSUs and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail, or such other delivery determined at the Company’s discretion. Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company by telephone, through a postal service, or electronic mail to Stock Administration. Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Participant understands that Participant’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service, or electronic mail to Stock Administration. Finally, Participant understands that Participant is not required to consent to electronic delivery if local laws prohibit such consent.
20. Insider Trading Restrictions/Market Abuse Laws. Participant acknowledges that, depending on Participant’s country of residence, the broker’s country, or the country in which the Shares are listed, Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect Participant’s ability to, directly or indirectly, acquire or sell the Shares or rights to Shares under the Plan during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in or regulations in the applicable jurisdiction). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders Participant placed before possessing the inside information. Furthermore, Participant may be prohibited from (i) disclosing the inside information to any third party, including fellow employees (other than on a “need to know” basis) and
(ii) “tipping” third parties or causing them to otherwise buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is Participant’s responsibility to comply with any applicable restrictions and understands that Participant should consult his or her personal legal advisor on such matters. In addition, Participant acknowledges that he or she read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Company’s securities.
21. Foreign Asset/Account, Exchange Control and Tax Reporting. Participant may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the acquisition, holding and/or transfer of Shares or cash resulting from his or her participation in the Plan. Participant may be required to report such accounts, assets, the balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in Participant’s country and/or repatriate funds received in connection with the Plan within certain time limits or according to specified procedures. Participant acknowledges that he or she is responsible for ensuring compliance with any applicable foreign asset/account, exchange control and tax reporting requirements and should consult his or her personal legal and tax advisors on such matters.
22. Code Section 409A. For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Internal Revenue Code and the regulations thereunder (“Section 409A”). Notwithstanding anything else provided herein, to the extent any payments provided under this RSU Agreement in connection with Participant’s termination of employment constitute deferred compensation subject to Section 409A, and Participant is deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment will not be made or commence until the earlier of (a) the expiration of the six (6) month period measured from Participant’s separation from service to the Employer or the Company, or (b) the date of Participant’s death following such a separation from service; provided, however, that such deferral will only be effected to the extent required to avoid adverse tax treatment to Participant including, without limitation, the additional tax for which Participant would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. To the extent any payment under this RSU Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment will be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
23. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the RSUs will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other Service that is applicable to Participant. In addition to any other remedies available under such policy and applicable law, the Company may require the cancellation of Participant’s RSUs (whether vested or unvested) and the recoupment of any gains realized with respect to Participant’s RSUs.
24. Lock-Up Agreement. In connection with the initial public offering of the Company’s securities and upon request of the Company or the underwriters managing any underwritten offering of the Company’s securities, Participant hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however and whenever acquired (other than those included in the registration), except pursuant to a transfer for no consideration in accordance with Section 4 above, without the prior written consent of the Company or
such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the public offering; provided however that, if during the last seventeen (17) days of the restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs, or prior to the expiration of the restricted period the Company announces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the restricted period, then, upon the request of the managing underwriter, to the extent required by any Financial Industry Regulatory Authority rules, the restrictions imposed by this Section shall continue to apply until the end of the third trading day following the expiration of the fifteen (15)-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In no event will the restricted period extend beyond two hundred sixteen (216) days after the effective date of the registration statement.
BY ACCEPTING THIS AWARD OF RSUS, PARTICIPANT AGREES TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
APPENDIX
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
GLOBAL RESTRICTED STOCK UNIT AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
Terms and Conditions
At such time as the Committee issues an RSU under the Plan to a Participant who resides and/or works outside of the United States, the Committee may adopt and include in this Appendix additional terms and conditions that govern such RSU. This Appendix forms part of the Agreement. Any capitalized term used in this Appendix without definition will have the meaning ascribed to it in the Notice, the Agreement or the Plan, as applicable.
If Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working, or Participant transfers employment and/or residency between countries after the Date of Grant, the Company will, in its sole discretion, determine to what extent the additional terms and conditions included herein will apply to Participant under these circumstances.
Notifications
This Appendix also includes information relating to exchange control, securities laws, foreign asset/account reporting and other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control, foreign asset/account reporting and other laws in effect in the respective countries as of [▪]. Such laws are complex and change frequently. As a result, Participant should not rely on the information herein as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time that Participant vests in the RSUs, sells Shares acquired under the Plan or takes any other action in connection with the Plan.
In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant should seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working and/or residing, or Participant transfers employment and/or residency after the Date of Grant, the information contained herein may not apply to Participant in the same manner.
Country-Specific Terms
[to come]
ANNEX C
NOTICE OF STOCK APPRECIATION RIGHT AWARD
NOTICE OF STOCK APPRECIATION RIGHT AWARD
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the SentinelOne, Inc. (the “Company”) 2021 Equity Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Stock Appreciation Right Award (the “Notice of Grant”) and the attached Stock Appreciation Right Agreement (the “SAR Agreement”).
You have been granted an award of Stock Appreciation Rights (the “SAR”) of the Company under the Plan subject to the terms and conditions of the Plan, this Notice of Grant and the SAR Agreement.
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Name:
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Address:
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Date of Grant:
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Vesting Commencement Date:
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Exercise Price:
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Total Number of Shares:
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Expiration Date:
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Vesting Schedule:
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[Sample vesting language:] [The SAR becomes vested and exercisable with respect to the first 25% of the Shares subject to the SAR when you complete 12 months of continuous Service from the Vesting Commencement Date. Thereafter, the SAR becomes vested and exercisable with respect to an additional 1/16th of the Shares subject to the SAR when you complete each quarter of Service.] [Note: actual vesting language to match vesting schedule approved by the Board or Committee]
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This Notice of Grant may be executed and delivered electronically, whether via the Company’s intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By accepting the SAR, you consent to the electronic delivery and acceptance as further set forth in the SAR Agreement. You acknowledge that the vesting of the SAR pursuant to this Notice of Grant is earned only by continuing Service, but you understand that your employment or consulting relationship with the Company or a Parent or Subsidiary is for an unspecified duration and can be terminated at any time and that nothing in this Notice of Grant, the SAR Agreement or the Plan changes the nature of that relationship. By accepting the SAR, you and the Company agree that the SAR is
granted under and governed by the terms and conditions of the Plan, the Notice of Grant and the SAR Agreement.
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PARTICIPANT:
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SENTINELONE, INC.
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Signature:
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By:
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Print Name:
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Its:
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STOCK APPRECIATION RIGHT AWARD AGREEMENT
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
You have been granted an award of Stock Appreciation Rights (the “SAR”) by SentinelOne, Inc. (the “Company”) under the Company’s 2021 Equity Incentive Plan (the “Plan”), subject to the terms and conditions of the Plan, the Notice of Stock Appreciation Right Award (the “Notice of Grant”), and this Stock Appreciation Right Agreement (the “Agreement”).
1. Grant of SAR. You have been granted a SAR for the number of Shares set forth in the Notice of Grant with the Exercise Price set forth in the Notice of Grant. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail.
2. Termination Period.
(a) General Rule. If your Service terminates for any reason except death or Disability, and other than for Cause, then this SAR will expire at the close of business at Company headquarters on the date three months after your termination of Service (subject to the expiration detailed in Section 5 or as provided in the Plan). In no event shall this SAR be exercised later than the Expiration Date set forth in the Notice of Grant. If your Service is terminated for Cause, this SAR will expire upon the date of such termination. The Company determines when your Service terminates for all purposes under this Agreement.
You acknowledge and agree that the vesting schedule set forth in the Notice of Grant may change prospectively in the event that your service status changes between full and part-time status in accordance with Company policies relating to work schedules and vesting of awards. You acknowledge that the vesting of the SARs pursuant to this Agreement is earned only by continuing Service.
(b) Death; Disability. If you die before your Service terminates (or you die within three months of your termination of Service other than for Cause), then this SAR will expire at the close of business at Company headquarters on the date 12 months after the date of death (subject to the expiration detailed in Section 5 or as provided in the Plan). If your Service terminates because of your Disability, then this SAR will expire at the close of business at Company headquarters on the date 12 months after your termination date (subject to the expiration detailed in Section 5 or as provided in the Plan).
(c) No Notice. You are responsible for keeping track of these exercise periods following your termination of Service for any reason. The Company will not provide further notice of such periods. In no event shall this SAR be exercised later than the Expiration Date set forth in the Notice of Grant.
3. Exercise of SAR.
(a) Right to Exercise. Subject to the applicable provisions of the Plan and this Agreement, this SAR is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice of Grant and the applicable provisions of the Plan and this Agreement. In the event of your death, Disability, or other cessation of Service, the exercisability of the SAR is governed by the applicable provisions of the Plan, the Notice of Grant and this Agreement. This SAR may not be exercised for a fraction of a Share.
(b) Method of Exercise. This SAR is exercisable by delivery of an exercise notice in a form specified by the Company (the “Exercise Notice”), which shall state the election to exercise the SAR, the number of Shares in respect of which the SAR is being exercised, and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. This SAR shall be deemed to be exercised upon receipt by the Company of a fully executed Exercise Notice and any applicable withholding of Tax-Related Items that are required to be withheld as detailed in Section 7 below.
(c) No Shares shall be issued pursuant to the exercise of this SAR unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for income tax purposes the exercised Shares shall be considered transferred to you on the date the SAR is exercised with respect to such exercised Shares.
4. Non-Transferability of SAR. This SAR may not be transferred in any manner other than by will or by the laws of descent or distribution or court order and may be exercised during your lifetime only by you unless otherwise permitted by the Committee on a case-by-case basis. The terms of the Plan and this Agreement shall be binding upon your executors, administrators, heirs, successors and assigns.
5. Term of SAR. This SAR shall in any event expire on the Expiration Date set forth in the Notice of Grant, which date is ten years after the Date of Grant. You are responsible for keeping track of the Expiration Date. The Company is not obligated to provide notice of the Expiration Date and you should not depend on the Company providing any such notice (even if such notices have been provided in the past or are provided in some but not all circumstances).
6. Tax Consequences. You should consult a tax adviser for tax consequences relating to this SAR in the jurisdiction in which you are subject to tax. YOU SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS SAR OR DISPOSING OF THE SHARES. You will not be allowed to exercise this SAR unless you make arrangements acceptable to the Company to pay Tax-Related Items that are required to be withheld as further described in Section 7 below.
7. Responsibility for Taxes. Regardless of any action the Company or, if different, your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer. You further acknowledge that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this SAR, including the grant, vesting or exercise of this SAR, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the SAR to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to any relevant taxable or tax withholding event, as applicable, you shall pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy any withholding obligation the Company and/or the Employer may have for Tax-Related Items. In this regard, you
authorize the Company and/or the Employer, and their respective agents, at their discretion, to withhold all applicable Tax-Related Items from your wages or other cash compensation paid to you by the Company and/or the Employer or by one or a combination of the following methods: (a) payment by you to the Company or the Employer of an amount equal to the Tax-Related Items in cash, (b) having the Company withhold otherwise deliverable cash or Shares having a value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned Shares having a value equal to the Tax-Related Items to be withheld, (d) withholding from proceeds of the sale of the Shares either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sale pursuant to this authorization), or (e) any other arrangement approved by the Company and permissible under applicable law; in all cases, under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided, however, that if you are a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale under (d) above (unless the Committee shall establish an alternate method prior to the taxable or withholding event). You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or your issuance of Shares upon exercise of the SARs that cannot be satisfied by the means previously described.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent in Shares. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested SARs, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.
Finally, you acknowledge that the Company has no obligation to deliver Shares or proceeds from the sale of Shares to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
8. Acknowledgement. The Company and you agree that the SAR is granted under and governed by the Notice of Grant, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions and the provisions of the Notice of Grant and this Agreement, and (iii) hereby accept the SAR subject to all of the terms and conditions set forth in this SAR Agreement and those set forth in the Plan and the Notice of Grant. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice of Grant and the SAR Agreement.
9. Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice of Grant constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning this SAR are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
10. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation
system on which the Company’s common stock may be listed or quoted at the time of such issuance or transfer. The Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.
11. Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice of Grant and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in San Francisco County, California or the federal courts of the United States for the Northern District of California and no other courts.
12. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.
13. Consent to Electronic Delivery and Acceptance of All Plan Documents and Disclosures. By your acceptance of this SAR, you consent to the electronic delivery of the Notice of Grant, this Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the SAR. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.
14. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the SAR shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies
available under such policy, applicable law may require the cancellation of your SAR (whether vested or unvested) and the recoupment of any gains realized with respect to your SAR.
BY ACCEPTING THIS SAR, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
ANNEX D
NOTICE OF PERFORMANCE SHARES AWARD
NOTICE OF PERFORMANCE SHARES AWARD
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the SentinelOne, Inc. (the “Company”) 2021 Equity Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Performance Shares Award (the “Notice”) and the attached Performance Shares Award Agreement (the “Performance Shares Agreement”). You have been granted an award of Shares (the “Performance Shares Award”) under the Plan subject to the terms and conditions of the Plan, this Notice and the attached Performance Shares Agreement.
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Name:
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Address:
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Number of Shares:
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Date of Grant:
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Fair Market Value on Date of Grant:
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Vesting Commencement Date:
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Vesting Schedule:
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Subject to the limitations set forth in this Notice, the Plan and the Performance Shares Agreement, the Shares will vest in accordance with the following schedule: [INSERT VESTING SCHEDULE]
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This Notice may be executed and delivered electronically, whether via the Company’s intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By accepting the Performance Shares Award, you consent to the electronic delivery and acceptance as further set forth in the Performance Shares Agreement. You acknowledge that the vesting of the Shares subject to the Performance Shares Award pursuant to this Notice is earned only by continuing Service and meeting the performance factors enumerated under the Vesting Schedule above, but you understand that your employment or consulting relationship with the Company or a Parent or Subsidiary is for an unspecified duration and can be terminated at any time, and that nothing in this Notice, the Performance Shares Agreement or the Plan changes the nature of that relationship. By accepting the Performance Shares Award, you and the Company agree that the Performance Shares Award is granted under and governed by the terms and conditions of the Plan, the Notice and the Performance Shares Agreement
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PARTICIPANT
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SENTINELONE, INC.
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Print Name:
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By:
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Signature:
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Its:
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PERFORMANCE SHARES AGREEMENT
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
You have been granted a Performance Shares Award (“Performance Shares Award”) by SentinelOne, Inc. (the “Company”), subject to the terms, restrictions and conditions of the Company’s 2021 Equity Incentive Plan (the “Plan”), the Notice of Performance Shares Award (“Notice”) and this Performance Shares Agreement (this “Agreement”).
1. Settlement. Your Performance Shares Award shall be settled in Shares and the Company’s transfer agent shall record ownership of such Shares in your name as soon as reasonably practicable after achievement of the performance factors enumerated under the Vesting Schedule in the Notice.
2. No Stockholder Rights. Unless and until you are recorded as the holder of such Shares on the stock records of the Company and its transfer agent, you shall have no right to dividends or to vote Shares.
3. No-Transfer. Your interest in this Performance Shares Award shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of by you or any person whose interest derives from your interest.
4. Restrictions on Resale. By signing this Agreement, you agree not to sell any Shares acquired pursuant to the Plan and this Agreement at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. This restriction will apply as long as you are providing Service to the Company or a Subsidiary of the Company.
5. Termination. If your Service terminates for any reason, all of your rights under the Plan, this Agreement and the Notice in respect of this Award shall immediately terminate. In case of any dispute as to whether a termination of Service has occurred, the Committee shall have sole discretion to determine whether such termination has occurred and the effective date of such termination.
6. Tax Consequences. YOU SHOULD CONSULT A TAX ADVISER BEFORE ACQUIRING THE SHARES IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX. Shares shall not be issued under this Agreement unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the acquisition or vesting of Shares.
7. Responsibility for Taxes. Regardless of any action the Company or, if different, your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer. You further acknowledge that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance Shares Award, including the grant of the Performance Shares Award, the issuance of the Shares subject to the Performance Shares Award, the vesting of such Shares, the subsequent sale of such Shares and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the Performance Shares Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
The Company will only recognize you as a record holder of Shares subject to the Performance Shares Award if you have paid or made, prior to any relevant taxable or tax withholding event, as applicable, adequate arrangements satisfactory to the Company and/or the Employer to satisfy any withholding obligation the Company and/or the Employer may have for Tax-Related Items. In this regard, you authorize the Company and/or the Employer, and their respective agents, at their discretion, to withhold all applicable Tax-Related Items from your wages or other cash compensation paid to you by the Company and/or the Employer or by withholding from proceeds of the sale of the Shares subject to the Performance Shares Award either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sale pursuant to this authorization). The Committee may also authorize one or a combination of the following methods to satisfy Tax-Related Items: (a) payment by you to the Company or the Employer of an amount equal to the Tax-Related Items in cash, (b) having the Company withhold Shares subject to the Performance Shares Award that would otherwise be issued to you when they vest having a value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned Shares having a value equal to the Tax-Related Items to be withheld, or (d) any other arrangement approved by the Company and permissible under applicable law; in all cases, under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided, however, that if you are a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale (unless the Committee shall establish an alternate method prior to the taxable or withholding event). You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or the issuance of Shares subject to this Performance Shares Award or vesting thereof that cannot be satisfied by the means previously described.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Shares subject to the Performance Shares Award that would otherwise be released when they vest. If the obligation for Tax-Related Items is satisfied by withholding in Shares that would otherwise be subject to release when they vest, for tax purposes, you are deemed to have been issued the full number of such Shares, notwithstanding that a number of the such Shares are held back solely for the purpose of paying the Tax-Related Items.
Finally, you acknowledge that the Company has no obligation to deliver Shares subject to the Performance Shares Award to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
8. Acknowledgement. The Company and you agree that the Performance Shares Award is granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions and the provisions of the Notice and this Agreement, and (iii) hereby accept the Performance Shares Award subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and this Agreement.
9. Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to
this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
10. Stop Transfer Orders.
(a) Stop-Transfer Notices. You agree that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(b) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as the owner or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
11. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock may be listed or quoted at the time of such issuance or transfer. The Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.
12. Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in San Francisco County, California or the federal courts of the United States for the Northern District of California and no other courts.
10. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.
11. Consent to Electronic Delivery of All Plan Documents and Disclosures. By acceptance of this Performance Shares Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Performance Shares Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a
postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.
12. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, Performance Shares Award shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Performance Shares Award (whether vested or unvested) and the recoupment of any gains realized with respect to your Performance Shares Award.
BY ACCEPTING THE PERFORMANCE SHARES AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
ANNEX E
NOTICE OF RESTRICTED STOCK AWARD
NOTICE OF RESTRICTED STOCK AWARD
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the SentinelOne, Inc. (the “Company”) 2021 Equity Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Restricted Stock Award (the “Notice”) and the attached Restricted Stock Agreement (the “Restricted Stock Agreement”).
You have been granted the opportunity to purchase Shares that are subject to restrictions (the “Restricted Shares”) and the terms and conditions of the Plan, this Notice and the attached Restricted Stock Agreement.
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Name of Purchaser:
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Total Number of Restricted Shares Awarded:
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Fair Market Value per Restricted Share:
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$
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Total Fair Market Value of Award:
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$
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Purchase Price per Restricted Share:
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$
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Total Purchase Price for all Restricted Shares:
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$
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Date of Grant:
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Vesting Commencement Date:
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Vesting Schedule:
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[Sample vesting language:] [Subject to the limitations set forth in this Notice, the Plan and the Restricted Stock Agreement, 25% of the total number of Restricted Shares will vest when you complete 12 months of continuous Service from the Vesting Commencement Date. Thereafter, an additional 1/16th of the total number of Restricted Shares will vest when you complete each quarter of Service.] [Note: actual vesting language to match vesting schedule approved by the Board or Committee]
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This Notice may be executed and delivered electronically, whether via the Company’s intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By purchasing the Restricted Shares, you consent to the electronic delivery and acceptance as further set forth in the Restricted Stock Agreement. You acknowledge that the vesting of the Restricted Shares pursuant to this Notice is earned only by continuing Service, but you understand that your employment or consulting relationship with the Company or a Parent or Subsidiary is for an unspecified
duration and can be terminated at any time, and that nothing in this Notice, the Restricted Stock Agreement or the Plan changes the nature of that relationship. By accepting the Restricted Shares, you and the Company agree that the Restricted Shares are granted under and governed by the terms and conditions of the Plan, this Notice and the Restricted Stock Agreement. If the Restricted Stock Agreement is not executed by you within thirty (30) days of the Company’s delivery of this Agreement to you, then this award shall be void.
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PARTICIPANT
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SENTINELONE, INC.
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Signature:
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By:
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Date:
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Its:
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RESTRICTED STOCK AGREEMENT
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
THIS RESTRICTED STOCK AGREEMENT (this “Agreement”) is made by and between SentinelOne, Inc., a Delaware corporation (the “Company”), and the purchaser (“you”) named on the Notice of Restricted Stock Award (the “Notice”) pursuant to the Company’s 2021 Equity Incentive Plan (the “Plan”) as of the date you have executed the Notice. Unless otherwise defined herein, the terms defined in the Plan shall have the same meanings in this Agreement.
1. Sale of Stock. Subject to the terms and conditions of this Agreement, on the Purchase Date (as defined below) the Company will issue and sell to you, and you agree to purchase from the Company, the number of Restricted Shares shown on the Notice at the Purchase Price per Restricted Share set forth on the Notice. The term “Restricted Shares” refers to the purchased Restricted Shares and all securities received in replacement of or in connection with the Restricted Shares pursuant to stock dividends or splits, all securities received in replacement of the Restricted Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which you are entitled by reason of your ownership of the Restricted Shares.
2. Time and Place of Purchase. The purchase and sale of the Restricted Shares under this Agreement shall occur at the principal office of the Company simultaneously with the execution of this Agreement by the parties, or on such other date as the Company and you shall agree (the “Purchase Date”). On the Purchase Date, the Company will issue a stock certificate registered in your name, or uncertificated shares designated for you in book entry form on the records of the Company’s transfer agent, representing the Restricted Shares to be purchased by you against payment of the purchase price therefor by you by (a) check or wire transfer made payable to the Company, (b) cancellation of indebtedness of the Company to you, (c) your personal Services that the Committee has determined have already been or will be rendered to the Company, or (d) a combination of the foregoing.
3. Restrictions on Resale. By signing this Agreement, you agree not to sell any Restricted Shares acquired pursuant to the Plan and this Agreement at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. This restriction will apply as long as you are providing Service to the Company or a Subsidiary of the Company.
4. Company’s Repurchase Right for Unvested Shares. The Company, or (subject to Section 4.4) its assignee, shall have the right (but not the obligation) to repurchase a portion of the Restricted Shares that are Unvested Shares (as defined below) at the times and on the terms and conditions set forth in this Section (the “Repurchase Right”) if your Service terminates for any reason, or no reason, including without limitation, death, Disability (as defined in the Plan), voluntary resignation or termination by the Company with or without Cause.
4.1 Termination of Service. In case of any dispute as to whether your Service has terminated, the Committee shall have discretion to determine in good faith whether your Service has been terminated and the effective date of your termination of Service.
4.2 Vested and Unvested Shares. Restricted Shares that are vested pursuant to the Vesting Schedule set forth in the Notice are “Vested Shares.” Restricted Shares that are not vested pursuant to the Vesting Schedule set forth in the Notice are “Unvested Shares.” On the Date of Grant, all of the Restricted Shares will be Unvested Shares. No fractional Restricted Shares shall be issued. No
Restricted Shares will become Vested Shares after your termination of Service unless as set forth in the Vesting Schedule in the Notice of Grant. The number of the Restricted Shares that are Vested Shares or Unvested Shares will be proportionally adjusted to reflect any stock split, reverse stock split or similar change in the capital structure of the Company as set forth in Section 2.6 of the Plan occurring after the Date of Grant.
4.3 Exercise of Repurchase Right. Unless the Company provides written notice to you within 90 days from the date of termination of your Service to the Company that the Company does not intend to exercise its Repurchase Right with respect to some or all of the Unvested Shares, the Repurchase Right shall be deemed automatically exercised by the Company as of the 90th day following such termination, provided that the Company may notify you that it is exercising its Repurchase Right as of a date prior to such 90th day. Unless you are otherwise notified by the Company pursuant to the preceding sentence that the Company does not intend to exercise its Repurchase Right as to some or all of the Unvested Shares, execution of this Agreement by you constitutes written notice to you of the Company’s intention to exercise its Repurchase Right with respect to all Unvested Shares to which such Repurchase Right applies at the time of your termination of Service. The Company, at its choice, may satisfy its payment obligation to you with respect to exercise of the Repurchase Right by either (A) delivering a check to you or wiring funds in the amount of the purchase price for the Unvested Shares being repurchased, or (B) in the event you are indebted to the Company, canceling an amount of such indebtedness equal to the purchase price for the Unvested Shares being repurchased, or (C) by a combination of (A) and (B) so that the combined payment and cancellation of indebtedness equals such purchase price. In the event of any deemed automatic exercise of the Repurchase Right by canceling an amount of such indebtedness equal to the purchase price for the Unvested Shares being repurchased, such cancellation of indebtedness shall be deemed automatically to occur as of the date of termination of your Service unless the Company otherwise satisfies its payment obligations. As a result of any repurchase of Unvested Shares pursuant to the Repurchase Right, the Company shall become the legal and beneficial owner of the Unvested Shares being repurchased and shall have all rights and interest therein or related thereto, and the Company shall have the right to transfer to its own name the number of Unvested Shares being repurchased by the Company, without further action by you.
4.4 Assignment. The Repurchase Right may be assigned by the Company in whole or in part to any persons or organization.
4.5 Additional or Exchanged Securities and Property. Subject to the provisions of Section 4.2 above, in the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed or issued with respect to, any Unvested Shares shall immediately be subject to the Repurchase Right. Appropriate adjustments shall be made to the price per share to be paid for Unvested Shares upon the exercise of the Repurchase Right (by allocating such price among the Unvested Shares and such other securities or property), provided that the aggregate purchase price payable for the Unvested Shares and all such other securities and property shall remain the same price that was original payable under the Repurchase Right to repurchase such Unvested Shares. Subject to the provisions of Section 4.2 above, in the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Repurchase Right may be exercised by the Company’s successor.
5. Non-Transferability of Unvested Shares. In addition to any other limitation on transfer created by applicable securities laws or any other agreement between the Company and you, you may
not transfer any Unvested Shares, or any interest therein, unless consented to in writing by a duly authorized representative of the Company. Any purported transfer is void and of no effect, and no purported transferee thereof will be recognized as a holder of the Unvested Shares for any purpose whatsoever. Should such a transfer purport to occur, the Company may refuse to carry out the transfer on its books, set aside the transfer, or exercise any other legal or equitable remedy. In the event the Company consents to a transfer of Unvested Shares, all transferees of Restricted Shares or any interest therein will receive and hold such Restricted Shares or interest subject to the provisions of this Agreement, including, insofar as applicable, the Repurchase Right. In the event of any purchase by the Company hereunder where the Restricted Shares or interest are held by a transferee, the transferee shall be obligated, if requested by the Company, to transfer the Restricted Shares or interest you for consideration equal to the amount to be paid by the Company hereunder. In the event the Repurchase Right is deemed exercised by the Company, the Company may deem any transferee to have transferred the Restricted Shares or interest to you prior to their purchase by the Company, and payment of the purchase price by the Company to such transferee shall be deemed to satisfy your obligation to pay such transferee for such Restricted Shares or interest, and also to satisfy the Company’s obligation to pay you for such Restricted Shares or interest.
6. Acceptance of Restrictions. Purchase of the Restricted Shares shall constitute your agreement to such restrictions and the legending of your certificates or the notation in the Company’s direct registration system for stock issuance and transfer of such restrictions and accompanying legends set forth in Section 7.1 with respect thereto. Notwithstanding such restrictions, however, so long as you are the holder of the Restricted Shares, or any portion thereof, he or she shall be entitled to receive all dividends declared on and to vote the Restricted Shares and to all other rights of a stockholder with respect thereto.
7. Stop Transfer Orders.
7.1 Stop-Transfer Notices. You agree that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
7.2 Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Restricted Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as the owner or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Restricted Shares shall have been so transferred.
8. No Rights as Employee, Director or Consultant. You understand that your employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), and that nothing in this Agreement changes the at-will nature of that relationship. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.
9. Miscellaneous.
9.1 Acknowledgement. The Company and you agree that the Restricted Shares are granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions and the provisions of the Notice and this Agreement, and (iii) hereby accept the Restricted Shares subject to all of the terms and
conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and the Restricted Stock Agreement.
9.2 Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Restricted Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
9.3 Compliance with Laws and Regulations. The issuance of Restricted Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock may be listed or quoted at the time of such issuance or transfer. The Restricted Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.
9.4 Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in San Francisco County, California or the federal courts of the United States for the Northern District of California and no other courts.
9.5 Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.
9.6 Notices. Any notice to be given under the terms of the Plan shall be addressed to the Company in care of its principal office, and any notice to be given to you shall be addressed to you at the address maintained by the Company for such person or at such other address as you may specify in writing to the Company. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (a) at the time of personal delivery, if delivery is in person; (b) at the time of transmission by facsimile, addressed to the other party at its facsimile number specified herein (or hereafter modified by subsequent notice to the parties hereto), with confirmation of receipt made by both telephone and printed confirmation sheet verifying successful transmission of the facsimile; (c) one (1) business day after deposit with an express overnight courier for United States deliveries, or two (2) business days after such deposit for deliveries outside of
the United States, with proof of delivery from the courier requested; or (d) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries. All notices for delivery outside the United States will be sent by facsimile or by express courier. All notices not delivered personally or by facsimile will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address or facsimile number set forth below the signature lines of this Agreement, or at such other address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto. Notices to the Company will be marked “Attention: [title].”
9.7 U.S. Tax Consequences. Unless an Election (defined below) is made, upon vesting of Restricted Shares, you will include in taxable income the difference between the fair market value of the vesting Restricted Shares, as determined on the date of their vesting, and the price paid for the Restricted Shares. This will be treated as ordinary income by you and will be subject to withholding by the Company when required by applicable law. In the absence of an Election, the Company shall satisfy the withholding requirements as set forth in Section 10 below. If you make an Election, then you must, prior to making the Election, pay in cash (or cash equivalent) to the Company an amount equal to the amount the Company is required to withhold for income and employment taxes.
10. Responsibility for Taxes. Regardless of any action the Company or, if different, your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer. You further acknowledge that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Shares purchased under this award, including the issuance of the Restricted Shares or vesting of such Restricted Shares, the subsequent sale of Restricted Shares and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the award or any aspect of the Restricted Shares to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
The Company will only recognize you as a record holder of Restricted Shares if you have paid or made, prior to any relevant taxable or tax withholding event, as applicable, adequate arrangements satisfactory to the Company and/or the Employer to satisfy any withholding obligation the Company and/or the Employer may have for Tax-Related Items. In this regard, you authorize the Company and/or the Employer, and their respective agents, at their discretion, to withhold all applicable Tax-Related Items from your wages or other cash compensation paid to you by the Company and/or the Employer or by one or a combination of the following methods: (a) payment by you to the Company or the Employer of an amount equal to the Tax-Related Items in cash, (b) having the Company withhold otherwise deliverable Restricted Shares that would otherwise be released from the Repurchase Right when they vest having a value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned Shares having a value equal to the Tax-Related Items to be withheld, (d) withholding from proceeds of the sale of the Restricted Shares either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sale pursuant to this authorization), or (e) any other arrangement approved by the Company and permissible under applicable law; in all cases, under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided, however, that if you are a Section 16 officer of the Company under the Exchange Act, then the method
of withholding shall be a mandatory sale under (d) above (unless the Committee shall establish an alternate method prior to the taxable or withholding event). You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your Participation in the Plan or your purchase of Restricted Shares that cannot be satisfied by the means previously described.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Restricted Shares that would otherwise be released from the Repurchase Right when they vest. If the obligation for Tax-Related Items is satisfied by withholding in Restricted Shares that would otherwise be released from the Repurchase Right when they vest, for tax purposes, you are deemed to have been issued the full number of Restricted Shares, notwithstanding that a number of the Restricted Shares are held back solely for the purpose of paying the Tax-Related Items.
Finally, you acknowledge that the Company has no obligation to deliver Restricted Shares or proceeds from the sale of Restricted Shares to you or to release Restricted Shares from the Repurchase Right when they vest until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
11. Section 83(b) Election. You hereby acknowledge that you have been informed that, with respect to the purchase of the Restricted Shares, an election may be filed by you with the Internal Revenue Service, within 30 days of the purchase of the Restricted Shares, electing for United States tax purposes pursuant to Section 83(b) of the Code to be taxed currently on any difference between the purchase price of the Restricted Shares and their Fair Market Value on the date of purchase (the “Election”). Making the Election will result in recognition of taxable income to you on the date of purchase, measured by the excess, if any, of the Fair Market Value of the Restricted Shares over the purchase price for the Restricted Shares. Absent such an Election, taxable income will be measured and recognized by you at the time or times on which the Company’s Repurchase Right lapses. You are strongly encouraged to seek the advice of your own tax advisors in connection with the purchase of the Restricted Shares and the advisability of filing of the Election. YOU ACKNOWLEDGE THAT IT IS SOLELY YOUR RESPONSIBILITY, AND NOT THE COMPANY’S RESPONSIBILITY, TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF YOU REQUEST THE COMPANY, OR ITS REPRESENTATIVE, TO MAKE THIS FILING ON YOUR BEHALF.
12. Consent to Electronic Delivery and Acceptance of All Plan Documents and Disclosures. By acceptance of this Restricted Stock Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Restricted Stock Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree
to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.
13. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the Restricted Shares shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Restricted Shares (whether vested or unvested) and the recoupment of any gains realized with respect to your Restricted Shares.
BY ACCEPTING THIS RESTRICTED STOCK AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
RECEIPT
SentinelOne, Inc. hereby acknowledges receipt of (check as applicable):
£ A check or wire transfer in the amount of $__________________
£ The cancellation of indebtedness in the amount of $__________________
£ Given by __________________ as consideration for the book entry in your name or Certificate No.
-__ for __________________ shares of Common Stock of SentinelOne, Inc.
£ Other method as permitted by the Plan and specifically approved by the Board or Committee, and described here: ____________________________________________________________________________________
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Dated:
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SENTINELONE, INC.
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By:
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Its:
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ANNEX F
NOTICE OF STOCK BONUS AWARD
NOTICE OF STOCK BONUS AWARD
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
Unless otherwise defined herein, the terms defined in the SentinelOne, Inc. (the “Company”) 2021 Equity Incentive Plan (the “Plan”) shall have the same meanings in this Notice of Stock Bonus Award (the “Notice”) and the attached Stock Bonus Award Agreement (the “Stock Bonus Agreement”).
You have been granted an award of Shares under the Plan (the “Stock Bonus Award”) subject to the terms and conditions of the Plan, this Notice and the attached Stock Bonus Agreement.
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Name:
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Address:
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Number of Shares:
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Date of Grant:
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Fair Market Value on Date of Grant:
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This Notice may be executed and delivered electronically, whether via the Company’s intranet or the Internet site of a third party or via email or any other means of electronic delivery specified by the Company. By accepting the Stock Bonus Award, you consent to the electronic delivery and acceptance as further set forth in the Stock Bonus Agreement. You understand that your employment or consulting relationship with the Company or a Parent or Subsidiary is for an unspecified duration and can be terminated at any time, and that nothing in this Notice, the Stock Bonus Agreement or the Plan changes the nature of that relationship. By accepting this Stock Bonus Award, you and the Company agree that this Stock Bonus Award is granted under and governed by the terms and conditions of the Plan, the Notice and the Stock Bonus Agreement.
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PARTICIPANT
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SENTINELONE, INC.
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Signature:
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By:
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Date:
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Its:
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STOCK BONUS AWARD AGREEMENT
SENTINELONE, INC.
2021 EQUITY INCENTIVE PLAN
You have been granted a Stock Bonus Award (“Stock Bonus Award”) by SentinelOne, Inc. (the “Company”), subject to the terms, restrictions and conditions of the Company’s 2021 Equity Incentive Plan (the “Plan”), the Notice of Stock Bonus Award (the “Notice”) and this Stock Bonus Award Agreement (this “Agreement”).
1. Issuance. Your Stock Bonus Award shall be issued in Shares, and the Company’s transfer agent shall record ownership of such Shares in your name as soon as reasonably practicable.
2. No Stockholder Rights. Unless and until you are recorded as the holder of such Shares on the stock records of the Company and its transfer agent, you shall have no right to dividends or to vote Shares.
3. Restrictions on Resale. By signing this Agreement, you agree not to sell any Shares acquired pursuant to the Plan and this Agreement at a time when applicable laws, regulations or Company or underwriter trading policies prohibit exercise or sale. This restriction will apply as long as you are providing Service to the Company or a Subsidiary of the Company.
4. Tax Consequences. YOU SHOULD CONSULT A TAX ADVISER BEFORE ACQUIRING THE SHARES IN THE JURISDICTION IN WHICH YOU ARE SUBJECT TO TAX. Shares shall not be issued under this Agreement unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the acquisition of Shares.
5. Responsibility for Taxes. Regardless of any action the Company or, if different, your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer. You further acknowledge that the Company and the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Stock Bonus Award, including the grant of the Stock Bonus Award, the issuance of the Shares subject to the Stock Bonus Award, the subsequent sale of such Shares and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the Stock Bonus Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. You acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
The Company will only recognize you as a record holder of Shares subject to the Stock Bonus Award if you have paid or made, prior to any relevant taxable or tax withholding event, as applicable, adequate arrangements satisfactory to the Company and/or the Employer to satisfy any withholding obligation the Company and/or the Employer may have for Tax-Related Items. In this regard, you authorize the Company and/or the Employer, and their respective agents, at their discretion, to withhold all applicable Tax-Related Items from your wages or other cash compensation paid to you by the Company and/or the Employer or by one or a combination of the following methods: (a) payment by you to the Company or the Employer of an amount equal to the Tax-Related Items in cash, (b) having the Company withhold Shares subject to the Stock Bonus Award having a value equal to the Tax-Related
Items to be withheld, (c) delivering to the Company already-owned Shares having a value equal to the Tax-Related Items to be withheld, (d) withholding from proceeds of the sale of the Shares subject to the Stock Bonus Award either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sale pursuant to this authorization), or (e) any other arrangement approved by the Company and permissible under applicable law; in all cases, under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided, however, that if you are a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be a mandatory sale under (d) above (unless the Committee shall establish an alternate method prior to the taxable or withholding event). You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of your participation in the Plan or the issuance of Shares subject to this Stock Bonus Award that cannot be satisfied by the means previously described.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Shares subject to the Stock Bonus Award that would otherwise be issued to you. If the obligation for Tax-Related Items is satisfied by withholding in Shares subject to the Stock Bonus Award that would otherwise be issued to you, for tax purposes, you are deemed to have been issued the full number of such Shares, notwithstanding that a number of the such Shares are held back solely for the purpose of paying the Tax-Related Items.
Finally, you acknowledge that the Company has no obligation to deliver Shares subject to the Stock Bonus Award to you until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section.
6. Acknowledgement. The Company and you agree that the Stock Bonus Award is granted under and governed by the Notice, this Agreement and the provisions of the Plan (incorporated herein by reference). You: (i) acknowledge receipt of a copy of the Plan and the Plan prospectus, (ii) represent that you have carefully read and are familiar with their provisions and the provisions of the Notice and this Agreement, and (iii) hereby accept the Stock Bonus Award subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice and the Stock Bonus Award.
7. Entire Agreement; Enforcement of Rights. This Agreement, the Plan and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments or negotiations concerning the purchase of the Shares hereunder are superseded. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
8. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s common stock may be listed or quoted at the time of such issuance or transfer. The Shares issued pursuant to this Agreement shall be endorsed with appropriate legends, if any, determined by the Company.
9. Stop Transfer Orders.
(a) Stop-Transfer Notices. You agree that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(b) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as the owner or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
10. Governing Law; Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of this Agreement shall be enforceable in accordance with its terms. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from the Plan, the Notice and this Agreement, the parties hereby submit and consent to litigation in the exclusive jurisdiction of the State of California and agree that any such litigation shall be conducted only in the courts of California in San Francisco County, California or the federal courts of the United States for the Northern District of California and no other courts.
10. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.
11. Consent to Electronic Delivery and Acceptance of All Plan Documents and Disclosures. By acceptance of this Stock Bonus Award, you consent to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements) or other communications or information related to the Stock Bonus Award. Electronic delivery may include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Company’s discretion. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at [insert email]. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. You agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at [insert email]. Finally, you understand that you are not required to consent to electronic delivery.
12. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the Stock Bonus Award shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of your employment or other Service that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation of your Stock Bonus Award and the recoupment of any gains realized with respect to your Stock Bonus Award.
BY ACCEPTING THE STOCK BONUS AWARD, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
SENTINELONE, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. SentinelOne, Inc. adopted the Plan effective as of the Effective Date. The purpose of this Plan is to provide eligible employees of the Company and the Participating Corporations with a means of acquiring an equity interest in the Company, to enhance such employees’ sense of participation in the affairs of the Company. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2. ESTABLISHMENT OF PLAN. The Company proposes to grant rights to purchase shares of Common Stock to eligible employees of the Company and its Participating Corporations pursuant to this Plan. The Company intends this Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed, although the Company makes no undertaking or representation to maintain such qualification. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. In addition, with regard to offers of options to purchase shares of Common Stock under the Plan to employees working for a Subsidiary or an Affiliate outside the United States, this Plan authorizes the grant of options under a Non-Section 423 Component that is not intended to meet Section 423 requirements, provided, to the extent necessary under Section 423 of the Code, the other terms and conditions of the Plan are met.
Subject to Section 14, a total seven million, fifty-six thousand, three hundred and nineteen (7,056,319) shares of Common Stock is reserved for issuance under this Plan. In addition, on each February 1 for the first ten (10) calendar years after the first Offering Date, the aggregate number of shares of Common Stock reserved for issuance under the Plan shall be increased automatically by the number of shares equal to one percent (1%) of the total number of outstanding shares of all classes of the Company’s common stock outstanding (on an as- converted basis) on the immediately preceding January 31st (rounded down to the nearest whole share); provided, that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year. Subject to Section 14, no more than one hundred and forty- one million, one hundred and twenty-six thousand, three hundred and eighty (141,126,380) shares of Common Stock may be issued over the term of this Plan. The number of shares initially reserved for issuance under this Plan and the maximum number of shares that may be issued under this Plan shall be subject to adjustments effected in accordance with Section 14. Any or all such shares may be granted under the Section 423 Component.
3. ADMINISTRATION. The Plan will be administered by the Committee. Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all eligible employees and Participants. The Committee will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility, to designate the Participating Corporations, to determine whether Participating Corporations shall participate in the Section 423 Component or Non-Section 423 Component and to decide upon any and all claims filed under the Plan. Every finding, decision and determination made by the Committee
will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Committee may adopt rules, sub-plans, and/or procedures relating to the operation and administration of the Plan designed to comply with local laws, regulations or customs or to achieve tax, securities law or other objectives for eligible employees outside of the United States. The Committee will have the authority to determine the Fair Market Value of the Common Stock (which determination shall be final, binding and conclusive for all purposes) in accordance with Section 8 below and to interpret Section 8 of the Plan in connection with circumstances that impact the Fair Market Value. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company. For purposes of this Plan, the Committee may designate separate offerings under the Plan (the terms of which need not be identical) in which eligible employees of one or more Participating Corporations will participate, and the provisions of the Plan will separately apply to each such separate offering even if the dates of the applicable Offering Periods of each such offering are identical. To the extent permitted by Section 423 of the Code, the terms of each separate offering under the Plan need not be identical, provided that the rights and privileges established with respect to a particular offering are applied in an identical manner to all employees of every Participating Corporation whose employees are granted options under that particular offering. The Committee may establish rules to govern the terms of the Plan and the offering that will apply to Participants who transfer employment between the Company and Participating Corporations or between Participating Corporations, in accordance with requirements under Section 423 of the Code to the extent applicable.
4. ELIGIBILITY.
(a) Any employee of the Company or the Participating Corporations is eligible to participate in an Offering Period under this Plan, except that one or more of the following categories of employees may be excluded from coverage under the Plan if determined by the Committee (other than where such exclusion is prohibited by applicable law):
(i) employees who do not meet eligibility requirements that the Committee may choose to impose (within the limits permitted by the Code);
(ii) employees who are not employed by the Company or a Participating Corporation prior to the beginning of such Offering Period or prior to such other time period as specified by the Committee;
(iii) employees who are customarily employed for twenty (20) or less hours per week;
(iv) employees who are customarily employed for five (5) months or less in a calendar year;
(v) (a) employees who are “highly compensated employees” of the Company or any Participating Corporation (within the meaning of Section 414(q) of the Code),
or (b) any employees who are “highly compensated employees” with compensation above a specified level, who is an officer and/or is subject to the disclosure requirements of Section 16(a) of the Exchange Act;
(vi) employees who are citizens or residents of a foreign jurisdiction (without regard to whether they are also a citizen of the United States or a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) if either (i) such employee’s participation is prohibited under the laws of the jurisdiction governing such employee, or (ii) compliance with the laws of the foreign jurisdiction would violate the requirements of Section 423 of the Code; and
(vii) individuals who provide services to the Company or any of its Participating Corporations who are reclassified as common law employees for any reason except for federal income and employment tax purposes.
The foregoing notwithstanding, an individual shall not be eligible if his or her participation in the Plan is prohibited by the law of any country that has jurisdiction over him or her, if complying with the laws of the applicable country would cause the Plan to violate Section 423 of the Code, or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan.
(b) No employee who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, owns stock or holds options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary shall be granted an option to purchase Common Stock under the Plan. Notwithstanding the foregoing, the rules of Section 424(d) of the Code shall apply in determining share ownership and the extent to which shares held under outstanding equity awards are to be treated as owned by the employee.
5. OFFERING DATES.
(a) Each Offering Period of this Plan may be of up to twenty-seven (27) months duration and shall commence and end at the times designated by the Committee. Each Offering Period shall consist of one or more Purchase Periods during which Contributions made by Participants are accumulated under this Plan. Offering Periods may be consecutive or overlapping.
(b) The initial Offering Period shall commence on the Effective Date and shall end with the Purchase Date that occurs on a date selected by the Committee which is approximately twenty-four (24) months after the commencement of the initial Offering Period. The initial Offering Period shall consist of four Purchase Periods (except as otherwise provided the Committee). Thereafter, a new Offering Period shall commence each six (6) months thereafter, with each such Offering Period consisting of a single six (6)-month Purchase Period, except as otherwise provided by an applicable sub-plan, or by the Committee. The Committee
may at any time establish a different duration for an Offering Period or Purchase Period to be effective after the next scheduled Purchase Date, up to a maximum duration of twenty-seven (27) months.
6. PARTICIPATION IN THIS PLAN.
(a) Any employee who is an eligible employee determined in accordance with Section 4 immediately prior to the Initial Offering Period will be automatically enrolled in the Initial Offering Period at a contribution level equal to fifteen percent (15%) of Compensation (as defined in Section 9). With respect to subsequent Offering Periods, any eligible employee determined in accordance with Section 4 will be eligible to participate in this Plan, subject to the requirement of Section 6(b) hereof and the other terms and provisions of this Plan.
(b) With respect to Offering Periods after the initial Offering Period, a Participant may elect to participate in this Plan by submitting an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates, subject to the other terms and provisions of this Plan.
(c) Once an employee becomes a Participant in an Offering Period, then such Participant will automatically participate in each subsequent Offering Period commencing immediately following the last day of the prior Offering Period unless the Participant withdraws or is deemed to withdraw from this Plan or terminates further participation in an Offering Period as set forth in Section 11 below. A Participant who is continuing participation pursuant to the preceding sentence is not required to file any additional enrollment agreement in order to continue participation in this Plan; a Participant who is not continuing participation pursuant to the preceding sentence is required to file an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.
7. GRANT OF OPTION ON ENROLLMENT. Becoming a Participant with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Participant of an option to purchase on the Purchase Date up to that number of shares of Common Stock determined by a fraction, the numerator of which is the amount accumulated in such Participant’s Contribution account during such Purchase Period and the denominator of which is the lower of (i) eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Offering Date (but in no event less than the par value of a share of the Common Stock), or (ii) eighty-five percent (85%) of the Fair Market Value of a share of the Common Stock on the Purchase Date; provided, however, that for the Purchase Period within the initial Offering Period the numerator shall be fifteen percent (15%) of the Participant’s compensation for such Purchase Period, or such lower percentage as determined by the Committee prior to the start of the Offering Period, and provided, further, that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 10(a) below with respect to the applicable Purchase Date.
8. PURCHASE PRICE. The Purchase Price per share at which a share of Common Stock will be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:
(a) The Fair Market Value on the Offering Date; or
(b) The Fair Market Value on the Purchase Date.
9. PAYMENT OF PURCHASE PRICE; CONTRIBUTION CHANGES; SHARE ISSUANCES.
(a) The Purchase Price shall be accumulated by regular payroll deductions made during each Offering Period, unless the Committee determines that contributions may be made in another form (including but not limited to with respect to categories of Participants outside the United States that Contributions may be made in another form due to local legal requirements). The Contributions are made as a percentage of the Participant’s Compensation in one percent (1%) increments not less than one percent (1%), nor greater than fifteen percent (15%) or such lower limit set by the Committee. “Compensation” shall mean base salary or regular hourly wages; however, the Committee shall have discretion to adopt a definition of Compensation from time to time of all cash compensation reported on the employee's Form W-2 or corresponding local country tax return, including without limitation base salary or regular hourly wages, bonuses, incentive compensation, commissions, overtime, shift premiums, pay during leaves of absence, and draws against commissions (or in foreign jurisdictions, equivalent cash compensation). For purposes of determining a Participant’s Compensation, any election by such Participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code (or in foreign jurisdictions, equivalent deductions) shall be treated as if the Participant did not make such election. Contributions shall commence on the first payday following the last Purchase Date (with respect to the initial Offering Period, as soon as practicable following the effective date of filing with the U.S. Securities and Exchange Commission a securities registration statement for the Plan) and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in this Plan. Notwithstanding the foregoing, the terms of any sub-plan may permit matching shares without the payment of any purchase price.
(b) A Participant may decrease the rate of Contributions during an Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions, with the new rate to become effective no later than the second payroll period commencing after the Company’s receipt of the authorization and continuing for the remainder of the Offering Period unless changed as described below. A decrease in the rate of Contributions may be made twice during the initial Offering Period and once during any subsequent Offering Periods, or more frequently under rules determined by the Committee. A Participant may increase or decrease the rate of Contributions for any subsequent Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.
(c) A Participant may reduce his or her Contribution percentage to zero during an Offering Period by filing with the Company or a third party designated by the Company a request for cessation of Contributions. Such reduction shall be effective beginning
no later than the second payroll period after the Company’s receipt of the request and no further Contributions will be made for the duration of the Offering Period. Contributions credited to the Participant’s account prior to the effective date of the request shall be used to purchase shares of Common Stock in accordance with Subsection (e) below. A reduction of the Contribution percentage to zero shall be treated as such Participant’s withdrawal from such Offering Period and the Plan, effective as of the day after the next Purchase Date following the filing date of such request with the Company.
(d) All Contributions made for a Participant are credited to his or her book account under this Plan and are deposited with the general funds of the Company, except to the extent local legal restrictions outside the United States require segregation of such Contributions. No interest accrues on the Contributions, except to the extent required due to local legal requirements. All Contributions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions, except to the extent necessary to comply with local legal requirements outside the United States.
(e) On each Purchase Date, so long as this Plan remains in effect and provided that the Participant has not submitted a signed and completed withdrawal form before that date which notifies the Company that the Participant wishes to withdraw from that Offering Period under this Plan and have all Contributions accumulated in the account maintained on behalf of the Participant as of that date returned to the Participant, the Company shall apply the funds then in the Participant’s account to the purchase of whole shares of Common Stock reserved under the option granted to such Participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The Purchase Price per share shall be as specified in Section 8 of this Plan. Any fractional share, as calculated under this Subsection (e), shall be rounded down to the next lower whole share, unless the Committee determines with respect to all Participants that any fractional share shall be credited as a fractional share. Any amount remaining in a Participant’s account on a Purchase Date which is less than the amount necessary to purchase a full share of the Common Stock shall be carried forward without interest (except to the extent necessary to comply with local legal requirements outside the United States) into the next Purchase Period or Offering Period, as the case may be, unless otherwise required to be refunded or returned to the Participant pursuant to this Section 9, Section 10(d), Section 11(b), Section 12, Section 13, Section 25, or as otherwise provided by this Plan; however, the Committee may determine that such amounts should be refunded without interest. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the Participant, without interest (except to the extent required due to local legal requirements outside the United States). No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date, except to the extent required due to local legal requirements outside the United States.
(f) As promptly as practicable after the Purchase Date, the Company shall issue shares for the Participant’s benefit representing the shares purchased upon exercise of his or her option.
(g) During a Participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The Participant will have no interest or voting right in shares covered by his or her option until such option has been exercised.
(h) To the extent required by applicable federal, state, local or foreign law, a Participant shall make arrangements satisfactory to the Company and the Participating Corporation employing the Participant for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company or any Subsidiary or Affiliate, as applicable, may withhold, by any method permissible under the applicable law, the amount necessary for the Company or Subsidiary or Affiliate, as applicable, to meet applicable withholding obligations, including any withholding required to make available to the Company or Subsidiary or Affiliate, as applicable, any tax deductions or benefits attributable to the sale or early disposition of shares of Common Stock by a Participant. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) Any other provision of the Plan notwithstanding, no Participant shall purchase Common Stock with a Fair Market Value in excess of the following limit:
(i) In the case of Common Stock purchased during an Offering Period that commenced in the current calendar year, the limit shall be equal to (A) $25,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased in the current calendar year (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary).
(ii) In the case of Common Stock purchased during an Offering Period that commenced in the immediately preceding calendar year, the limit shall be equal to (A) $50,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the immediately preceding calendar year.
(iii) In the case of Common Stock purchased during an Offering Period that commenced two calendar years prior, the limit shall be equal to (A) $75,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the two immediately preceding calendar years.
For purposes of this Subsection (a), the Fair Market Value of Common Stock shall be determined in each case as of the beginning of the Offering Period in which such Common Stock is purchased. Employee stock purchase plans not described in Section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (a) from purchasing additional Common Stock under the Plan, then his or her Contributions shall automatically be discontinued and shall automatically resume at the beginning of the earliest Purchase Period that will end in the next calendar year (if he or she then is an eligible employee), provided that when the
Company automatically resumes such Contributions, the Company must apply the rate in effect immediately prior to such suspension.
(b) In no event shall a Participant be permitted to purchase more than three thousand, five hundred (3,500) shares on any one Purchase Date or such lesser number as the Committee shall determine. If a lower limit is set under this Subsection (b), then all Participants will be notified of such limit prior to the commencement of the next Offering Period for which it is to be effective.
(c) If the number of shares to be purchased on a Purchase Date by all Participants exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company will give notice of such reduction of the number of shares to be purchased under a Participant’s option to each Participant affected.
(d) Any Contributions accumulated in a Participant’s account which are not used to purchase stock due to the limitations in this Section 10, and not covered by Section 9(e), shall be returned to the Participant as soon as practicable after the end of the applicable Purchase Period, without interest (except to the extent required due to local legal requirements outside the United States).
11. WITHDRAWAL.
(a) Each Participant may withdraw from an Offering Period under this Plan pursuant to a method specified for such purpose by the Company. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.
(b) Upon withdrawal from this Plan, the accumulated Contributions shall be returned to the withdrawn Participant, without interest (except to the extent required due to local legal requirements outside the United States), and his or her interest in this Plan shall terminate. In the event a Participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for Contributions in the same manner as set forth in Section 6 above for initial participation in this Plan.
(c) To the extent applicable, if the Fair Market Value on the first day of the current Offering Period in which a Participant is enrolled is higher than the Fair Market Value on the last day of any applicable Purchase Period, (1) the Company will automatically withdraw the Participant from the prior Offering Period and the Participant will be automatically enrolled in a new Offering Period, (2) the old Offering Period is terminated, (3) the new Offering Period will be coterminous with the originally scheduled termination date of the old Offering Period, and (4) any funds accumulated in a Participant’s account prior to the first day of such new Offering Period will be applied to the purchase of shares on the Purchase Date preceding the first day of such new Offering Period.
12. TERMINATION OF EMPLOYMENT. Termination of a Participant’s employment for any reason, including retirement, death, disability, or the failure of a Participant to remain an eligible employee of the Company or of a Participating Corporation, immediately terminates his or her participation in this Plan (except as required due to local legal requirements outside the United States). In such event, accumulated Contributions credited to the Participant’s account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest (except to the extent required due to local legal requirements outside the United States). For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Corporation in the case of sick leave, military leave, or any other leave of absence approved by the Company; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute. The Company will have sole discretion to determine whether a Participant has terminated employment and the effective date on which the Participant terminated employment, regardless of any notice period or garden leave required under local law.
13. RETURN OF CONTRIBUTIONS. In the event a Participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the Participant all accumulated Contributions credited to such Participant’s account. No interest shall accrue on the Contributions of a Participant in this Plan (except to the extent required due to local legal requirements outside the United States).
14. CAPITAL CHANGES. If the number and class of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Committee shall adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 2 and 10 shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with the applicable securities laws; provided that fractions of a share will not be issued.
15. NONASSIGNABILITY. Neither Contributions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.
16. USE OF PARTICIPANT FUNDS AND REPORTS. The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be required to segregate Participant Contributions (except to the extent required due to local legal requirements outside the United States). Until shares are issued, Participants will only have the rights of an unsecured creditor unless otherwise required under local law. Each Participant shall receive, or have access to, promptly after the end of each Purchase Period a
report of his or her account setting forth the total Contributions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each U.S. taxpayer Participant shall notify the Company in writing if the Participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the “Notice Period”). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any transfer of the shares. The obligation of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Corporation, or restrict the right of the Company or any Participating Corporation to terminate such employee’s employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees granted an option under the Section 423 Component of this Plan shall have equal rights and privileges with respect to this Plan or within any separate offering under the Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code, without further act or amendment by the Company, the Committee or the Board, shall be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan.
20. NOTICES. All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. This Plan will become effective on the Effective Date. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares that are subject to such stockholder approval before becoming available under this Plan shall occur prior to stockholder approval of such shares and the Board or Committee may delay any Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase Date as deemed necessary or desirable to obtain such approval (provided that if a Purchase Date would occur more than six (6) months after commencement of the Offering Period to which it relates, then such Purchase Date shall not occur and instead such Offering Period shall terminate without the purchase of such shares and Participants in such Offering Period shall be refunded their Contributions without interest). This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time pursuant to
Section 25 below), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) the tenth anniversary of the Effective Date.
22. DESIGNATION OF BENEFICIARY.
(a) If authorized by the Committee, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under this Plan in the event of such Participant’s death prior to a Purchase Date. Such form shall be valid only if it was filed with the Company at the prescribed location before the Participant’s death.
(b) If authorized by the Company, such designation of beneficiary may be changed by the Participant at any time by written notice filed with the Company at the prescribed location before the Participant’s death. In the event of the death of a Participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such Participant’s death, the Company shall deliver such cash to the executor or administrator of the estate of the Participant or to the legal heirs of the Participant.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the U.S. Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, exchange control restrictions and/or securities law restrictions outside the United States, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Shares may be held in trust or subject to further restrictions as permitted by any subplan.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.
25. AMENDMENT OR TERMINATION. The Committee, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. Unless otherwise required by applicable law, if the Plan is terminated, the Committee, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Committee in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its previously- scheduled expiration, all amounts then credited to Participants’ accounts for such Offering Period, which have not been used to purchase shares of Common Stock, shall be returned to those Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable. Further, the Committee will be entitled to change the Purchase Periods and Offering Periods, limit the frequency and/or number of changes in the amount contributed during an Offering Period, establish the exchange ratio applicable to amounts contributed in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the
administration of the Plan, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts contributed from the Participant’s base salary and other eligible compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan. Such actions will not require stockholder approval or the consent of any Participants. However, no amendment shall be made without approval of the stockholders of the Company (obtained in accordance with Section 21 above) within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan; or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan. In addition, in the event the Board or Committee determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board or Committee may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequences including, but not limited to: (i) amending the definition of compensation, including with respect to an Offering Period underway at the time; (ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (iii) shortening any Offering Period by setting a Purchase Date, including an Offering Period underway at the time of the Committee’s action; (iv) reducing the maximum percentage of Compensation a participant may elect to set aside as Contributions; and (v) reducing the maximum number of shares a Participant may purchase during any Offering Period. Such modifications or amendments will not require approval of the stockholders of the Company or the consent of any Participants.
26. CORPORATE TRANSACTIONS. In the event of a Corporate Transaction, the Offering Period for each outstanding right to purchase Common Stock will be shortened by setting a new Purchase Date and will end on the new Purchase Date. The new Purchase Date shall occur on or prior to the consummation of the Corporate Transaction, as determined by the Board or Committee, and the Plan shall terminate on the consummation of the Corporate Transaction.
27. CODE SECTION 409A; TAX QUALIFICATION.
(a) Options granted under the Plan generally are exempt from the application of Section 409A of the Code. However, options granted to U.S. taxpayers which are not intended to meet the Code Section 423 requirements are intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Subject to Subsection (b), options granted to U.S. taxpayers outside of the Code Section 423 requirements shall be subject to such terms and conditions that will permit such options to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the shares of Common Stock subject to an option be delivered within the short-term deferral period. Subject to Subsection (b), in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Committee determines that an option or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the option shall be granted, exercised, paid, settled or deferred in a manner that will
comply with Section 409A of the Code, including Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.
(b) Although the Company may endeavor to (i) qualify an option for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Subsection (a). The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
28. DEFINITIONS.
(a) “Affiliate” means any entity, other than a Subsidiary or Parent, (i) that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
(b) “Board” shall mean the Board of Directors of the Company.
(c) “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.
(d) “Committee” shall mean the Compensation Committee of the Board that consists exclusively of one or more members of the Board appointed by the Board.
(e) “Common Stock” shall mean the Class A common stock of the Company.
(f) “Company” shall mean SentinelOne, Inc.
(g) “Contributions” means payroll deductions taken from a Participant's Compensation and used to purchase shares of Common Stock under the Plan and, to the extent payroll deductions are not permitted by applicable laws (as determined by the Committee in its sole discretion) contributions by other means, provided, however, that allowing such other contributions does not jeopardize the qualification of the Plan as an “employee stock purchase plan” under Section 423 of the Plan.
(h) “Corporate Transaction” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
(i) “Effective Date” shall mean the date on which the Registration Statement covering the initial public offering of the shares of Common Stock is declared effective by the U.S. Securities and Exchange Commission.
(j) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
(k) “Fair Market Value” shall mean, as of any date, the value of a share of Common Stock determined as follows:
(1) if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (collectively, the “Nasdaq Market”), its closing price on the Nasdaq Market on the date of determination, or if there are no sales for such date, then the last preceding business day on which there were sales, as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
(2) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
(3) if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
(4) with respect to the initial Offering Period, Fair Market Value on the Offering Date shall be the price at which shares of Common Stock are offered to the public pursuant to the Registration Statement covering the initial public offering of shares of Common Stock; or
(5) if none of the foregoing is applicable, by the Board or the Committee in good faith.
(l) “Non-Section 423 Component” means the part of the Plan which is not intended to meet the requirements set forth in Section 423 of the Code.
(m) “Notice Period” shall mean within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased.
(n) “Offering Date” shall mean the first business day of each Offering Period. However, for the initial Offering Period the Offering Date shall be the Effective Date.
(o) “Offering Period” shall mean a period with respect to which the right to purchase Common Stock may be granted under the Plan, as determined by the Committee pursuant to Section 5(a).
(p) “Parent” shall have the same meaning as “parent corporation” in Sections 424(e) and 424(f) of the Code.
(q) “Participant” shall mean an eligible employee who meets the eligibility requirements set forth in Section 4 and who is either automatically enrolled in the initial Offering Period or who elects to participate in this Plan pursuant to Section 6(b).
(r) “Participating Corporation” shall mean any Parent, Subsidiary or Affiliate that the Committee designates from time to time as eligible to participate in this Plan. For purposes of the Section 423 Component, only the Parent and Subsidiaries may be Participating Corporations, provided, however, that at any given time a Parent or Subsidiary that is a Participating Corporation under the Section 423 Component shall not be a Participating Corporation under the Non-Section 423 Component. The Committee may provide that any Participating Corporation shall only be eligible to participate in the Non-Section 423 Component.
(s) “Plan” shall mean this SentinelOne, Inc. 2021 Employee Stock Purchase Plan, as may be amended from time to time.
(t) “Purchase Date” shall mean the last business day of each Purchase Period.
(u) “Purchase Period” shall mean a period during which Contributions may be made toward the purchase of Common Stock under the Plan, as determined by the Committee pursuant to Section 5(b).
(v) “Purchase Price” shall mean the price at which Participants may purchase shares of Common Stock under the Plan, as determined pursuant to Section 8.
(w) “Section 423 Component” means the part of the Plan, which excludes the Non-Section 423 Component, pursuant to which options to purchase shares of Common Stock under the Plan that satisfy the requirements for “employee stock purchase plans” set forth in Section 423 of the Code may be granted to eligible employees.
(x) “Subsidiary” shall have the same meaning as “subsidiary corporation” in Sections 424(e) and 424(f) of the Code.
ANNEX A
2021 EMPLOYEE STOCK PURCHASE PLAN ENROLLMENT FORM
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SENTINELONE, INC. (THE “COMPANY”)
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ENROLLMENT CONFIRMATION /
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2021 EMPLOYEE STOCK PURCHASE PLAN
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CHANGE FORM
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Capitalized terms used but not otherwise defined herein shall
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FOR INITIAL OFFERING PERIOD
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have the meaning given to them in the ESPP.
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COMMENCING ON EFFECTIVE DATE
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You have been automatically enrolled in the ESPP. This form must be completed by [DATE]
regardless of whether you want to continue, change your contribution level, or withdraw from the ESPP.
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SECTION 1
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Name:
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PERSONAL DAT
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Home Address
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Employee ID:
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SECTION 2
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Continue participation in ESPP
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ELECT/CHANGE/OPT-
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I hereby authorize the Company to continue my enrollment by withholding from each of my
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OUT OF ES
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each Purchase Period the below-specified percentage of my compensation, as long as I continue to p
in the ESP
Continue my contribution level at 15
Decrease my contribution level to % (must be a whole number between 1%
Note: After this initial election, you may only decrease your contributions one time to a percentage ot
0% during this Offering Period, to be effective during this Offering Period. Such a change will be effective as soon as reasonably practicable after this form is received by the Company. Any other decreases will take effect with the next Offering Period. You may not increase your contributions during this Offering Period after you confirm your initial election. Thereafter, any increase in your contribution
Withdraw from ESP
I understand that my enrollment in the ESPP was automatically effective at the beginning of the initial Offering Period. I hereby elect to withdraw from the ESPP and stop my contributions under the ESPP, effective as soon as reasonably practicable after this form is received by the Company. Accumulated contributions will be returned to me without interest. Note: If you withdraw, you cannot resume parti
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SECTION 6
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Unless there is an available exemption from any registration, qualification or other legal requirement applicable to the shares of Common Stock, the Company shall not be required to deliver any shares under the ESPP prior to the completion of any registration or qualification of the shares under any applicable law, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable. I agree that the Company shall have unilateral authority to amend the ESPP and this Agreement without my consent to the extent
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COMPLIANCE WIT
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LAW
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SECTION 7
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The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding my participation in the ESPP or my acquisition or sale of shares of Common Stock. I understand that I should consult with my own personal tax, legal and financial advisors regarding my participation in the ESPP b
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NO ADVIC
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REGARDING GRAN
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SECTION 8
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The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the ESPP by electronic means. I hereby consent to receive such documents by electronic delivery and agree to participate in the ESPP through an on-line or electronic system established and maintained by the Company or a t
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ELECTRONIC
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DELIVERY AN
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ACCEPTANCE
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SECTION 9:
ACKNOWLEDGMENT AND SIGNATURE
I acknowledge that I have received the ESPP Prospectus (which summarizes the major features of the ESPP) and that the ESPP is available online at sec.gov. I have read the ESPP Prospectus and my signature below indicates that I hereby agree to be bound by the terms of the ESPP.
Signature: Date:
ANNEX B
2021 EMPLOYEE STOCK PURCHASE PLAN ENROLLMENT
CONFIRMATION/CHANGE FORMS
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SENTINELONE, INC. (THE “COMPANY”)
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ENROLLMENT CONFIRMATION /
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2021 EMPLOYEE STOCK PURCHASE PLAN
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CHANGE FORM
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Capitalized terms used but not otherwise defined herein shall
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FOR INITIAL OFFERING PERIOD
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have the meaning given to them in the ESPP.
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COMMENCING ON EFFECTIVE DATE
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You have been automatically enrolled in the ESPP. This form must be completed by [DATE]
regardless of whether you want to continue, change your contribution level, or withdraw from the ESPP.
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SENTINELONE, INC. (THE “COMPANY”)
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ENROLLMENT/CHANGE FORM
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2021 EMPLOYEE STOCK PURCHASE PLAN
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Capitalized terms used but not otherwise defined herein shall
have the meaning given to them in the ESPP.
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May [ ] 2021
«First_Name» «Last_Name»
«Address_Line_1»
«Address_Line_2»
Dear«First_Name»:
This letter agreement amends and restates the employment letter entered into between you and Sentinel
Labs, Inc. (the “Company”, or “SentinelOne”), dated «Prior_Agreement_Date» (the “Prior Agreement”).
1. Duties and Responsibilities. You will continue to work in the role of «Title» reporting to «Reporting_Name» in his capacity as «Reporting_Title».
2. Salary. In this position, the Company will pay you an annual base salary of $[▪], payable in accordance with the Company’s customary payroll practice. Your salary will be subject to periodic review and adjustment by the Company’s management.
3. Variable Compensation. You will continue to be eligible to receive variable bonus compensation paid in accordance with the Company’s bonus compensation policies and at the sole discretion of the Company's board of directors (the “Board”). Your bonus compensation shall be targeted at $[▪] per year.
4. Termination Benefits. You will continue to be eligible to receive change in control and severance payments and benefits under the Change in Control and Severance Agreement (the “Severance Agreement”) between you and the Company, dated [▪], attached to this offer letter as Exhibit A. Pursuant to the Severance Agreement and for the avoidance of doubt, each of your outstanding equity awards granted prior to March 24, 2021, shall remain subject to the acceleration terms set forth therein and not those set forth in the Severance Agreement.
5. Employee Benefits. You will continue to be eligible to participate in a number of Company-sponsored benefits (including the Company’s 401(k) plan and group health insurance plan), subject to and in accordance with applicable eligibility requirements with the terms and conditions as in effect from time to time. You will continue to be eligible for flexible time off and paid Company holidays.
6. Equity Awards. The Company acknowledges that it has previously issued equity awards to you. Nothing in this letter will amend or affect the terms of such award agreements, except as set forth in your Severance Agreement.
7. Expenses. Expenses related to your employment at the Company are subject to the Company’s Travel & Expenses Policy.
8. Confidentiality Agreement. By signing this letter agreement, you reaffirm the terms and conditions of the At-Will Employment, Confidential Information and Invention Assignment Agreement by and between you and the Company dated «CIIA_Date», attached to this offer letter as Exhibit B.
9. At-Will Employment. You should be aware that your employment with the Company is for no specified period and constitutes at-will employment. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice. Participation in any stock option, benefit, compensation or incentive program does not change the nature of the employment
relationship, which remains “at-will.” No one other than an executive officer of the Company has the authority to enter into an agreement for employment for any specified period, or to make any promises or commitments contrary to the Company’s at-will policy. To be valid and enforceable, any employment agreement for a specified term entered into by the Company must be in writing, expressly described therein as an “employment agreement” and signed by an executive officer of the Company.
10. No Conflicting Obligations. You understand and agree that by signing this letter agreement, you represent to the Company that your performance will not breach any other agreement to which you are a party and that you have not, and will not during the term of your employment with the Company, enter into any oral or written agreement in conflict with any of the provisions of this letter or the Company’s policies. You are not to bring with you to the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other person or entity with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to third parties. Also, we expect you to abide by any obligations to refrain from soliciting any person employed by or otherwise associated with any former employer and suggest that you refrain from having any contact with such persons until such time as any non-solicitation obligation expires.
11. Outside Activities. While you render services to the Company, you agree that you will not engage in any other employment, consulting or other business activity without the written consent of the Company. In addition, while you render services to the Company, you will not assist any person or entity in competing with the Company, in preparing to compete with the Company or in hiring any employees or consultants of the Company.
12. Equal Employment Opportunity. The Company is an equal opportunity employer and conducts its employment practices based on business needs and in a manner that treats employees and applicants on the basis of merit and experience. The Company prohibits unlawful discrimination on the basis of race, color, religion, sex, pregnancy, national origin, citizenship, ancestry, age, physical or mental disability, veteran status, marital status, domestic partner status, sexual orientation, or any other consideration made unlawful by federal, state or local laws.
13. General Obligations. As an employee, you will be expected to continue to adhere to the Company’s standards of professionalism, loyalty, integrity, honesty, reliability and respect for all. You will also be expected to continue to comply with the Company’s policies and procedures.
14. Complete Offer and Agreement. This letter (inclusive of its exhibits) sets forth the entire agreement and terms of your employment with the Company and supersedes any prior representations, discussions or agreements, even if inconsistent, and whether written or oral, between you and the Company, including the Prior Agreement. It is understood that the Company may, from time to time, in its sole discretion, adjust the salaries, incentive compensation and benefits paid to you and its other employees, as well as job titles, locations, duties, responsibilities, assignments and reporting relationships.
15. Withholdings. All forms of compensation paid to you as an employee of the Company shall be less all applicable withholdings.
[SIGNATURE PAGE FOLLOWS]
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Very truly yours,
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SENTINELONE
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By:
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«Signatory_Name»
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«Signatory_Title»
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ACCEPTED AND AGREED:
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«First_Name» «Last_Name»
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Signature
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Date
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[SIGNATURE PAGE TO AMENDED AND RESTATED OFFER LETTER]
EXHIBIT A
Change in Control and Severance Agreement
EXHIBIT B
At-Will Employment, Confidential Information and Invention Assignment Agreement
Exhibit 10.7
EXECUTION VERSION
OFFICE LEASE
(NNN)
444 CASTRO STREET
MOUNTAIN VIEW, CALIFORNIA
LANDLORD:
SIC-MOUNTAIN BAY PLAZA, LLC, a Delaware limited liability company
TENANT:
SENTINEL LABS, INC., a Delaware corporation, dba SENTINELONE
Dated for reference purposes as of: June 9, 2020
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Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
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TABLE OF CONTENTS
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BASIC LEASE INFORMATION
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1.
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LEASE
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1
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2.
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TERM
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1
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3.
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RENT
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2
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4.
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ADDITIONAL RENT FOR NNN EXPENSES AND TAXES
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2
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5.
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LETTER OF CREDIT; LATE CHARGE
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7
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6.
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USE OF PREMISES
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11
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7.
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ALTERATIONS, MECHANICS' LIENS
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11
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8.
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WORK TO BE PERFORMED BY LANDLORD
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13
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9.
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RESTRICTIONS ON USE
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14
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10.
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COMPLIANCE WITH LAW
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15
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11.
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INDEMNITY AND EXCULPATION
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16
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12.
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INSURANCE
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16
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13.
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RULES AND REGULATIONS
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18
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14.
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UTILITIES AND SERVICES
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18
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15.
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PERSONAL PROPERTY AND GROSS RECEIPTS TAXES
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21
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16.
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MAINTENANCE
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21
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17.
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RESTORATION OF PREMISES
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22
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18.
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ENTRY BY LANDLORD
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22
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19.
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ESTOPPEL CERTIFICATES
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23
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20.
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ABANDONMENT OF PREMISES
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23
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21.
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REMOVAL OF TRADE FIXTURES OF TENANT AT END OF TERM
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23
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22.
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SURRENDER OF LEASE
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23
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23.
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HOLDING OVER
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24
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24.
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LANDLORD DEFAULT; MORTGAGEE PROTECTIONS
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24
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25.
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DEFAULT; LANDLORD'S REMEDIES UPON DEFAULT
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24
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26.
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ATTORNEYS' AND ADMINISTRATIVE FEES ON DEFAULT
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27
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27.
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INSOLVENCY
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27
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28.
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ASSIGNMENT OR SUBLETTING
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27
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29.
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TRANSFER BY LANDLORD
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32
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30.
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DAMAGE
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32
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31.
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CONDEMNATION
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33
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32.
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SUBORDINATION TO ENCUMBRANCES
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34
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33.
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[INTENTIONALLY OMITTED]
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Error! Bookmark not defined.
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34.
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MISCELLANEOUS
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35
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35.
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ADDITIONAL PROVISIONS
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41
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RULES AND REGULATIONS
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EXHIBIT A PREMISES
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EXHIBIT B WORK LETTER
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EXHIBIT C COMMENCEMENT DATE MEMORANDUM
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EXHIBIT D CALIFORNIA ASBESTOS NOTICE
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EXHIBIT E FORM OF LETTER OF CREDIT
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EXHIBIT F OFFER SPACE
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EXHIBIT G FORM OF SUBORDINATION, NON DISTURBANCE AND ATTORNMENT AGREEMENT
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
444 CASTRO STREET
BASIC LEASE INFORMATION
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Lease Date
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June 9, 2020
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Tenant
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SENTINEL LABS, INC.,
A DELAWARE CORPORATION dba SentinelOne
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Contact Person
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Telephone
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Address
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Prior to the Commencement Date:
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From and After the Commencement Date:
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With an email copy to:
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Landlord
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SIC-MOUNTAIN BAY PLAZA, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
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Contact Person:
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Property Manager
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Telephone
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Address
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With a copy to:
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And to:
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Building
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444 Castro Street, Mountain View, California 94041. The term "Building" includes the building, parking areas, and the land and improvements surrounding the building and designated from time to time by Landlord as appurtenant thereto together with utilities, facilities, driveways, sidewalks, underground vaults, walkways and other amenities appurtenant to or servicing the building.
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Building Rentable Square Footage
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173,921 rentable square feet
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Premises
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Suite
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400
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Floor(s)
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Fourth (4th)
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Rentable Square Footage
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Approximately 10,740.
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Term
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Eighty-four (84) full calendar months
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Commencement Date
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Subject to the terms of Paragraph 2 of the Lease, the later to occur of (i) March 1, 2021, and (ii) the date Landlord delivers possession of the Premises to Tenant following the date upon which the "Tenant Improvements" are Substantially Completed (defined in the Work Letter attached as Exhibit B to the Lease), which Lease Commencement Date is anticipated to be March 1, 2021 (the "Anticipated Commencement Date").
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Expiration Date
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The last day of the eighty-fourth (84th) full calendar month following the Commencement Date
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Base Monthly Rental
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Period
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Annual Base Rent
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Base Monthly Rent
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Rate Per Rentable
Sq. Ft. (rounded to two decimals)
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Month 1 - Month 12
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$1,043,928.00
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$86,994.00
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$8.10
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Month 13 - Month 24
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$1,074,859.20
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$89,571.60
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$8.34
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Month 25 - Month 36
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$1,107,079.20
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$92,256.60
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$8.59
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Month 37 - Month 48
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$1,140,588.00
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$95,049.00
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$8.85
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Month 49 - Month 60
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$1,175,385.60
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$97,948.80
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$9.12
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Month 61 - Month 72
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$1,210,183.20
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$100,848.60
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$9.39
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Month 73 - Month 84
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$1,246,269.60
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$103,855.80
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$9.67
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Tenant's Share
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6.18%
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NNN Expenses and Taxes
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In addition to Base Monthly Rental, NNN Charges (as defined in Paragraph 3.C below) shall be paid monthly (initially in the amount of $24,916.80 per month) by Tenant pursuant to Paragraph 4.
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Payment Upon Lease Execution
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Base Monthly Rental together with estimated NNN Charges for the first full rent paying month of the Term, in the combined amount of $111,910.80, shall be paid by Tenant to Landlord in full upon Tenant's execution of the Lease.
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Use
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General office use and related ancillary uses, including sales and training uses; provided, however, that notwithstanding anything to the contrary set forth hereinabove, and as more particularly set forth in the Lease, Tenant shall be responsible for operating and maintaining the Premises pursuant to, and in no event may Tenant's permitted Use violate, (A) Landlord's "Rules and Regulations," as that term is set forth in Paragraph 13 of this Lease, (B) all applicable laws, (C) all applicable zoning, building codes and any applicable covenants, conditions, and restrictions, and (D) consistent with Class A office standards in the market in which the Building is located.
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Security Deposit
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[Intentionally Deleted.]
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Letter of Credit
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$855,441.00, subject to reduction pursuant to Paragraph 5.B below.
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Parking
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During the Term of the Lease, Tenant shall have the right to the use of twenty-seven (27) spaces in the parking facility servicing the Building (based on a parking ratio of 2.52) unreserved parking pass(es) for every 1,000 rentable square feet of the Premises at no charge.
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Brokers
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Landlord:
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Tenant:
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Guarantor(s)
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None.
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LANDLORD
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TENANT
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SIC- MOUNTAIN BAY PLAZA, LLC,
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SENTINEL LABS, INC.,
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a Delaware limited liability company
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a Delaware corporation
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By:
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The Swig Company, LLC, a Delaware limited
liability company as Property Manager
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By:
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/s/ Bob Parker
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Bob Parker
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By:
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/s/ Philip Connor Kidd IV
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Chief Financial Officer
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Philip Connor Kidd IV
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Executive Vice President and
Director of Asset Management
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Date:
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6/11/2020
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6/12/2020
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Date:
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NNN
OFFICE LEASE
This lease ("Lease") is made and entered into in Mountain View, California, on June 9, 2020 by and between SIC-MOUNTAIN BAY PLAZA, LLC, a Delaware limited liability company ("Landlord"), and SENTINEL LABS, INC., a Delaware corporation dba SentinelOne ("Tenant").
1. LEASE
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord the Premises described in the Basic Lease Information, and depicted on Exhibit A attached hereto, upon and subject to all of the terms, covenants and conditions herein set forth. Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of said terms, covenants and conditions, and Tenant agrees that this Lease is made upon the condition of such performance. Except as otherwise specifically set forth in this Lease, Tenant accepts the Premises in its “as is” state of repair and condition, and it is specifically agreed that Landlord has made no representations to Tenant regarding the condition of the Premises or the Building. Tenant’s lease of the Premises shall include the right to use, in common with others and subject to the other provisions of this Lease, the public lobbies, entrances, stairs, elevators and other public portions of the Building, all as may be designated by Landlord from time to time. All of the exterior windows and outside walls of the Premises and any spaces in the Premises used for shafts, stacks, pipes, conduits, ducts, electrical equipment or other utilities or Building facilities are reserved solely to Landlord and Landlord shall have a right of access through the Premises for the purpose of operating, maintaining and repairing the same, in accordance with Paragraph 18 hereof.
2. TERM
The Premises are leased to Tenant for a term (herein called the "Term") to commence and end on the dates respectively specified in the Basic Lease Information, unless the Term shall sooner terminate as hereinafter provided. Notwithstanding the foregoing, if the Term is scheduled to end on a date that is other than the last day of the month, the Term shall be extended so that it ends on the last day of the applicable month. If Landlord, for any reason whatsoever, is unable to deliver possession of the Premises to Tenant in the condition required by this Lease by the date specified herein as the Anticipated Commencement Date, Landlord shall not be liable for any loss resulting therefrom, and this Lease shall not be either void or voidable. The parties acknowledge that as of the date of this Lease, there is a global pandemic caused by the COVID-19 virus outbreak. In an effort to curb the rapid spread of coronavirus, residents have been ordered to shelter in their place of residence pursuant to California Governor Gavin Newsom’s Executive Order N-33-20 and all orders issued by local, state, or federal authorities applicable to the Premises and in effect as of the date of this Lease and directly related to the Covid-19 pandemic that materially limits or prohibits Tenant’s employees from traveling to and accessing and using the Premises for the permitted Use hereunder (as may be amended or renewed, the “Shelter in Place Order”). Notwithstanding anything to the contrary contained herein, in the event the Tenant Improvements are Substantially Completed on a date when the Shelter in Place Order is in effect and Landlord would otherwise deliver the Premises to Tenant and pursuant to the Shelter in Place Order Tenant is prohibited from accessing and using the Premises for the permitted Use hereunder, Landlord agrees to temporarily postpone the Commencement Date until the earlier to occur of (i) the date the Shelter in Place Order is no longer in effect or is modified so that it no longer prohibits Tenant’s employees from traveling to, using, and accessing the Premises for the permitted Use hereunder, or (ii) the date that is fifteen (15) days following the date upon which the Tenant Improvements are Substantially Completed and Landlord would otherwise deliver the Premises to Tenant. Provided Tenant has timely delivered all prepaid rental, the Letter of Credit, and insurance certificates required hereunder, if the Premises are not delivered to Tenant in the condition required by this Lease within two hundred seventy (270) days following Landlord’s receipt of permits for the Tenant Improvements (the “Outside Delivery Date”), taking into consideration the effect of any Tenant Delays, then Tenant shall be entitled to an abatement of Base Rent equal to one (1) day of Base Rent for each day until the Premises are delivered to Tenant in the condition required hereunder. If the Premises are not delivered in the condition required by this Lease within three hundred sixty (360) days following Landlord’s receipt of permits for the Tenant Improvements (the “Outside Termination Date”), as extended by the number of days of Tenant Delay (as
set forth in the Work Letter), if any, Tenant may elect to terminate this Lease by providing notice to Landlord within ten (10) business days following the Outside Termination Date but prior to the date that the entire Premises are actually delivered to Tenant in the condition required herein. Landlord and Tenant acknowledge and agree that the Outside Delivery Date and the Outside Termination Date shall be postponed by the number of days the delivery of the Premises is delayed due to events of force majeure described in Paragraph 24.B. If any actual delay in the Substantial Completion of the Tenant Improvements is the result of a Tenant Delay (pursuant to the Work Letter), then the Substantial Completion of the Tenant Improvements shall be deemed to be the date the Tenant Improvements would have been Substantially Completed if no Tenant Delay had occurred; provided, however, that no Tenant Delay shall be deemed to have occurred unless and until Landlord has provided written notice to Tenant specifying the action or inaction that constitutes the Tenant Delay and if such action or inaction is not cured within two (2) business days after receipt of such notice, then a Tenant Delay, as set forth in such notice, shall be deemed to have occurred commencing as of the date such notice is received and continuing for the number of days the Substantial Completion of the Tenant Improvements was in fact actually delayed. At any time during the Term, Landlord may deliver to Tenant a notice in the form as set forth in Exhibit C, attached hereto, as confirmation as to the commencement date and expiration date of the Term, which Tenant shall execute and return to Landlord within ten (10) business days of receipt thereof. If Tenant fails to execute and return such notice to Landlord within such ten (10) business day period, the parties agree that the commencement date and expiration date of the Term shall be the dates set forth in such notice delivered by Landlord.
3. RENT
A. Base Monthly Rental. Tenant agrees to pay Base Monthly Rental to Landlord, without notice, in advance, on the first day of each calendar month of the Term. Notwithstanding the foregoing, Tenant shall pay one (1) month of Base Monthly Rental together with estimated NNN Charges for the first full rent paying month of the Term upon Tenant’s execution of the Lease and such payment shall be credited to the first Base Monthly Rental and NNN Charges due. In addition, Tenant shall provide the Letter of Credit within one (1) business day following the mutual execution and delivery of this Lease. In the event the Term commences on a day other than the first day of a calendar month, then the Base Monthly Rental for said fractional month shall be prorated on the basis of a thirty (30) -day month.
B. Payments. Base Monthly Rental shall be paid by Tenant to Landlord, without deduction or offset, in lawful money of the United States of America, in accordance with such procedures and to such persons and/or places as Landlord may from time to time designate in a notice to Tenant.
C. Additional Rent. In addition to the Base Monthly Rental, Tenant shall pay to Landlord all charges and other amounts required under this Lease (herein called "Additional Rent"), including, without limitation, Additional Rent resulting from NNN Expenses and Taxes (“NNN Charges”) pursuant to the provisions of Paragraph 4 hereof. All such Additional Rent shall be payable to Landlord at the place where the Base Monthly Rental is payable and Landlord shall have the same remedies for a default in the payment of Additional Rent as for a default in the payment of Base Monthly Rental. All sums payable by Tenant under this Lease are collectively referred to as "Rent".
4. ADDITIONAL RENT FOR NNN EXPENSES AND TAXES
A. Definitions. For purposes of this Paragraph 4, the following terms shall have the meanings hereinafter set forth:
(1) "Tenant's Share" shall mean the percentage figure so specified in the Basic Lease Information. Tenant's Share has been computed by dividing the rentable area of the Premises by the total rentable area of the Building. In the event that either the rentable area of the Premises or the total rentable area of the Building is changed due to physical changes, Tenant's Share may, at Landlord's election, be appropriately adjusted, and, as to the Tax Year or Expense Year (as said terms are hereinafter defined) in which such adjustment occurs, Tenant's Share shall be determined on the basis of the number of days during such Tax Year and Expense Year at each such percentage.
(2) "Tax Year" shall mean each twelve (12) -month consecutive period commencing January 1st of each year during the Term, including any partial years during which the Lease may commence or end; provided that Landlord, upon notice to Tenant, may change the Tax Year from time to time to any other twelve (12) month consecutive period and, in the event of any such change, Tenant's Share of Taxes (as hereinafter defined) shall be equitably adjusted for the Tax Years involved in any such change.
(3) "Taxes" shall mean all taxes, assessments and charges levied upon or with respect to the Building and any personal property of Landlord used in the operation thereof, or Landlord's interest in the Building and such personal property. Taxes shall include, without limitation, all general real property taxes and general and special assessments, supplemental assessments which may result from changes in ownership or completion of new construction; escape assessments, charges, fees or assessments for transit, housing, police, fire, improvement districts, or other governmental services or purported benefits to the Building, service payments in lieu of taxes, taxes or surcharges on rents, and any tax, fee or excise on the act of entering into this Lease or any other lease of space in the Building, or on the use or occupancy of the Building or any part thereof, or on the rent payable under any lease or in connection with the business of renting space in the Building, that are now or hereafter levied or assessed against Landlord by the United States of America, the State of California, the City and County in which the Building is located, or any political subdivision, public corporation, district or other political or public entity, and shall also include any other tax, fee or other excise, however described, that may be levied or assessed as a substitute for, or as an addition to, in whole or in part, any other Taxes, whether or not now customary or in the contemplation of the parties on the date of this Lease. Tenant shall pay, within thirty (30) days of Landlord’s demand (with reasonable backup documentation), its share (as reasonably determined by Landlord) of any early care and commercial rents tax (as the same may be supplemented, amended, modified or replaced from time to time) for any Tax Year in which such tax is imposed upon Landlord by any applicable governmental authority. Tenant and Landlord hereby acknowledge and agree that Proposition 13 was adopted by the voters of the State of California in the June 1978 election (“Proposition 13”) and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants, and, in further recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Taxes shall also include any governmental or private assessments or the Building’s contribution towards a governmental or private cost-sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies. Taxes shall not include franchise taxes, documentary transfer taxes, inheritance or capital stock taxes or income taxes measured by the net income of Landlord from all sources, unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord as a substitute for, or as an addition to, in whole or in part, any other tax that would otherwise constitute a Tax. Taxes shall also include reasonable legal fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Taxes.
(4) "Expense Year" shall mean each twelve (12) month consecutive period commencing January 1st of each year during the Term, including any partial years during which the Lease may commence or end; provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) month consecutive period, and, in the event of any such change, Tenant's Share of Expenses (as hereinafter defined) shall be equitably adjusted for the Expense Years involved in any such change.
(5) "Expenses" shall mean the total costs and expenses paid or incurred by Landlord in connection with the management, operation, maintenance and repair of the Building, in accordance with sound real estate management and accounting practices, consistently applied, including, without limitation, (i) the cost of air conditioning, electricity, electrical surcharges for excessive or peak time use, steam, heating, mechanical, ventilating, elevator systems and all other utilities and the cost of supplies and equipment and maintenance and service contracts in connection therewith, (ii) the cost of Building maintenance, repair, and cleaning, (iii) the cost of fire, extended coverage, boiler, sprinkler, commercial general liability, property damage, rental interruption, earthquake and other insurance together with any
deductibles charged to or paid by Landlord, (iv) wages, salaries and other labor costs, including taxes, insurance, retirement, medical and other employee benefits (provided that if any employee performs services in connection with the Building and other buildings, costs associated with such employee may be proportionately included in Expenses based on the percentage of time such employee spends in connection with the operation, maintenance and management of the Building), (v) fees, charges and other costs, including management fees, consulting fees, legal fees and accounting and audit fees, of all independent contractors engaged by Landlord or reasonably charged by Landlord if Landlord performs management services in connection with the Building not to exceed three percent (3%) of gross revenues, (vi) the cost of supplying, replacing and cleaning employee uniforms, the cost of Building engineer services, costs of upkeep and decoration of all common areas of the Building (vii) the fair market rental value of Landlord's and the property manager's offices in or serving the Building, (viii) the costs of normal repair and replacement of worn-out equipment, facilities and installations, (ix) the cost of any capital improvements made by Landlord to the Building or capital assets acquired by Landlord in order to comply with any local, state, or federal law, ordinance, rule, regulation, code or order of any governmental entity or insurance requirement (collectively “Legal Requirements”), or to comply with any amendment or change to the enactment or interpretation of any Legal Requirement, (x) the cost of any capital improvements made to the Building for the protection of the health or safety of the occupants, in order to supply a continuous or reliable source of electricity, or as a labor saving device to effect other economies or efficiencies in the operation or maintenance of the Building, such costs under (ix) and (x) above to be amortized over such reasonable period as Landlord shall determine in accordance with its real estate management and accounting practices for the Building, consistently applied, together with interest on the unamortized balance at the rate of nine percent (9%) per annum or such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing such capital improvements, (xi) costs imposed by any association of which the Building is a member, and (xii) any other expenses of any other kind whatsoever reasonably incurred in managing, operating, maintaining, and repairing the Building. Variable components of Expenses shall be adjusted to reflect one hundred percent (100%) occupancy of the Building during any period in which the Building is not one hundred percent (100%) occupied. In addition, if any particular work or service includable in Expenses is not furnished to a tenant who has undertaken to perform such work or service itself, Expenses shall be deemed to be increased by an amount equal to the additional Expenses which would have been incurred if Landlord had furnished such work or service to such tenant and conversely, Expenses shall exclude the cost of services or work incurred directly by Tenant (and not by reimbursement for Expenses). The parties agree that any statements to the effect that Landlord is to perform certain of its obligations hereunder at its own or sole cost or expense shall not be interpreted as excluding any cost from constituting an Expense or a component of Taxes if such cost is otherwise an Expense or component of axes. There shall be excluded from Expenses the following: (a) costs in connection with leasing space in the Building, including brokerage commissions, tenant improvements (except in connection with general maintenance and repairs provided to tenants of the Building in general), brochures and marketing supplies, and legal fees in negotiating and preparing lease documents or incurred in connection with disputes with Building tenants or prospective Building tenants; (b) except as specifically provided in (viii), (ix) and (x) above, any capital improvement costs; (c) costs in connection with services or other benefits that are provided to another tenant or occupant of the Building and that are not available to Tenant; (d) repairs or work paid from insurance, or condemnation or warranty proceeds, or other costs for which Landlord is reimbursed by a third party or a tenant of the Building (other than by means of an Expense reimbursement provision); (e) costs, penalties or fines arising from Landlord’s violation of Legal Requirements; (f) overhead and profit paid to Landlord or its affiliated subsidiaries or parent entities for goods and/or services in the Building, to the extent the same exceeds the costs which would be incurred for the same if provided by unaffiliated third parties on a competitive basis; (g) reserves of any kind; (h) principal payments, late charges, penalties, liquidated damages, bad-debt expenses, interest, amortization or other payments on mortgages, or ground lease payments, if any; (i) costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, including costs of defending any lawsuits with any mortgagee, and the costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord’s interest in the Building; (j) any cost or expense related to removal, cleaning, abatement or remediation of Hazardous Materials in or about the Building, including, without limitation, hazardous substances in the ground water or soil, except to the extent such removal, cleaning, abatement or remediation is related to the general repair and maintenance of the Building; (k) the cost of complying
with any Legal Requirements in effect (and as interpreted and enforced) on the date of this Lease, provided that if any portion of the Building that was in compliance with all applicable Legal Requirements on the date of this Lease becomes out of compliance due to normal wear and tear, the cost of bringing such portion of the Building into compliance shall be included in Expenses unless otherwise excluded pursuant to the terms hereof; and (l) any costs recovered by Landlord to the extent such cost recovery allows Landlord to recover more than 100% of Expenses.
B. Payment. Tenant shall pay to Landlord as Additional Rent one-twelfth (1/12th) of Tenant's Share of the Taxes of each Tax Year on or before the first day of each month during such Tax Year, in advance, in an amount estimated by Landlord and billed by Landlord to Tenant; provided that Landlord shall have the right initially to determine monthly estimates and to revise such estimates from time to time. With reasonable promptness after Landlord has received the tax bills for any Tax Year, Landlord shall furnish Tenant with a statement (herein called "Landlord's Tax Statement") setting forth the amount of Taxes for such Tax Year, and Tenant's Share, if any, of Taxes. If the actual Taxes for such Tax Year exceed the estimated Taxes paid by Tenant for such Tax Year, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual Taxes within thirty (30) days after the receipt of Landlord's Tax Statement, and if the total amount paid by Tenant for any such Tax Year shall exceed the actual Taxes for such Tax Year, such excess shall be credited against the next installment of Taxes due from Tenant to Landlord hereunder or reimbursed to Tenant within sixty (60) days of the date of the statement if the Term has expired, but only if Tenant has provided Landlord with a valid forwarding address.
C. Landlord’s Expense Estimate. Tenant shall pay to Landlord as Additional Rent one-twelfth (1/12th) of Tenant's Share of the Expenses for each Expense Year on or before the first day of each month of such Expense Year, in advance, in an amount estimated by Landlord and billed by Landlord to Tenant; provided that Landlord shall have the right initially to determine monthly estimates and to revise such estimates from time to time. With reasonable promptness after the expiration of each Expense Year, Landlord shall furnish Tenant with a statement (herein called "Landlord's Expense Statement"), setting forth in reasonable detail the Expenses for the Expense Year, and Tenant's Share, if any, of Expenses. If the actual Expenses for such Expense Year exceed the estimated Expenses paid by Tenant for such Expense Year, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual Expenses within thirty (30) days after the receipt of Landlord's Expense Statement, and if the total amount paid by Tenant for any such Expense Year shall exceed the actual Expenses for such Expense Year, such excess shall be credited against the next installment of the estimated Expenses due from Tenant to Landlord hereunder or reimbursed to Tenant within sixty (60) days of the date of the statement if the Term has expired, but only if Tenant has provided Landlord with a valid forwarding address.
D. Reconciliation. If the Expiration Date of the Term shall occur on a date other than the end of a Tax Year or Expense Year, Tenant's Share of Taxes and Expenses for the Tax Year and the Expense Year in which the Expiration Date falls shall be in the proportion that the number of days from and including the first day of the Tax Year or Expense Year in which the Expiration Date occurs to and including the Expiration Date bears to 360; provided, however, Landlord may, pending the determination of the amount of Taxes and Expenses, if any, for such partial Tax Year and Expense Year, furnish Tenant with statements of estimated Taxes, estimated Expenses, and Tenant's Share of each thereof for such partial Tax Year and Expense Year. Within thirty (30) days after receipt of such estimated statement, Tenant shall remit to Landlord, as Additional Rent, the amount of Tenant's Share of such Taxes and Expenses. If, after such Taxes and Expenses have been finally determined and Landlord's Tax Statement and Landlord's Expense Statement have been furnished to Tenant, there shall have been an underpayment of Tenant's Share of Taxes or Expenses, Tenant shall remit the amount of such underpayment to Landlord within thirty (30) days of receipt of such statements, and if there shall have been an overpayment, Landlord shall remit the amount of any such overpayment to Tenant with the delivery of Landlord’s Tax Statement and Landlord’s Expense Statement (as applicable), but only if Tenant has provided Landlord with a valid forwarding address.
E. Books and Records. Landlord shall maintain adequate records of Expenses and Taxes in accordance with sound real estate accounting and management practices, consistently applied. Any statements provided by Landlord in connection with Tenant’s Share thereof shall be final and binding on Tenant unless Tenant, within one hundred eighty (180) days of its receipt thereof, shall contest any item therein by giving written notice to Landlord, specifying each item contested and the reasons therefor. In such event, Landlord and Tenant shall endeavor in good faith to promptly resolve any disagreement set forth in Tenant’s notice provided that Tenant shall not withhold payment of any contested or disputed item.
F. Audit. Upon Tenant's written request given not more than one hundred twenty (120) days after Tenant's receipt of a statement provided by Landlord in connection with Tenant’s Share for a particular year, and provided that Tenant is not then in default under this Lease beyond the applicable notice and cure period provided in this Lease, specifically including, but not limited to, the timely payment of Additional Rent (whether or not the same is the subject of the audit contemplated herein), Landlord shall furnish Tenant with such reasonable supporting documentation in connection with said Expenses as Tenant may reasonably request. Landlord shall provide said documentation to Tenant within thirty (30) days after Tenant's written request therefor. Within one hundred eighty (180) days after receipt of a Statement by Tenant (the "Audit Period"), if Tenant disputes the amount of Expenses set forth in such statement, an independent certified public accountant (which accountant (i) shall be subject to Landlord’s reasonable approval, (ii) [intentionally omitted], (iii) is not working on a contingency fee basis [i.e., Tenant must be billed based on the actual time and materials that are incurred by the certified public accounting firm in the performance of the audit], and (iv) shall not as of the time of the audit currently be providing accounting and/or lease administration services to another tenant in the Building in connection with a review or audit by such other tenant of Expenses), designated and paid for by Tenant, may, after reasonable notice to Landlord and at reasonable times, audit Landlord's records with respect to such statement at Landlord's corporate offices, provided that (A) Tenant is not then in default under this Lease (beyond the applicable notice and cure periods provided under this Lease), (B) Tenant has paid all amounts required to be paid under the applicable statement, and (C) a copy of the audit agreement between Tenant and its particular certified public accounting firm has been delivered to Landlord prior to the commencement of the audit. In connection with such audit, Tenant and Tenant's certified public accounting firm must agree in advance to follow Landlord's reasonable rules and procedures regarding an audit of the aforementioned Landlord records, and shall execute a commercially reasonable confidentiality agreement regarding such audit. If the audit reveals an overcharge to Tenant that exceeds the actual Expenses by five percent (5%) then, in addition to promptly repaying such overpayment to Tenant, Landlord shall pay the reasonable cost of conducting such audit provided that such cost shall not exceed $5,000. Any audit report prepared by Tenant's certified public accounting firm shall be delivered concurrently to Landlord and Tenant within the Audit Period. Tenant's failure to audit the amount of Expenses set forth in any such statement within the Audit Period shall be deemed to be Tenant's approval of such statement and Tenant, thereafter, waives the right or ability to audit the amounts set forth in such statement. If after such audit, Tenant still disputes such Expenses, an audit to determine the proper amount shall be made, at Tenant's expense, by an independent certified public accountant selected by Landlord and subject to Tenant's reasonable approval. Tenant hereby acknowledges that Tenant's sole right to audit Landlord's records and to contest the amount of Expenses payable by Tenant shall be as set forth in this Paragraph 4.F, and Tenant hereby waives any and all other rights pursuant to applicable law to audit such records and/or to contest the amount of Expenses payable by Tenant.
G. Personal Property Taxes. Tenant shall also pay when due one hundred percent all taxes levied against all personal property located within the Premises, including but not limited to such taxes levied on equipment, inventory, trade fixtures and furnishings, regardless of whether or not the same belong to Landlord or Tenant, and Tenant shall cause such personal property taxes to be assessed and billed separately from Landlord's taxes and cause such tax bill to be sent directly to Tenant. Tenant shall also pay one hundred percent of all Taxes levied against any above Building Standard improvements made to the Premises by on behalf of or for Tenant, as and when paid by Landlord, and within thirty (30) days of receipt of invoice from Landlord.
H. Survival. In the event of any mutually agreed termination of this Lease prior to its scheduled expiration date, then notwithstanding any agreement to the contrary, Tenant shall remain liable for all Rent accrued or payable under this Lease through said date of termination.
5. LETTER OF CREDIT; LATE CHARGE
A. [Intentionally Omitted]
B. Letter of Credit.
(1) Tenant shall deliver to Landlord, within one (1) business day following the mutual execution and delivery of this Lease, an unconditional, clean, irrevocable letter of credit (the "L-C") in the amount set forth in the Basic Lease Information (the "L-C Amount"), which L-C shall be issued by a solvent and nationally recognized bank (a bank which accepts deposits, maintains accounts, has a local San Francisco, California office (or which will accept fax presentments) which will negotiate a letter of credit, and whose deposits are insured by the FDIC) reasonably acceptable to Landlord (such approved, issuing bank being referred to herein as the "Bank"), which Bank must have a short term Fitch Rating which is not less than "F1", and a long term Fitch Rating which is not less than “A” (or in the event such Fitch Ratings are no longer available, a comparable rating from Standard and Poor’s Professional Rating Service or Moody’s Professional Rating Service) (collectively, the “Bank’s Credit Rating Threshold”). Notwithstanding anything to the contrary set forth herein, Landlord hereby preapproves the L-C in the form of Exhibit E, attached hereto and Silicon Valley Bank as the issuing Bank for the L-C and all requirements of this Paragraph 5.B shall apply to any other Bank. Tenant shall pay all expenses, points and/or fees incurred by Tenant in obtaining the L-C. The L-C shall (i) be "callable" at sight, irrevocable and unconditional, (ii) be maintained in effect, whether through renewal or extension, for the period commencing on the date of this Lease and continuing until the date (the "L-C Expiration Date") that is no less than ninety (90) days after the expiration of the Term, and Tenant shall deliver a new L-C or certificate of renewal or extension to Landlord at least sixty (60) days prior to the expiration of the L-C then held by Landlord, without any action whatsoever on the part of Landlord, (iii) be fully assignable by Landlord, its successors and assigns, (iv) permit partial draws and multiple presentations and drawings, and (v) be otherwise subject to the International Standby Practices-ISP 98, International Chamber of Commerce Publication #590. Landlord, or its then managing agent, shall have the right to draw down an amount up to the face amount of the L-C if any of the following shall have occurred or be applicable: (A) such amount is due to Landlord under the terms and conditions of this Lease, or (B) Tenant has filed a voluntary petition under the U. S. Bankruptcy Code or any state bankruptcy code (collectively, "Bankruptcy Code"), or (C) an involuntary petition has been filed against Tenant under the Bankruptcy Code, or (D) the Lease has been rejected, or is deemed rejected, under Section 365 of the U.S. Bankruptcy Code, following the filing of a voluntary petition by Tenant under the Bankruptcy Code, or the filing of an involuntary petition against Tenant under the Bankruptcy Code, or (E) the Bank has notified Landlord that the L-C will not be renewed or extended through the L-C Expiration Date, or (F) Tenant is placed into receivership or conservatorship, or becomes subject to similar proceedings under Federal or State law, or (G) Tenant executes an assignment for the benefit of creditors, or (H) if any of the Bank's Fitch Ratings (or other comparable ratings to the extent the Fitch Ratings are no longer available) have been reduced below the Bank's Credit Rating Threshold, or (I) there is otherwise a material adverse change in the financial condition of the Bank, and Tenant has failed to provide Landlord with a replacement letter of credit, conforming in all respects to the requirements of this Paragraph 5 (including, but not limited to, the requirements placed on the issuing Bank more particularly set forth in this Paragraph 5 above), in the amount of the applicable L-C Amount, within ten (10) days following Landlord’s written demand therefor (with no other notice or cure or grace period being applicable thereto, notwithstanding anything in this Lease to the contrary) (each of the foregoing being an "L-C Draw Event"). The L-C shall be honored by the Bank regardless of whether Tenant disputes Landlord's right to draw upon the L-C, and regardless of any discrepancies between the L-C and this Lease. In addition, in the event the Bank is placed into receivership or conservatorship by the Federal Deposit Insurance Corporation or any successor or similar entity, then, effective as of the date such receivership or conservatorship occurs, said L-C shall be deemed to fail to meet the requirements of this Paragraph 5, and, within ten (10) business days following Landlord's notice to Tenant of such receivership or
conservatorship (the "L-C FDIC Replacement Notice"), Tenant shall replace such L-C with a substitute letter of credit from a different issuer (which issuer shall meet or exceed the Bank's Credit Rating Threshold and shall otherwise be acceptable to Landlord in its reasonable discretion) and that complies in all respects with the requirements of this Paragraph 5. If Tenant fails to replace such L-C with such conforming, substitute letter of credit pursuant to the terms and conditions of this Paragraph 5, then, notwithstanding anything in this Lease to the contrary, Landlord shall have the right to declare Tenant in default of this Lease for which there shall be no notice or grace or cure periods being applicable thereto (other than the aforesaid ten (10) business day period). Tenant shall be responsible for the payment of any and all costs incurred with the review of any replacement L-C (including without limitation Landlord’s reasonable attorneys’ fees), which replacement is required pursuant to this paragraph or is otherwise requested by Tenant. In the event of an assignment by Tenant of its interest in the Lease (and irrespective of whether Landlord's consent is required for such assignment), the acceptance of any replacement or substitute letter of credit by Landlord from the assignee shall be subject to Landlord's prior written approval, in Landlord's sole and absolute discretion, and the attorney's fees incurred by Landlord in connection with such determination shall be payable by Tenant to Landlord within ten (10) days of billing.
(2) Tenant hereby acknowledges and agrees that Landlord is entering into this Lease in material reliance upon the ability of Landlord to draw upon the L-C upon the occurrence of any L-C Draw Event. In the event of any L-C Draw Event, Landlord may, but without obligation to do so, and without notice to Tenant (except in connection with an L-C Draw Event under this Paragraph 5 above), draw upon the L-C, in part or in whole, to cure any such L-C Draw Event and/or to compensate Landlord for any and all damages of any kind or nature sustained or which Landlord reasonably estimates that it will sustain resulting from Tenant's breach or default of the Lease or other L-C Draw Event and/or to compensate Landlord for any and all damages arising out of, or incurred in connection with, the termination of this Lease, including, without limitation, those specifically identified in Section 1951.2 of the California Civil Code. The use, application or retention of the L-C, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this Lease or by any applicable law, it being intended that Landlord shall not first be required to proceed against the L-C, and such L-C shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. Tenant agrees not to interfere in any way with payment to Landlord of the proceeds of the L-C, either prior to or following a "draw" by Landlord of any portion of the L-C, regardless of whether any dispute exists between Tenant and Landlord as to Landlord's right to draw upon the L-C. No condition or term of this Lease shall be deemed to render the L-C conditional to justify the issuer of the L-C in failing to honor a drawing upon such L-C in a timely manner. Tenant agrees and acknowledges that (i) the L-C constitutes a separate and independent contract between Landlord and the Bank, (ii) Tenant is not a third party beneficiary of such contract, (iii) Tenant has no property interest whatsoever in the L-C or the proceeds thereof, and (iv) in the event Tenant becomes a debtor under any chapter of the Bankruptcy Code, Tenant is placed into receivership or conservatorship, and/or there is an event of a receivership, conservatorship or a bankruptcy filing by, or on behalf of, Tenant, neither Tenant, any trustee, nor Tenant's bankruptcy estate shall have any right to restrict or limit Landlord's claim and/or rights to the L-C and/or the proceeds thereof by application of Section 502(b)(6) of the U. S. Bankruptcy Code or otherwise.
(3) If, as a result of any drawing by Landlord of all or any portion of the L-C, the amount of the L-C shall be less than the L-C Amount, Tenant shall, within ten (10) business days thereafter, provide Landlord with additional letter(s) of credit in an amount equal to the deficiency, and any such additional letter(s) of credit shall comply with all of the provisions of this Paragraph 5, and if Tenant fails to comply with the foregoing, the same shall be subject to the terms of this Paragraph 5 below. Tenant further covenants and warrants that it will neither assign nor encumber the L-C or any part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Without limiting the generality of the foregoing, if the L-C expires earlier than the L-C Expiration Date, Landlord will accept a renewal thereof (such renewal letter of credit to be in effect and delivered to Landlord, as applicable, not later than sixty (60) days prior to the expiration of the L-C), which shall be irrevocable and automatically renewable as above provided through the L-C Expiration Date upon the same terms as the expiring L-C or such other
terms as may be acceptable to Landlord in its sole discretion. However, if the L-C is not timely renewed, or if Tenant fails to maintain the L-C in the amount and in accordance with the terms set forth in this Paragraph 5, Landlord shall have the right to either (x) present the L-C to the Bank in accordance with the terms of this Paragraph 5, and the proceeds of the L-C may be applied by Landlord against any Rent payable by Tenant under this Lease that is not paid when due and/or to pay for all losses and damages that Landlord has suffered or that Landlord reasonably estimates that it will suffer as a result of any breach or default by Tenant under this Lease, or (y) pursue its remedy under this Lease. In the event Landlord elects to exercise its rights under the foregoing item (x), (I) any unused proceeds shall constitute the property of Landlord (and not Tenant’s property or, in the event of a receivership, conservatorship, or a bankruptcy filing by, or on behalf of, Tenant, property of such receivership, conservatorship or Tenant’s bankruptcy estate) and need not be segregated from Landlord’s other assets, and (II) Landlord agrees to pay to Tenant within thirty (30) days after the L-C Expiration Date the amount of any proceeds of the L-C received by Landlord and not applied against any Rent payable by Tenant under this Lease that was not paid when due or used to pay for any losses and/or damages suffered by Landlord (or reasonably estimated by Landlord that it will suffer) as a result of any breach or default by Tenant under this Lease; provided, however, that if prior to the L-C Expiration Date a voluntary petition is filed by Tenant, or an involuntary petition is filed against Tenant by any of Tenant’s creditors, under the Bankruptcy Code, then Landlord shall not be obligated to make such payment in the amount of the unused L-C proceeds until either all preference issues relating to payments under this Lease have been resolved in such bankruptcy or reorganization case or such bankruptcy or reorganization case has been dismissed.
(4) [Intentionally Omitted]
(5) The L-C shall also provide that Landlord may, at any time and without notice to Tenant and without first obtaining Tenant's consent thereto, transfer (one or more times) all or any portion of its interest in and to the L-C to another party, person or entity, regardless of whether or not such transfer is from or as a part of the assignment by Landlord of its rights and interests in and to this Lease. In the event of a transfer of Landlord's interest under this Lease, Landlord shall transfer the L-C, in whole or in part, to the transferee and thereupon Landlord shall, without any further agreement between the parties, be released by Tenant from all liability therefor, and it is agreed that the provisions hereof shall apply to every transfer or assignment of the whole of said L-C to a new landlord. In connection with any such transfer of the L-C by Landlord, Tenant shall, at Tenant's sole cost and expense, execute and submit to the Bank such applications, documents and instruments as may be necessary to effectuate such transfer and, Tenant shall be responsible for paying the Bank's transfer and processing fees in connection therewith; provided that, Landlord shall have the right (in its sole discretion), but not the obligation, to pay such fees on behalf of Tenant, in which case Tenant shall reimburse Landlord within ten (10) days after Tenant's receipt of an invoice from Landlord therefor.
(6) Landlord and Tenant (1) acknowledge and agree that in no event or circumstance shall the L-C or any renewal thereof or substitute therefor or any proceeds thereof be deemed to be or be treated as a “security deposit” under any law applicable to security deposits in the commercial context, including, but not limited to, Section 1950.7 of the California Civil Code, as such Section now exists or as it may be hereafter amended or succeeded (the “Security Deposit Laws”), (2) acknowledge and agree that the L-C (including any renewal thereof or substitute therefor or any proceeds thereof) is not intended to serve as a security deposit, and the Security Deposit Laws shall have no applicability or relevancy thereto, and (3) waive any and all rights, duties and obligations that any such party may now, or in the future will, have relating to or arising from the Security Deposit Laws. Tenant hereby irrevocably waives and relinquishes the provisions of Section 1950.7 of the California Civil Code and any successor statute, and all other provisions of law, now or hereafter in effect, which (x) establish the time frame by which a landlord must refund a security deposit under a lease, and/or (y) provide that a landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by a tenant or to clean the premises, it being agreed that Landlord may, in addition, claim those sums specified in this Paragraph 5 and/or those sums reasonably necessary to (a) compensate Landlord for any loss or damage caused by Tenant's breach of this Lease, including any damages Landlord suffers following termination of this Lease, and/or (b) compensate Landlord for any and all damages arising out of, or incurred in connection with, the termination of this
Lease, including, without limitation, those specifically identified in Section 1951.2 of the California Civil Code.
(7) Tenant agrees not to interfere in any way with any payment to Landlord of the proceeds of the L-C, either prior to or following a "draw" by Landlord of all or any portion of the L-C, regardless of whether any dispute exists between Tenant and Landlord as to Landlord's right to draw down all or any portion of the L-C. No condition or term of this Lease shall be deemed to render the L-C conditional and thereby afford the Bank a justification for failing to honor a drawing upon such L-C in a timely manner. Tenant shall not request or instruct the Bank of any L-C to refrain from paying sight draft(s) drawn under such L-C. Tenant's sole remedy in connection with the improper presentment or payment of sight drafts drawn under any L-C shall be the right to obtain from Landlord a refund of the amount of any sight draft(s) that were improperly presented or the proceeds of which were misapplied.
(8) Subject to the remaining terms of this Paragraph 5.B(8), and provided that no material nonmonetary or monetary default (beyond applicable notice and cure periods) has occurred hereunder at any time prior to the effective date (each a “L-C Reduction Effective Date”) of any reduction of the L-C Amount (the “L-C Reduction Conditions”), then Tenant shall have the right to reduce the L-C Amount so that the reduced L-C Amounts will be as follows: (i) $760,392.00 effective as of the first day of the second Lease Year; (ii) $665,343.00 effective as of the first day of the third Lease Year; (iii) $570,294.00 effective as of the first day of the fourth Lease Year; (iv) $475,245.00 effective as of the first day of the fifth Lease Year; (v) $380,196.00 effective as of the first day of the sixth Lease Year; and (vi) $285,147.00 effective as of the first day of the seventh Lease Year. If Tenant is entitled to a reduction in the L-C Amount, Tenant shall provide Landlord with written notice requesting that the L-C Amount be reduced as provided above (the “L-C Reduction Notice”). Notwithstanding anything to the contrary contained herein, if Tenant fails to satisfy the L-C Reduction Conditions at any time prior to any L-C Reduction Effective Date, then Tenant shall have no further right to reduce the L-C Amount as described herein. Notwithstanding the foregoing, if the failure to satisfy the L-C Reduction Conditions was due to a material nonmonetary or monetary default by Tenant (beyond applicable notice and cure periods), and thereafter no material nonmonetary or monetary default occurs during the twenty-four (24) month period following the L-C Reduction Effective Date when the L-C Reduction Conditions were not met, then Tenant’s right to reduce the L-C Amount as described herein shall be reinstated. If a material nonmonetary or monetary default by Tenant occurs after such twenty-four (24) month period then Tenant shall have no further right to reduce the L-C Amount as described herein. If Tenant provides Landlord with a L-C Reduction Notice, and Landlord determines that Tenant is entitled to reduce the L-C Amount as provided herein, any reduction in the L-C Amount shall be accomplished by Tenant providing Landlord with a substitute L-C in the reduced L-C Amount or an amendment to the existing L-C reducing the L-C Amount of the existing L-C to the reduced L-C Amount, which substitute L-C or amendment, as applicable, shall comply with the requirements of this Paragraph 5.B. If Tenant provides Landlord with a substitute L-C in connection with the foregoing, then upon Landlord’s receipt thereof, Landlord shall return the original L-C to Tenant.
C. Late Charges. Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent or other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which would be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Landlord. Accordingly, if any installment of Base Monthly Rental, NNN Charges, or any other sum due from Tenant shall not be received by Landlord within three (3) days after said amount is due, Tenant shall pay to Landlord, in addition to any other sums payable hereunder, a late charge of five percent (5%) of the amount due, plus any reasonable attorneys' fees incurred by Landlord by reason of Tenant's failure to pay Base Monthly Rental, NNN Charges, and/or other charges when due hereunder, together with interest at the maximum rate of interest allowed by law from the date due until paid; provided, however, that the foregoing late charge shall not apply to the first such late payment as to which such late charge would otherwise be applicable in any twelve (12) month period of the Term of this Lease or any extension thereto until following written notice to Tenant and the expiration of five (5) business days thereafter without cure. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs which Landlord will incur by reason of the late payment by Tenant. Acceptance of such late
charges by the Landlord shall in no event constitute a waiver of Tenant's default with respect to any such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder.
6. USE OF PREMISES
The Premises shall be used for the use specified in the Basic Lease Information and for no other purposes without the prior written consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. Under no circumstances shall Tenant cause or allow the occupancy load of the Premises to exceed one (1) person per one hundred and twenty-five (125) rentable square feet of the Premises; provided that Landlord acknowledges and agrees that Tenant may temporarily exceed such occupancy limitation on a periodic basis (e.g. for meetings, etc.), provided such excess occupancy is not material and does not burden other tenants in the Building or the parking for the Building, as determined in Landlord’s reasonable discretion.
7. ALTERATIONS, MECHANICS' LIENS
A. Alterations. Tenant agrees not to make or suffer to be made any alteration, addition or improvement to or of the Premises (excluding Cosmetic Alterations defined below) (hereinafter referred to as "Alterations"), or any part thereof, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, Tenant acknowledges that, by way of example and without limitation, it shall be reasonable for Landlord to withhold its consent to Alterations affecting the structural portions of the Building or the life-safety, electrical, plumbing, heating, ventilation, air-conditioning, fire-protection, telecommunications or other building systems (collectively, the "Building Systems"), or Alterations which require work to be performed in portions of the Building outside the Premises. In addition, as a condition of its consent to Alterations hereunder, Landlord may impose any reasonable requirements that Landlord considers necessary, including a requirement that Tenant provide Landlord with a surety bond, a letter of credit, or other financial assurance that the cost of the Alterations will be paid when due if the cost of the Alteration will exceed $100,000 in any one instance and provided no bond shall be required for the initial Tenant Improvements. Alterations made by Tenant, including without limitation any partitions (movable or otherwise) or carpeting, shall become a part of the Building and belong to Landlord; provided, however, that equipment, trade fixtures and movable furniture shall remain the property of Tenant. If Landlord consents to the making of any Alterations, the same shall be designed and constructed or installed by Tenant at Tenant's expense (including expenses incurred in complying with applicable laws). All Alterations shall be performed using union labor and only by contractors or mechanics approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed; provided, however, that (i) Landlord may, in its reasonable discretion, provide a list of specific engineers, general contractors, subcontractors, and architects to perform work affecting the Building Systems who charge commercially reasonable rates; and (ii) if Landlord consents to any Alterations that require work to be performed outside the Premises, Landlord may elect to perform such work at Tenant's expense. Excepting Cosmetic Alterations (which Tenant may perform with prior written notice to, but without the prior consent of, Landlord), all Alterations shall be made in accordance with complete and detailed architectural, mechanical and engineering plans and specifications approved in writing by Landlord and shall be designed and diligently constructed in a good and workmanlike manner and in compliance with all applicable laws. The design and construction of any Alterations shall be performed in accordance with Landlord's applicable rules, regulations and requirements. Tenant shall cause any Alterations to be made in such a manner and at such times so that any such work shall not disrupt or unreasonably interfere with the use or occupancy of other tenants or occupants of the Building. Under no circumstances shall Landlord be liable to Tenant for any damage, loss, cost or expense incurred by Tenant on account of Tenant's plans and specifications, Tenant's contractors or subcontractors, design of any work, construction of any work, or delay in completion of any work. “Cosmetic Alterations” as used herein shall mean any alteration, addition or improvement that: (i) is of a cosmetic nature such as painting, hanging pictures and installing carpeting; (ii) is not visible from the exterior of the Premises or Building; (iii) will not affect the Building Systems; (iv) costs less than $50,000.00 in the aggregate during any twelve (12) month period of the Term of this Lease (excluding painting and installing carpeting), and (v) does not require work to be performed inside the walls or above
the ceiling of the Premises. Although Cosmetic Alterations do not require Landlord’s prior written consent, Cosmetic Alterations are otherwise subject to the terms of this Paragraph 7.
B. Requirements. Subsequent to obtaining Landlord's consent and prior to commencement of the Alterations (excepting Cosmetic Alterations), Tenant shall deliver to Landlord (i) any building or other permit required by applicable laws in connection with the Alterations; (ii) a copy of the executed construction contract(s); (iii) written acknowledgments from all materialmen, contractors, artisans, mechanics, laborers and any other persons furnishing any labor, services, materials, supplies or equipment in excess of Five Thousand Dollars ($5,000) in the aggregate) to Tenant with respect to the Premises that they will look exclusively to Tenant for payment of any sums in connection therewith and that Landlord shall have no liability for such costs; and (iv) evidence of the insurance required in connection with any such work as set forth in this Lease. In addition, Tenant shall require its general contractor and major subcontractors to carry and maintain the following insurance at no expense to Landlord, and Tenant shall furnish Landlord with satisfactory evidence thereof prior to the commencement of construction: (A) Commercial General Liability Insurance with limits of not less than $3,000,000 combined single limit for bodily injury and property damage, including personal injury and death, and Products and Completed Operations Coverage in an amount not less than $500,000 per incident, $1,000,000 in the aggregate; (B) Comprehensive automobile liability insurance with a policy limit of not less than $1,000,000 each accident for bodily injury and property damage, providing coverage at least as broad as the Insurance Services Office (ISO) Business Auto Coverage form covering Automobile Liability, code 1 "any auto", and insuring against all loss in connection with the ownership, maintenance and operation of automotive equipment that is owned, hired or non-owned; (C) Worker's Compensation with statutory limits and Employer's Liability Insurance with limits of not less than $100,000 per accident, $500,000 aggregate disease coverage and $100,000 disease coverage per employee; and (D) "Builder's All Risk" insurance in an amount approved by Landlord covering the Alterations (unless Tenant elects to obtain such coverage with Landlord’s prior approval, which shall not be unreasonably withheld), including such extended coverage endorsements as may be reasonably required by Landlord, it being understood and agreed that the Alterations shall be insured by Tenant pursuant to the terms of this Lease immediately upon completion thereof. All such insurance policies (except Workers' Compensation insurance) shall be endorsed to add Landlord, the holder of any mortgage covering the Building and Landlord's designated agents as additional insureds with respect to liability arising out of work performed by or for Tenant's general contractor, to specify that such insurance is primary and that any insurance or self-insurance maintained by Landlord shall not contribute with it, and to provide that coverage shall not be reduced, terminated, cancelled or materially modified except after thirty (30) days’ prior written notice has been given to Landlord. Tenant's general contractor shall furnish Landlord the same evidence of insurance for its on-site subcontractors as required of Tenant's general contractor.
C. Inspections; Notices. Landlord shall have the right (but not an obligation) to inspect the construction work during the progress thereof, and to require corrections of faulty construction or any material deviation from the plans for such Alterations as approved by Landlord; provided, however, that no such inspection shall be deemed to create any liability on the part of Landlord, or constitute a representation by Landlord or any person hired to perform such inspection that the work so inspected conforms with such plans or complies with any applicable laws, and no such inspection shall give rise to a waiver of, or estoppel with respect to, Landlord's continuing right at any time or from time to time to require the correction of any faulty work or any material deviation from such plans. Promptly following completion of any Alterations, Tenant shall (i) furnish to Landlord "as-built" plans therefor, (ii) cause a timely notice of completion to be recorded in the Office of the Recorder of the County in which the Building is located in accordance with Civil Code Section 3093 or any successor statute, and (iii) deliver to Landlord evidence of full payment and unconditional final waivers of all liens for labor, services, or materials in excess of $5,000. All trash or surplus materials which may accumulate in connection with Tenant's construction activities shall be removed by Tenant at its own expense from the Premises and the Building.
D. Restoration. Except for Cosmetic Alterations and the initial Tenant Improvements, Tenant shall pay to Landlord a fee in the amount of five percent (5%) of the cost of the Alterations for its review of plans and oversight of the progress of the work and Tenant shall reimburse Landlord for all out
of pocket costs and expenses incurred in connection therewith. All sums due to Tenant's contractors, if paid by Landlord due to Tenant's failure to pay such sums when due, shall bear interest payable to Landlord at the maximum interest rate permitted by law until fully paid. At the expiration or earlier termination of this Lease and otherwise in accordance with Paragraph 17 hereof, Tenant shall be required to remove at Tenant’s sole cost and expense or pay Landlord the reasonably estimated cost of removing, all Alterations made to the Premises except for any such Alterations which Landlord expressly indicates shall not be required to be removed from the Premises by Tenant as provided herein and to restore the Premises to their configuration and condition before the Alterations were made, and to repair any damage to the Premises caused by such removal. Tenant shall use a general contractor reasonably approved by Landlord for such removal and repair. In the event Landlord designates Tenant to complete such removal and restoration work Rent shall continue to be paid by Tenant following the Expiration Date until such work is completed at the rental rate set forth in the Basic Lease Information. Notwithstanding anything to the contrary contained herein, so long as Tenant’s written request for consent for a proposed Alteration substantially contains the following language “PURSUANT TO PARAGRAPH 7 OF THE LEASE, IF LANDLORD CONSENTS TO THE SUBJECT ALTERATION, LANDLORD SHALL NOTIFY TENANT IN WRITING WHETHER OR NOT LANDLORD WILL REQUIRE SUCH ALTERATION TO BE REMOVED AT THE EXPIRATION OR EARLIER TERMINATION OF THE LEASE.”, at the time Landlord gives its consent for such Alteration, if it so does, Tenant shall also be notified whether or not Landlord will require that such Alteration, or any portion thereof, is to be removed upon the expiration or earlier termination of this Lease. If Tenant’s written notice strictly complies with the foregoing and if Landlord fails to notify Tenant within twenty (20) days of Landlord’s receipt of such notice whether Tenant shall be required to remove the subject Alterations at the expiration or earlier termination of this Lease, it shall be assumed that Landlord shall require the removal of the subject Alterations. Notwithstanding the foregoing, it is agreed that other than voice and data wiring and cabling and any supplemental HVAC and associated duct work at or serving the Premises (which Tenant shall be required to remove and restore), Tenant shall have no obligation to remove that portion of the Alterations that comprise any standard office improvements such as, without limitation, gypsum board, partitions, ceiling grids and tiles, floor tiles, fluorescent lighting panels, Building standard doors and non-glued down carpeting.
E. Liens. Tenant agrees to keep the Premises and the Building free from any liens arising out of any work performed, materials furnished or obligations incurred by Tenant. Tenant shall promptly and fully pay and discharge all claims on which any such lien could be based. In the event that Tenant does not, within ten (10) days following the recording of such notice of any such lien, cause the same to be released of record (or bonded over), Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such purpose, and all expenses incurred by it in connection therewith, shall be payable to Landlord by Tenant, as additional Rent, on demand, together with interest at the Interest Rate from the date such expenses are incurred by Landlord to the date of the payment thereof by Tenant to Landlord. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law, or which Landlord shall deem proper for the protection of Landlord, the Premises, and the Building, from mechanic's, materialmen's and other liens. Tenant shall give Landlord at least twenty (20) days' prior written notice of the date of commencement of any construction on the Premises in order to permit the posting of such notices. Notwithstanding the foregoing, if Tenant shall contest the validity of any such lien, claim or demand, then Tenant shall, at its sole expense defend and protect itself, Landlord and the Premises and indemnify and hold harmless Landlord from and against the same and shall promptly pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof.
8. WORK TO BE PERFORMED BY LANDLORD
Except as set forth in Exhibit B attached hereto, Landlord shall not be required to perform any work or make any improvements in or about the Premises or the Building of any type or nature unless a special agreement to that effect is expressly set forth in this Lease.
9. RESTRICTIONS ON USE
A. General. No use shall be made or permitted to be made of the Premises, nor acts done, that will increase the existing rate of insurance upon the Building or cause a cancellation of any insurance policy covering the Building or any part thereof, nor shall Tenant sell, or permit to be kept, used, or sold in, on or about the Premises or the Building, any illegal substance or any article that may be prohibited by the standard form of fire insurance policy. Tenant shall, at its sole cost and expense, comply with any and all requirements pertaining to the Premises and/or Tenant’s use thereof, made by any insurance organization or company providing fire and commercial general liability insurance covering the Building.
B. Prohibited Uses. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or unreasonably interfere with the rights of other tenants or occupants of the Building or injure or unreasonably annoy them or violate any exclusive rights of any such tenants or occupants, nor shall Tenant use or allow the Premises or any part of the Building to be used for any unlawful or objectionable purposes. Without limiting the generality of the foregoing, Tenant shall not use or permit the usage of any illegal drug or substance and shall not make or permit any unreasonable or unnecessary noises or odors in or upon the Premises or the Building. Tenant shall not commit, or suffer to be committed, any waste upon the Premises or any nuisance (public or private) or other act or thing of any kind or nature whatsoever that may disturb the quiet enjoyment or cause unreasonable annoyance of any other tenant in the Building. Tenant shall not bring upon the Premises or any portion of the Building or use the Premises or permit the Premises or any portion thereof to be used for the growing, manufacturing, administration, or distribution (including without limitation, any retail sales) possession, use or consumption of any cannabis, marijuana or cannabinoid product or compound, regardless of the legality or illegality of the same. The provisions of this paragraph are for the benefit of Landlord only and are not, and shall not be construed to be, for the benefit of any tenant or occupant of the Building or any third party.
C. Hazardous Materials. Tenant shall comply with all Environmental Laws pertaining to and shall not engage in any activity involving, nor bring upon the Premises or the Building, any Hazardous Materials (except for immaterial amounts of Hazardous Materials incidental to office use (e.g. copier toner, cleaning supplies) and which are used in strict compliance with applicable law and any rules and regulations promulgated by Landlord), nor exacerbate any preexisting Hazardous Materials, without the express prior written consent of Landlord. For the purpose of this Lease, "Hazardous Materials" shall be defined, collectively, as any and all substances, chemicals, wastes, sewage or other materials that are now or hereafter regulated, controlled or prohibited by any local, state or federal law or regulation requiring removal, warning or restrictions on the use, generation, disposal or transportation thereof including, without limitation, (a) any substance defined as a "hazardous substance", "hazardous material", "hazardous waste", "toxic substance", or "air pollutant" in the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1801, et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901, et seq., the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. 1251 et seq., the Clean Air Act ("CAA"), 42 U.S.C. 7401 et seq., or the Toxic Substances Control Act ("TSCA"), 15 U.S.C. 2601, et seq., all as previously amended and amended hereafter; and (b) any hazardous substance, hazardous waste, toxic substance, toxic waste, air pollutant, hazardous material, waste, chemical, or compound described in any other federal, state, or local statute, ordinance, code, rule, regulation, order, decree or other law now or at any time hereafter in effect regulating, relating to or imposing liability or standards of conduct concerning any hazardous, toxic, or dangerous substance, chemical, material, compound or waste. As used herein, the term "Hazardous Materials" also means and includes, without limitation, asbestos; flammable, explosive or radioactive materials; gasoline or gasoline additives; oil; motor oil; waste oil; petroleum (including, without limitation, crude oil or any component thereof); petroleum-based products; paints and solvents; lead; cyanide; DDT; printing inks; acids; pesticides; ammonium compounds; polychlorinated biphenyls; and other regulated chemical products. The statutes, regulations, court and administrative agency decisions, and other laws now or at any time hereafter in effect that govern or regulate Hazardous Materials are herein collectively referred to as "Environmental Laws". In connection therewith, Tenant shall indemnify, defend and hold Landlord and the Landlord Parties harmless from and against any and all losses, damages, liabilities, judgments, costs, claims,
expenses, penalties, permits, and attorneys' and consultant's fees arising out of or involving any Hazardous Materials brought onto the Premises or used in the Premises by Tenant, its agents, employees, independent contractors or invitees. Tenant's obligations under this paragraph shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment and the cost of investigation, removal, remediation, restoration and/or abatement thereof, and shall survive the expiration or earlier termination of this Lease. Tenant further acknowledges that it is aware of the fact that the Building may contain Hazardous Materials and that a report and/or other information pertaining thereto may be available for Tenant’s review at the office of the Building. Tenant shall comply with all Environmental Laws as well as rules and regulations promulgated from time to time by Landlord relating to the use and disposal of any asbestos - containing materials and lead based paint which may be present. Tenant’s indemnification hereunder shall include, but is not limited to, any claimed injury or death to Tenant or its agents, employees or independent contractors related to exposure to Hazardous Materials. Attached hereto as Exhibit D is the current annual disclosure statement regarding asbestos -containing materials in the Building. Tenant acknowledges that such notice complies with the requirements of Section 25915 of the California Health and Safety Code. Notwithstanding anything to the contrary contained in this Lease, Tenant shall not be liable for any cost or expense related to removal, cleaning, abatement or remediation of Hazardous Materials existing in the Premises prior to the date Landlord tenders possession of the Premises to Tenant, including, without limitation, Hazardous Materials in the ground water or soil, except to the extent that any of the foregoing results directly or indirectly from any act or omission by Tenant or its employees, agents, independent contractors and/or invitees or any Hazardous Materials disturbed, distributed or exacerbated by Tenant or its employees, agents, independent contractors and/or invitees. For purposes of this Paragraph 9, Tenant, not Landlord, shall have the burden to prove with reasonable documentation that such Hazardous Materials were in fact preexisting in the Premises prior to the date Landlord delivered possession of the Premises to Tenant. Notwithstanding the foregoing, if any asbestos containing materials or other Hazardous Materials is discovered in the Premises during Landlord’s construction of the Tenant Improvements, to the extent necessary to comply with Environmental Laws in effect and as applied as of the date of this Lease in order for Landlord to construct the Tenant Improvements and/or for Tenant to occupy the Premises, as reasonably determined by Landlord, Landlord, at Landlord’s sole cost (and not as part of the Allowance), shall remove, remediate, encapsulate or leave undisturbed such asbestos containing materials or other Hazardous Materials, whichever is appropriate as determined by Landlord.
10. COMPLIANCE WITH LAW
Tenant shall, at its sole cost and expense, promptly comply with all laws pertaining to the Premises or Tenant's use or occupancy thereof, and shall faithfully observe all laws applicable to the Premises and the Building and Tenant’s use and occupancy thereof (other than general office use) and all requirements of any board of fire underwriters or other similar body now or hereafter constituted related to or affecting the condition, use, or occupancy of the Premises and the Building; provided, however, Tenant shall not be required to perform any structural alterations or structural improvements to the Premises to comply with any applicable laws except to the extent triggered by Tenant’s specific use of the Premises beyond general office use or by Tenant’s Alterations. Tenant, at its sole cost and expense, shall promptly perform all work to the Premises or other portions of the Building required to effect such compliance. The judgment of any court of competent jurisdiction, or the admission of Tenant in any action or proceeding against Tenant, whether or not Landlord is a party thereto, that Tenant has violated any law pertaining to the Premises or the Building shall be conclusive of that fact as between Landlord and Tenant. Without limiting the generality of the foregoing, the duties of Tenant under this provision shall include the making of all such alterations of the Premises and the Building as may be required by law by reason of Tenant's use of the Premises, (other than general office use), occasioned by reason of the failure of Tenant to effect repairs, maintenance, replacement or cleaning of the Premises as required under this Lease, or required by reason of Tenant’s alteration of the Premises, Tenant’s particular employees or employment practices, and/or the construction of the initial improvements to the Premises.
11. INDEMNITY AND EXCULPATION
As a material part of the consideration for this Lease, and except to the extent due to the gross negligence or willful misconduct of Landlord or Landlord Parties, Tenant hereby agrees that Landlord, Landlord’s agents, partners, employees and property manager, and any lender holding a mortgage or deed of trust covering the Premises, and their respective officers, agents, servants, employees, and independent contractors (collectively, “Landlord Parties”) shall not be liable to Tenant or any other party for any damage to Tenant or damage, theft or vandalism to Tenant's property, or the property of Tenant’s employees, agents, independent contractors and/or invitees, and Tenant agrees to indemnify, defend and hold Landlord and the Landlord Parties harmless from and against any claims pertaining thereto. Tenant further agrees to indemnify Landlord and the Landlord Parties and defend and hold them harmless from and against all claims, damages, liabilities, causes of action, costs, and expenses (including reasonable attorneys' fees) arising out of any injury to person or damage to property occurring in, on, or about the Premises from any cause whatsoever, or in on or about the Building if arising due to the negligence or intentional misconduct of Tenant or its employees, agents, independent contractors and/or invitees, and regardless of any claimed negligence on the part of Landlord or Landlord Parties except to the extent of the gross negligence or willful misconduct of Landlord. Tenant's obligation under this paragraph to indemnify, defend and hold Landlord and the Landlord Parties harmless shall not be limited to the amount of available insurance proceeds, but rather shall extend to the full amount of the claim. Landlord shall protect, indemnify and hold Tenant and Tenant’s employees harmless from and against any and all loss, claims, liability or costs (including court costs and reasonable attorneys’ fees) incurred by reason of any damage to any property (including but not limited to property of Tenant) or any injury (including but not limited to death) to any person occurring in, on or about the common areas of the Building to the extent that such injury or damage shall be caused by or arise solely from the gross negligence or willful misconduct of Landlord, its agents, employees or property manager. The indemnity obligations set forth in this Lease shall survive expiration or termination of this Lease.
12. INSURANCE
A. Commercial General Liability and Property Damage Insurance. Tenant at its sole cost and expense shall maintain during the entire Term (including any additional period that Tenant shall have possession of or otherwise occupy or conduct activities in or about the Premises whether before or after the Term) Commercial General Liability insurance in an amount not less than $1,000,000 per occurrence combined single limit for bodily injury and property damage and $2,000,000 general aggregate, together with Umbrella/Excess Liability insurance in the minimum amount of $5,000,000 combined single limit covering both bodily injury and property damage. Such policies shall be written on an occurrence basis, per form ISO CG 00 01 (12/07) or equivalent, covering bodily injury, property damage and personal injury losses, and shall include blanket contractual liability, independent contractor’s coverage, completed operations, products liability, and severability of interests, insuring against all liability of Tenant and Landlord and their authorized representatives arising out of and in connection with Tenant's use or occupancy of the Premises and the Building, and insuring Tenant and Landlord from legal liability for damage to person or property, however arising. Landlord and such other parties as Landlord may designate from time to time shall be named as additional insureds under such policy or policies, and the policy or policies shall be primary insurance insofar as Landlord is concerned, and shall be non-contributing to any other insurance carried by Landlord. Not more frequently than every three years, if, in the opinion of Landlord's lender or of the insurance broker retained by Landlord, the amount of Commercial General Liability Insurance and/or property damage insurance coverage at that time is not adequate, Tenant shall increase the insurance coverage as reasonably required by either said lender or insurance broker.
B. Workers' Compensation and Employer’s Liability Insurance. Tenant at its sole cost and expense shall also carry and maintain in full force and effect during the entire Term hereof (and during any additional period that Tenant shall have possession of or otherwise occupy or conduct activities in or about the Premises whether before or after the Term) Workers’ Compensation Insurance as may be required by law together with Employer’s Liability Insurance with a limit not less than
$1,000,000 Bodily Injury Each Accident; $1,000,000 Bodily Injury By Disease - Each Person; and $1,000,000 Bodily Injury By Disease - Policy Limit.
C. Personal Property Insurance. Tenant at its sole cost and expense shall also carry and maintain in full force and effect during the entire Term hereof (and during any additional period that Tenant shall have possession of or otherwise occupy or conduct activities in, on or about the Premises whether before or after the Term) property insurance on a “Special Form Causes of Loss” basis, per ISO form CP 10 30 (06/07) or equivalent, covering Tenant’s equipment, furniture, fixtures and other personal property located on the Premises in an amount equal to 100% of the full replacement cost thereof and including an Agreed Amount endorsement waiving coinsurance.
D. Builder's Risk Insurance. If Tenant shall at any time make any alterations of the Premises, while performing such work Tenant shall, at its sole cost and expense, carry "All-Risk" builder's risk insurance, completed value form, in an amount satisfactory to Landlord.
E. Automobile Liability Insurance. Tenant at its sole cost and expense shall also carry and maintain in full force and effect during the entire Term hereof (and during any additional period that Tenant shall have possession of or otherwise occupy or conduct activities in, on or about the Premises whether before or after the Term) automobile liability insurance with limits of not less than $1,000,000 per occurrence covering owned, hired and non-owned vehicles used by Tenant.
F. Business Interruption Insurance. Tenant at its sole cost and expense shall also carry and maintain in full force and effect during the entire Term hereof (and during any additional period that Tenant shall have possession of or otherwise occupy or conduct activities in, on or about the Premises whether before or after the Term) business interruption insurance in such amount as will reimburse Tenant for direct or indirect loss of earnings attributable to all perils insured against by the property insurance described above for a period of not less than twelve (12) months.
G. Liquor Liability Insurance. If the Tenant is in the business of manufacturing, selling, serving, furnishing or distributing alcoholic beverages from the Premises, Tenant at its sole cost and expense shall carry liquor liability insurance with liability limits of not less than Five Million Dollars ($5,000,000).
H. Other Insurance Matters. All the insurance required under this Lease shall:
(1) be issued by insurance companies licensed and authorized to do business in the State of California, with a “General Policyholders Rating” of at least an A-, VIII as set forth in the most recent edition of Best's Insurance Guide;
(2) contain a provision stating that the insurer shall endeavor to provide at least thirty (30) days written notice to Landlord and all others named as additional insureds prior to any cancellation or material modification of such policy; provided, however, that in the event that Tenant’s insurance carrier will not provide such notice to Landlord, then Tenant covenants and agrees to provide at least thirty (30) days written notice to Landlord of any cancellation of such policy or any material decrease in coverage; and
(3) be renewed not less than five (5) days before expiration of the term of the policy.
A certificate of the policy, together with evidence of payment of premiums, shall be deposited with Landlord prior to delivery and/or admittance of Tenant to the Premises, and on each renewal of the policy. Notwithstanding the foregoing, if Landlord is brought into a suit or claim under Tenant's required insurance coverages, Landlord reserves the right to receive a full copy of the applicable policy(ies).
In the event Tenant fails, at any time during the Term, to keep said insurance in full force and effect, which failure is not cured within one (1) business day following written notice to Tenant, Landlord
may pay the necessary premiums therefor and the repayment thereof, plus an administrative surcharge of five percent (5%), shall be deemed to be a part of the Rent due hereunder, payable as such on the next date upon which Base Monthly Rental becomes due.
I. Landlord’s Insurance. Landlord shall keep in force throughout the Term Commercial General Liability Insurance and All Risk or Special Form coverage insuring the Landlord and the Building, in such amounts and with such deductibles as Landlord reasonably determines from time to time, in accordance with sound and reasonable risk management principles and as part of Landlord’s general risk policy, but in any event reasonably consistent with the levels and types of coverage from time to time being maintained by institutional owners of comparable office use buildings in the same geographic area as the Building. The cost of all such insurance is included in Expenses, subject to any express limitations set forth in this Lease.
J. Waiver of Subrogation. Tenant and Landlord hereby release each other, their authorized representatives, and the holders of any liens or encumbrances covering the Building, from any claims for damage to any person, to the Premises, the Building, and other improvements in which the Premises are located; and to the fixtures, personal property, trade fixtures, improvements, and alterations of each party in, on or about the Premises or the Building, that are caused by or result from risks insured against under any fire or extended coverage insurance policy or policies carried by or that should be carried by the other party at the time of any such damage. Each party shall cause each insurance policy obtained by it to provide that the insurance company waives all right of recovery by way of subrogation against the other party and its authorized representatives and lenders in connection with any damage covered by any policy.
13. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the Rules and Regulations promulgated for the Building and all reasonable modifications of and additions thereto placed into effect from time to time by Landlord. Such Rules and Regulations, as in effect on the date of this Lease, are attached hereto following the signature page of this Lease. Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Building of any of said Rules and Regulations. Notwithstanding the foregoing, Landlord shall promulgate and enforce its Rules and Regulations in a non-discriminatory manner. In the event of a conflict between the terms of the Lease and the Rules and Regulations, the terms of the Lease shall prevail.
14. UTILITIES AND SERVICES
A. General. Landlord shall furnish to the Premises, during Business Hours (as defined below), excluding Building Holidays (as defined below), and subject to applicable laws and the rules and regulations of the Building, (i) electricity suitable for general office use (provided, however, that Tenant shall not at any time have a connected electrical load for lighting purposes in excess of one watt per square foot of the Premises or a connected load for all other power requirements in excess of four (4) watts per square foot of the Premises, and further provided that Tenant will comply with all directives of Landlord related to energy conservation), (ii) janitorial service, (iii) building heating during Business Hours established by Landlord (excluding evenings, weekends and Building Holidays), and (iv) elevator service. Tenant agrees at all times to cooperate fully with Landlord and to abide by all the regulations and requirements which Landlord may prescribe for the proper functioning and protection of the Building's heating systems if any. The cost and expense of any such services and utilities shall be included in Expenses except to the extent otherwise set forth in this Lease. As used in this Lease, the term “Business Hours” shall mean Mondays through Fridays (excluding Building Holidays) from 8:00 AM to 6:00 PM, subject to change from time to time in Landlord’s reasonable discretion. As used in this Lease, the term “Building Holidays” shall mean holidays commonly recognized by other office buildings in the area where the Building is located, as reasonably determined by Landlord.
B. Payment. Notwithstanding any provision to the contrary contained in this Lease, at Landlord’s election (which shall be provided by written notice to Tenant), Tenant shall pay directly to the
utility company pursuant to the utility company's separate meters (or to Landlord in the event Landlord provides submeters instead of the utility company's meters), the cost of all electricity, gas, water and sewer services provided to and/or consumed in the Premises (including normal and excess consumption and including the cost of electricity to operate the HVAC air handlers), which electricity, gas, water and sewer services shall be separately metered (as described above) or otherwise equitably allocated and directly charged by Landlord to Tenant and other tenants of the Building. If Landlord makes such election, Tenant shall pay such cost (including the cost of such meters or submeters) within thirty (30) days after demand (including reasonable backup documentation) and as Additional Rent under this Lease (and not as part of the Expenses).
C. Additional Services. Landlord may make available extra or additional services from time to time. In the event Tenant requests that such additional services be provided, Tenant shall pay for such extra or additional services, an amount equal to Landlord's scheduled charge or rate for providing such additional services, such amount to be considered additional Rent hereunder. Upon request by Tenant in accordance with the procedures established by Landlord from time to time for furnishing HVAC and lighting service at times other than the then current Business Hours, Landlord shall furnish such after hours service to Tenant. As of the date of this Lease, the prevailing rate for after hours HVAC service is $75.00 per hour per suite (as such rate is subject to change from time to time in Landlord’s sole but reasonable discretion on a Building standard basis), which service is provided in one hour increments. All charges for such extra or additional services shall be due and payable at the same time as the installment of Base Monthly Rental with which they are billed, or if billed separately, shall be due and payable within thirty (30) days after such billing. Any such billings for extra or additional services shall include an itemization of the extra or additional services rendered, and the charge for each such service.
D. No Liability. Except as otherwise provided herein, Landlord shall not be liable for, and Tenant shall not be entitled to, any abatement or reduction of any amounts owing hereunder by reason of Landlord's failure to furnish any of the foregoing utilities and/or services when such failure is caused by accident, breakage, repairs, strikes, lockouts or other labor disturbances or disputes of any character, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord including, without limitation, any governmental energy conservation program, and any such failure shall not constitute or be construed as a constructive or other eviction of Tenant. Landlord shall use commercially reasonable and diligent efforts to remedy any failure or interruption in the furnishing of such utilities or services, and shall, if feasible, provide advance notice to Tenant in writing (which shall not be less than two (2) business days) prior to any interruption or unavailability of such utilities or services reasonably within Landlord’s control. In the event any governmental entity promulgates or revises any law applicable to the Building, or any part thereof, relating to the use or conservation of energy, water, gas, light, or electricity, or relating to the reduction of automobile or other emissions, or the provision of any other utility or service provided with respect to this Lease, or in the event Landlord makes improvements to the Building or any part thereof in order to comply with such a law, whether the law is mandatory or voluntary, Landlord may, in its sole discretion, comply with such law or make such improvements to the Building or any part thereof related thereto. Such compliance and the making of such improvements shall in no event entitle Tenant to any damages, relieve Tenant of the obligation to pay Rent or any other amounts reserved or payable hereunder, or constitute or be construed as a constructive or other eviction of Tenant. However, notwithstanding the foregoing, if the Premises, or a material portion of the Premises, are made untenantable for a period in excess of five (5) consecutive business days solely as a result of an interruption, diminishment or termination of any essential services that Landlord is obligated to provide pursuant to the terms of this Lease (the “Service Failure”), such Service Failure is due to Landlord’s active negligence or willful misconduct and such Service Failure is otherwise reasonably within the control of Landlord to correct, then Tenant shall have the option to elect to receive, as Tenant’s sole remedy, an abatement of the Base Monthly Rental payable hereunder during the period beginning on the sixth (6th) consecutive business day of the Service Failure and ending on the day the interrupted service has been restored (the “Service Failure Rent Abatement”). Tenant may elect to receive the Service Failure Rent Abatement by providing written notice to Landlord within three (3) business days following the foregoing six (6) consecutive business day period. Without limiting the foregoing, if any Service Failure is not caused by Landlord’s active negligence or willful misconduct but is within Landlord’s reasonable control to correct and Landlord fails to commence commercially reasonable efforts to remedy the Service Failure
within nine (9) consecutive business days following Landlord’s actual knowledge of the Service Failure and then continue to make commercially reasonable efforts to prosecute such cure to completion, then Tenant shall have the option to elect to receive, as Tenant’s sole remedy, the Service Failure Rent Abatement during the period beginning on the tenth (10th) consecutive business day of the Service Failure and ending on the day the interrupted service has been restored. Tenant may elect to receive the Service Failure Rent Abatement by providing written notice to Landlord within three (3) business days following the foregoing ten (10) consecutive business day period. In either event, if the entire Premises have not been rendered untenantable by the Service Failure, the amount of abatement shall be equitably prorated. If, on the Commencement Date, the Shelter in Place Order is in effect or, following the Commencement Date, a new shelter in place order directly arising from the Covid-19 pandemic (the “Second Shelter in Place Order”) is in effect, and the Shelter in Place Order or Second Shelter in Place Order, as applicable, prohibits Tenant’s employees from traveling to, using, and accessing the Premises for the Use permitted hereunder (a “Shelter in Place Event”), Landlord shall agree to a one time deferral of fifty percent (50%) of the Base Rent then due under this Lease for the Premises originally described herein (the “Deferred Base Rent”) until the earlier of (i) the date the Shelter in Place Order or Second Shelter in Place Order, as applicable, is no longer in effect or is modified so that it no longer prohibits Tenant’s employees from traveling to, using, and accessing the Premises for the User permitted hereunder, or (ii) the date that is ninety (90) days following the date the applicable Shelter in Place Event first occurs (such period shall be referred to herein as the “Deferred Base Rent Period”); provided, however, that Tenant shall repay the Deferred Base Rent over a six (6) month period (or such shorter period in the event the Term shall terminate prior to the end of such six (6) month period) equal monthly installments commencing on the first (1st) full calendar month following the Deferred Base Rent Period. If the Shelter in Place Order is not in effect on the Commencement Date, or, if applicable, when the Second Shelter in Place Order is no longer in effect, or once Tenant receives the benefits of the Deferred Base Rent set forth in this Section, Tenant’s rights to receive any Deferred Base Rent in connection with the Covid-19 pandemic shall be null and void.
E. Excess Usage. Landlord makes no representation regarding the adequacy or fitness of the heating, air conditioning or ventilation equipment in the Building to maintain temperatures that may be required for any equipment of Tenant, and Landlord shall have no liability for damage suffered by Tenant or others in connection therewith, provided that Landlord shall maintain the Building in good order and condition, consistent with its current condition. Whenever, as the result of (i) heat-generating machines or equipment; (ii) the lights; (iii) the occupancy of the Premises by more than one (1) person per 125 square feet of net rentable area therein; (iv) an electrical load for lighting or power in excess of the limits per square foot of the Premises specified herein; or (v) any rearrangement of partitioning or other improvements, the Building heating, air conditioning and ventilation system supplied by Landlord is affected due to Tenant’s use and occupancy, Landlord shall have the right (but not the obligation) to install or cause the installation of supplementary heating, air conditioning and ventilation units or other equipment in the Premises. Within thirty (30) days of written demand (including reasonable backup documentation), Tenant shall pay for all such supplementary services and utilities, and shall pay the costs of installation, maintenance and operation of such supplementary equipment.
F. Restrictions. Tenant will not use electric space heaters in the Premises or operate its business in such a way or use any apparatus or device as will increase the amount of electricity or water usually furnished or supplied by Landlord for the purpose of using the Premises for general office use during regular business hours, or connect with electric current, except through existing electrical outlets in the Premises, or connect with water pipes, any apparatus or device for the purpose of using electric current or water. If Tenant shall require water or electric current in excess of that customarily furnished or supplied to other tenants of the Building for use of their premises for general office purposes during regular business hours, Tenant shall first procure the consent of Landlord, which Landlord will not unreasonably refuse, condition or delay, to the use thereof, and Landlord may cause an electric-current or water meter to be installed in the Premises so as to measure the amount of excess electric current or water so consumed by Tenant. The costs of any such meter and of the installation and maintenance thereof shall be borne by Tenant. Tenant agrees to pay to Landlord after thirty (30) days’ of notice the costs of all such excess water and electric current consumed, as shown by said meters, at the highest marginal rates charged Landlord for such services by the local public utility furnishing the same, plus any
additional actual third-party expense incurred by Landlord in providing such excess current and/or keeping account of the excess electric current or water so consumed.
G. After-Hours. Tenant acknowledges that during non-Building Hours, weekends and Building Holidays, as the same may be designated by Landlord from time to time, public access to the Building may be limited and heating, air conditioning, janitorial and other normal building services will not be provided or may be provided on a limited or “additional cost to tenant” basis, provided such costs are also assessed to other tenants in the Building in a non-discriminatory manner in accordance with Landlord’s standard practices in respect of the Building.
15. PERSONAL PROPERTY AND GROSS RECEIPTS TAXES
Tenant shall be responsible for and shall pay before delinquency all taxes and other governmental charges and impositions levied against Tenant, Tenant's improvements, fixtures, trade fixtures, alterations, furniture, fixtures, equipment, or other personal property, Tenant's leasehold interest, the Rent or other charges payable by Tenant, any business carried on at the Premises, or in connection with the use or occupancy thereof, including, without limitation, any gross receipts taxes, payroll taxes, rent tax or sales tax, service tax, transfer tax or value added tax, or any other applicable tax on the rent, any general or special assessments, levies, fees or charges, transit or transportation charges, housing subsidies and/or housing fund assessments, possessory interest taxes, business or license taxes or fees, job training subsidies and/or assessments, or open space charges and taxes and assessments due to any type of ballot measure, including an initiative adopted by the voters or local agency, or a state proposition approved by the voters, irrespective of whether any of the foregoing is assessed or designated as a real or personal property tax or on the rent payable under this Lease, and irrespective of whether any of the foregoing is assessed to or against Landlord or Tenant. Should any of the foregoing be payable by Landlord or be applied in any manner to the real property taxes levied on the Building or appurtenances thereto, Landlord shall immediately notify Tenant and Tenant, upon written demand, and receipt of a statement from Landlord together with a copy of such underlying bill, will pay such personal property taxes and gross receipts taxes to Landlord within thirty (30) days (but in no event less than three (3) business days prior to when the bill must be paid) who in turn will pay the same to the property tax collector.
16. MAINTENANCE
A. Tenant’s Repairs. By entry hereunder, Tenant accepts the Premises as being in good and sanitary order, condition and repair. Notwithstanding anything contained herein to the contrary, Tenant shall have ten (10) months from the completion of the Landlord Work and Tenant Improvements in which to discover and notify Landlord of any latent defects in the Landlord Work and Tenant Improvements. Landlord shall be responsible for the correction of any latent defects with respect to which it received timely notice from Tenant. Tenant, at its sole cost and expense, shall keep the Premises and every part thereof in good and sanitary condition and repair, damage thereto by fire, earthquake, act of God or the elements excepted unless caused by Tenant's negligence or willful act. Tenant agrees to carry out promptly all maintenance that at any time may become necessary to put and keep the Premises in as good and sanitary a condition as when received by Tenant from Landlord, reasonable wear and tear excepted, and, the preceding sentence notwithstanding, to replace immediately all glass now or hereafter installed in the Premises, however broken. Maintenance or repair required because of burglary or vandalism shall be the sole responsibility of Tenant. Tenant hereby waives all rights under, and the benefits of, Subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code, and under any similar law, permitting Tenant to make repairs at the expense of Landlord or to terminate a lease by reason of the condition of, or damage to, the leased premises.
B. Landlord’s Repairs. Landlord shall maintain in operating order and keep in good repair and condition and consistent with the current condition of the Building, the structural portions of the Building, including the foundation, floor/ceiling slabs, roof structure (as opposed to roof membrane), and curtain wall, and all common and public areas servicing the Building, including the parking facility, and the base Building mechanical, electrical, life safety, plumbing and sprinkler systems and HVAC systems
which were not constructed by or on behalf of Tenant or any other tenant or occupant of the Building. The costs and expenses of the foregoing may be included in Expenses, subject to any limitations in Paragraph 4.
17. RESTORATION OF PREMISES
Tenant agrees that upon the expiration of the Term, the earlier termination of the Lease for whatever reason, or Tenant's abandonment of the Premises, whichever occurs first, Tenant shall surrender or leave the Premises in good condition and repair, free of all personal property and trade fixtures, and generally in the same condition as when received (and as improved), reasonable wear and tear excepted, and damage by fire, earthquake, acts of God, or the elements excepted, unless caused by Tenant's negligent or willful act or omission, and if Tenant has made any alteration or improvement of the Premises, Tenant will in all cases effect the restoration of the Premises unless Landlord has expressly set forth in writing that a particular alteration or improvement shall not be removed pursuant to Paragraph 7. As used throughout this Paragraph 17, "restoration" means the reconstruction, rebuilding, rehabilitation, and repairs necessary to return altered, improved, or damaged portions of the Premises and other damaged property in, on or about the Premises to substantially the same physical condition in which they were immediately before the alteration, improvement, or damage.
18. ENTRY BY LANDLORD
Landlord reserves the right and Tenant shall permit Landlord, and its authorized representatives, partners, investors, lenders and any other Landlord invitees, to enter the Premises at all reasonable times and having given at least twenty-four (24) hours’ prior notice (which notice shall be in writing, which may include email; provided, however, if, following Landlord’s transmission of the notice to Tenant via email, Tenant fails to receive Landlord’s notice, the validity of the notice shall not be affected by such failure) for purposes of (i) inspecting, performing maintenance or making alterations of the Premises or any other portion of the Building, including the erection and maintenance of such scaffolding, canopies, fences, and props as Landlord may reasonably require; (ii) posting notices of non-responsibility or non-liability for alterations or repairs; or (iii) showing or submitting the Premises to prospective purchasers or tenants (provided that Landlord agrees that except in the event (A) Tenant is in default under this Lease beyond any applicable notice and cure periods, (B) Landlord and Tenant have agreed to an early termination of this Lease and the early termination date of this Lease is nine (9) months from the date of such showing, or (C) Landlord and Tenant otherwise mutually agree to the contrary, Landlord shall not show the Premises to prospective tenants except during the last nine (9) months of the then current Term of this Lease), all of which actions Landlord may take without any abatement of Rent. The rights of Landlord, its agents, contractors and representatives under this Paragraph 18 shall be subject to the following: (a) promptly finishing any work for which it entered, and promptly repairing any damage caused to the Premises by Landlord or anyone accessing the Premises under this Section; (b) (unless impracticable in case of an emergency) complying with all of Tenant’s reasonable security and safety regulations; (c) (unless impracticable in case of an emergency) if Tenant so elects, Landlord shall be accompanied by a representative of Tenant during any such entry; and (d) (unless impracticable in case of an emergency) Landlord shall not unreasonably interfere with or adversely affect Tenant’s use of, or access to, the Premises. Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by such entry stemming from Landlord’s actions as they relate to this Paragraph 18 solely. Landlord shall use reasonable efforts in order that the entrance to the Premises shall not be blocked by the making of such alterations or the performing of such maintenance and that the business of Tenant shall not thereby be interfered with unreasonably. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon, and about the Premises, excluding Tenant's vaults and safes and Secured Areas (as hereinafter defined), and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premises including entry to any Secured Area. Any entry to the Premises obtained by Landlord by any of said means, or otherwise, shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises, or an eviction of Tenant from the Premises or any portion thereof. Landlord has the right to make alterations to the
Building or demolish or erect other buildings on the real property adjacent thereto. Except as otherwise set forth herein, Tenant will not in such event be entitled to any direct or consequential damages for any damage or inconvenience occasioned thereby, provided Landlord will use its reasonable efforts to accomplish such work in such a manner as to minimize any inconvenience to Tenant and otherwise comply with its obligations under this Section 18. Notwithstanding the foregoing, except (a) to the extent requested by Tenant, (b) in connection with scheduled maintenance programs, and/or (c) in the event of an emergency, Landlord shall provide to Tenant reasonable prior notice (either written (including by electronic mail) or oral notice, provided if oral notice is given Landlord will endeavor to provide an acknowledgement by email) before Landlord enters the Premises to perform any repairs therein. Notwithstanding anything herein to the contrary, Tenant may designate in writing certain areas of the Premises as “Secured Areas” should Tenant require such areas for the purpose of securing confidential information or valuable property. The Secured Areas shall include Tenant’s telecom/server room.
19. ESTOPPEL CERTIFICATES
At any time and from time to time upon not more than ten (10) business days after a request is received from Landlord, Tenant shall execute, acknowledge and deliver to Landlord, or to such party as Landlord may designate, a written statement certifying the Commencement Date and Expiration Date of this Lease, that this Lease is unmodified and in full force and effect (or, if there have been any modifications of this Lease, that the Lease is in full force and effect as modified and stating the date and nature of the modification or modifications), that Landlord is not in default under this Lease (or, if there is any claimed default, stating the nature and extent thereof), that Tenant is not in default under this Lease (or, if Tenant is in default, specifying the nature and extent thereof), the current amounts of and the dates up to which Rent has been paid, the period for which Rent and other charges have been paid in advance, and any additional matters or information that may reasonably be requested by Landlord. It is expressly understood and agreed that any such statement delivered pursuant to this Paragraph 19 may be relied upon by any prospective purchaser of the Building or any lender, prospective lender, or any assignee or prospective assignee of any lender, and by any third person designated by Landlord. If Tenant fails to execute and deliver such statement within such ten (10) business day period, Landlord may provide to Tenant a second written request with respect to such statement. If Tenant fails to deliver such certificate within five (5) business days after Landlord's second written request therefor, Tenant shall be in default of the Lease without further notice or any opportunity to cure such default, entitling Landlord to any and all damages to which Landlord is entitled in Paragraph 25 of this Lease. Tenant acknowledges and agrees that Tenant’s indemnity obligations set forth in Paragraph 11 above shall apply to any and all claims arising from or related to any such default by Tenant.
20. ABANDONMENT OF PREMISES
Tenant shall not or abandon the Premises at any time during the Term. If Tenant abandons the Premises, or is dispossessed by process of law or otherwise, any personal property belonging to Tenant and left in or on the Premises shall be deemed to be abandoned and, at the option of Landlord, such property may be removed and stored in any public warehouse or elsewhere at the cost of and for the account of Tenant. As used in this Lease, the term “abandon” or derivatives thereof shall have the meaning given to such term in Section 1951.3 of the Civil Code of the State of California.
21. REMOVAL OF TRADE FIXTURES OF TENANT AT END OF TERM
If Tenant shall fully and faithfully perform all of Tenant's obligations under this Lease, then Tenant may remove, and upon the request of Landlord shall remove, at Tenant's sole cost and expense, all trade fixtures and movable furniture installed in, on or about the Premises by Tenant and Tenant shall repair, or at Landlord’s election reimburse Landlord for the cost of repairing, all damage resulting from the removal thereof.
22. SURRENDER OF LEASE
The voluntary or other surrender of this Lease by Tenant, accepted by Landlord and memorialized in a written instrument, or the mutual cancellation hereof, shall not work a merger and, at the option of Landlord, shall either terminate any or all existing subleases or subtenancies or operate as an assignment to Landlord of any or all of such subleases or subtenancies.
23. HOLDING OVER
Any holding over after the expiration of the Term or earlier termination of this Lease by Landlord, with or without the written consent of Landlord, shall be construed at Landlord’s election to be either a tenancy at sufferance or a tenancy from month to month, at a rent equal to one hundred fifty percent (150%) of the Rent payable under this Lease during the last full Rent-paying month before the date of such expiration or termination. In addition, Tenant shall indemnify Landlord and hold it harmless from and against all damages, costs, claims, causes of action, liabilities, and expenses (including, without limitation, attorneys' fees and expenses and claims for damages by any other person to whom Landlord may have leased all or any part of the Premises effective upon such expiration) sustained by Landlord by reason of such holding over.
24. LANDLORD DEFAULT; MORTGAGEE PROTECTIONS
A. No Default. No default or breach of any of the terms, covenants or conditions of this Lease shall exist on the part of Landlord until (i) Tenant shall serve upon Landlord a notice specifying with particularity wherein said default or breach is alleged to exist, and (ii) Landlord shall fail to perform or observe said term, covenant or condition, as the case may be, within thirty (30) days after receiving said notice.
B. Force Majeure. If Landlord or Tenant shall be delayed or prevented from the performance of any act required by this Lease (other than, (i) with respect to Tenant, the payment of Base Monthly Rental, Additional Rent, any obligation in connection with the Letter of Credit, or any other charge payable by Tenant to Landlord under this Lease, and (ii) with respect to Landlord, the application of the Allowance (defined in Exhibit B) to the Tenant Improvements) by reason of acts of God, strikes, lockouts, labor troubles, inability to procure materials, restrictive laws, government orders, global pandemic conditions consistent with COVID-19, or any other cause beyond such party’s reasonable control (except as otherwise expressly provided in the Work Letter, as to Tenant), the performance of such act shall be excused for the period of the delay, and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay.
C. Mortgagee Protections. Tenant agrees to give any holder of any lien or other such encumbrance covering any part of the project of which the Building is a part (“Mortgagee”), by registered mail, a copy of any notice of default served upon Landlord, provided that prior to such notice Tenant has been notified in writing (by way of notice of assignment of rents and leases, or otherwise) of the address of such Mortgagee. If Landlord shall have failed to cure such default within thirty (30) days from the effective date of such notice of default, then the Mortgagee shall have an additional thirty (30) days within which to cure such default or if such default cannot be cured within that time, then such additional time as may be necessary to cure such default (including the time necessary to foreclose or otherwise terminate its lien or other such encumbrance, if necessary to effect such cure), and this Lease shall not be terminated so long as such remedies are being diligently pursued.
25. DEFAULT; LANDLORD'S REMEDIES UPON DEFAULT
A. Default. The occurrence of any of the following shall constitute a breach or default of this Lease by Tenant:
(1) Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, within three (3) business days after receipt of Landlord’s written notice stating that such Rent is past due; or
(2) Except where a specific time period is otherwise set forth for Tenant's performance in this Lease, in which event the failure to perform by Tenant within such time period shall be a default by Tenant under this Paragraph 25, any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for twenty (20) days after written notice thereof from Landlord to Tenant; provided that if the nature of such default is such that the same cannot reasonably be cured within a twenty (20) day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure such default, but in no event exceeding a period of time in excess of sixty (60) days after written notice thereof from Landlord to Tenant; or
(3) To the extent permitted by law, (i) Tenant or any guarantor of this Lease being placed into receivership or conservatorship, or becoming subject to similar proceedings under Federal or State law, or (ii) a general assignment by Tenant or any guarantor of this Lease for the benefit of creditors, or (iii) the taking of any corporate action in furtherance of bankruptcy or dissolution whether or not there exists any proceeding under an insolvency or bankruptcy law, or (iv) the filing by or against Tenant or any guarantor of any proceeding under an insolvency or bankruptcy law, unless in the case of such a proceeding filed against Tenant or any guarantor the same is dismissed within sixty (60) days, or (v) the appointment of a trustee or receiver to take possession of all or substantially all of the assets of Tenant or any guarantor, unless possession is restored to Tenant or such guarantor within sixty (60) days, or (vi) any execution or other judicially authorized seizure of all or substantially all of Tenant's assets located upon the Premises or of Tenant's interest in this Lease, unless such seizure is discharged within sixty (60) days; or
(4) Abandonment of all or a substantial portion of the Premises by Tenant, pursuant to Section 1951.3 of the California Civil Code; or
(5) The failure by Tenant to timely observe or perform according to the provisions of Paragraphs 6, 19, 28, or 32 of this Lease within the respective time periods specified therein (if any), and which failure is not cured within three (3) business days after written notice to Tenant.
The notice periods provided herein are in lieu of, and not in addition to, any notice periods provided by law.
Landlord shall have the following remedies if Tenant breaches or defaults on this Lease. These remedies are not exclusive but are in addition to any rights and remedies now or later allowed by law or in equity.
B. Termination. Landlord shall have the right either to terminate Tenant's right of possession to the Premises and thereby terminate this Lease or to have this Lease continue in full force and effect with Tenant at all times having the right of possession to the Premises. Should Landlord elect to terminate Tenant's right of possession to the Premises and thereby terminate this Lease, then Landlord shall have the immediate right of entry to and may remove all persons and property from the Premises. Such property so removed may be stored at Landlord’s election in a public warehouse or elsewhere in accordance with applicable law at the cost and for the account of Tenant. Upon such termination Landlord, in addition to any other rights and remedies, including rights and remedies under Subparagraphs (1), (2) and (4) of Subdivision (a) of Section 1951.2 of the California Civil Code, or any amendment thereto or any successor law thereof, shall be entitled to recover from Tenant the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of the award exceeds the amount of such rental loss that the Tenant proves could be reasonably avoided. The amount Landlord may recover under Subparagraph (4) of Subdivision (a) of Section 1951.2 of the California Civil Code shall include, without limitation, the cost of recovering possession of the Premises, expenses of reletting (including advertising), brokerage commissions and fees, costs of placing the Premises in good order, condition and repair, including necessary maintenance, alteration and restoration of the Premises, reasonable attorneys' fees, court costs, and costs incurred in the appointment of and performance by a receiver to protect the Premises or Landlord's interest under this Lease. The worth at the time of the award of the amount referred to in Subparagraph (3) of Subdivision (a) of Section 1951.2 of the California Civil Code shall be computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award plus one percent (1%). The worth at the time of the award referred to in Subparagraphs (1) and (2) of Subdivision (a) of Section 1951.2 of the California Civil Code shall be computed by allowing interest at the maximum rate permitted by law. Prior to such award, Landlord may relet the Premises for the purpose of mitigating damages suffered by Landlord because of Tenant's failure to perform its obligations hereunder.
C. Continuation of Lease. Should Landlord, following any breach or default of this Lease by Tenant, elect to keep this Lease in full force and effect with Tenant retaining the right of possession to the Premises (notwithstanding the fact that Tenant may have vacated or abandoned the Premises), Landlord shall have the right to enforce all of its rights and remedies under this Lease or allowed by law or in equity including, but not limited to, the right to recover the installments of Rent as they become due under this Lease and all other rights provided by Section 1951.4 of the California Civil Code. Notwithstanding any such election to have this Lease remain in full force and effect, Landlord may at any time thereafter elect to terminate Tenant's right of possession to the Premises and thereby terminate this Lease for any previous breach or default which remains uncured, or for any existing or subsequent breach or default. For purposes of Landlord's right to continue this Lease in effect upon Tenant's breach or default, acts of maintenance or preservation or efforts by Landlord to relet the Premises or the appointment of a receiver on initiative of Landlord to protect its interest under this Lease do not constitute a termination of Tenant's right of possession.
D. [Intentionally Omitted.]
E. Indemnification. Nothing in this paragraph shall affect the right of Landlord hereunder to indemnification for liability arising prior to the termination of the Lease for damage to person or property.
F. Right to Cure. If Tenant shall be in default in the performance of any term, covenant or condition to be performed by it under this Lease, beyond any applicable or reasonable cure period, then, after notice and without waiving or releasing Tenant from the performance of such term, covenant or condition, Landlord may, but shall not be obligated to, perform the same, and, in exercising any such right, may pay necessary and incidental costs and expenses in connection therewith. All sums so paid by Landlord, together with interest thereon at the maximum rate of interest allowed by law, shall be deemed Additional Rent hereunder and shall be payable to Landlord by Tenant within thirty (30) days following receipt of written notice of such with supporting statement(s).
G. Interest. Rent not paid when due shall bear interest, in addition to any late charge provided hereunder, at the maximum rate of interest allowed by law from the date due until paid.
H. No Waiver. No security or guaranty which may now or hereafter be furnished to Landlord for the payment of the Rent or for performance by Tenant of the other terms, covenants or conditions of this Lease shall in any way be a bar or defense to any action in unlawful detainer, for the recovery of the Premises, or to any action which Landlord may at any time commence for a breach of any of the terms, covenants or conditions of this Lease.
I. Waiver of Redemption Right. Tenant hereby waives any and all rights conferred by Section 3275 of the Civil Code of California and by Sections 1174(c) and 1179 of the Code of Civil Procedure of California and any and all other laws and rules of law from time to time in effect during the Term (as the same may be extended) providing that Tenant shall have any right to redeem, reinstate or restore this Lease following its termination by reason of Tenant’s breach.
J. Waiver of Jury Trial. If any action or proceeding between Landlord and Tenant to enforce the provisions of this Lease (including an action or proceeding between Landlord and the trustee or debtor in possession while tenant is a debtor in a proceeding under any bankruptcy law) proceeds to trial, Landlord and Tenant hereby waive their respective rights to a jury in such trial. Landlord and Tenant hereby agree that this paragraph constitutes a written consent to waiver of trial by jury within the meaning of California Code of Civil Procedure Section 631(a)(2), and Tenant does hereby authorize and empower
Landlord to file this paragraph and/or lease, as required, with the clerk or judge of any court of competent jurisdiction as a written consent to waiver of jury trial.
26. ATTORNEYS' AND ADMINISTRATIVE FEES ON DEFAULT
If either Landlord or Tenant shall obtain legal counsel or bring an action against the other by reason of the breach or default of any term, covenant or condition hereof or otherwise arising out of this Lease, the unsuccessful party shall pay to the prevailing party its attorneys' fees, which shall be payable whether or not such action is prosecuted to judgment. The term "prevailing party" shall include, without limitation, a party who obtains substantially the relief sought whether by compromise, settlement or judgment. In addition, if Landlord becomes involved in any dispute or litigation, threatened or actual, by or against anyone not a party to this Lease, but arising by reason of or related to any act or omission of Tenant, Tenant agrees to pay Landlord’s reasonable attorneys’ fees and other costs incurred by Landlord in connection therewith.
27. INSOLVENCY
A. Either:
(1) the appointment of a receiver to take possession of all or substantially all of the assets of Tenant; or
(2) a general assignment by Tenant for the benefit of creditors; or
(3) any action taken or suffered by Tenant under any insolvency, bankruptcy, or reorganization act; or
(4) the admission by Tenant in writing of its inability to pay its debts as they become due; or
(5) the levying of execution upon any interest of Tenant in or under this Lease or upon the property of Tenant within the Premises, unless the same shall be bonded against or discharged within twenty (20) days following the levy or within five (5) days prior to the proposed sale thereunder, whichever is earlier; or
(6) the attachment or garnishment of any interest of Tenant in, to, or under this Lease or upon the property of Tenant in the Premises, unless the same is discharged within twenty (20) days after the levy thereof, shall constitute a breach of this Lease by Tenant and a default hereunder. On the happening of such an event, this Lease shall terminate five (5) days after receipt by Tenant of notice of termination; provided, however, that notwithstanding such termination Landlord may enforce its remedies under Paragraph 25 and provided further that neither such termination nor such exercise of remedies shall terminate the right of Landlord or any lender to enforce any and all indemnities given by Tenant under the terms of this Lease. In no event shall this Lease be assigned or assignable by reason of any voluntary or involuntary bankruptcy proceedings, nor shall any rights or privileges hereunder be an asset of Tenant in any bankruptcy, insolvency, or reorganization proceedings, except at the election of Landlord so to treat the same. In the event this Lease is assumed and assigned by Tenant's trustee in bankruptcy, Landlord shall require that such assignee deposit with Landlord security in an amount equal to Landlord's then standard security deposit requirements for similar tenants of the Building.
28. ASSIGNMENT OR SUBLETTING
A. General. Tenant shall not, directly or indirectly, voluntarily or involuntarily, assign, pledge, encumber, or otherwise transfer this Lease or any interest therein, and shall not sublet the Premises or any part thereof or any right or privilege appurtenant thereto, or permit any other person (the authorized employees of Tenant and guests excepted) to occupy or use the Premises or any portion thereof
(collectively “Transfer”) except for “Permitted Transfers” defined below, without first receiving the written consent of Landlord, which, except as hereinafter provided, may be withheld in Landlord’s sole and absolute discretion. If Tenant is a corporation (other than a corporation the stock of which is publicly traded) a Transfer shall include any direct or indirect change in the legal or beneficial ownership or control of the shares of stock, either in one (1) transaction or a series of transactions, which constitute control of Tenant. Notwithstanding the foregoing, any bona fide sale or transfer of the capital stock of Tenant in an aggregate amount not to exceed seventy-five percent (75%) of the direct or indirect ownership of all of the voting stock of Tenant if Tenant is a corporation over no more than three separate and unrelated financing transactions shall be deemed a Permitted Transfer for purposes of this Lease only if all of the following conditions precedent are satisfied to Landlord’s satisfaction (i) such sale or transfer occurs solely in connection with any bona fide financing, capitalization or recapitalization for the benefit of Tenant, and (ii) Tenant provides to Landlord ten (10) days’ prior written notice of such sale or transfer, and (iii) following such transfer, Tenant’s tangible net worth remains at least equal to Tenant’s tangible Net Worth (as defined below) as of the date of this Lease as reasonably determined by Landlord. If Tenant is a partnership, whether general or limited, or a limited liability company, a Transfer shall include any direct or indirect change in the legal or beneficial ownership or control of the partnership interests or, as the case may be, any change in the membership or control of said limited liability company, either in one (1) transaction or a series of transactions, which constitute control of Tenant. The term "control" as used herein means either 50% or more of the ownership interest in Tenant or the power, directly or indirectly, to direct or cause the direction of the management or policies of Tenant. Any Transfer, including but not limited to a transfer by operation of law, without Landlord's prior written consent shall be void and shall, at the option of Landlord, constitute a default under this Lease. A consent to one Transfer shall not be deemed to be a consent to any other or further Transfer.
B. Consent. Landlord agrees to not unreasonably withhold, condition or delay its consent (i) to an assignment of this Lease to an approved assignee or (ii) to a sublease of all or a portion of the Premises to an approved subtenant, provided that Tenant is not then in default under this Lease nor is any event then occurring which with the giving of notice or the passage of time, or both, would constitute a default. However, in lieu of granting such consent in connection with an assignment or a proposed sublease which results in more than fifty percent (50%) of the Premises being sublet for substantially all of the remaining Term, Landlord may terminate this Lease with respect to the transfer space (provided that Tenant shall pay all costs in connection with the physical subdivision of any portion of the Premises) or exercise its other rights, all as hereinafter provided. Landlord shall grant or deny Tenant’s request for consent to a Transfer (“Transfer Notice”) within thirty (30) days following delivery of the Transfer Notice.
C. Landlord’s Review. Without otherwise limiting the criteria upon which Landlord may withhold its consent, Landlord shall be entitled to consider all reasonable criteria including, but not limited to, the following: (1) whether or not the proposed subtenant or assignee is engaged in a business which, and the use of the Premises will be in a manner which, is in keeping with the then character and nature of all other tenancies in the Building, (2) whether the use to be made of the Premises by the proposed subtenant or assignee will comply with the permitted use under this Lease, and whether such use would be prohibited by any other portion of this Lease, including, but not limited to, any reasonable rules and regulations then in effect, or under applicable laws, and whether such use imposes a greater load upon the Premises and the Building services than imposed by Tenant, (3) the business reputation of the proposed individuals who will be managing and operating the business operations of the proposed assignee or subtenant, and the long-term financial and competitive business prospects ability of the proposed assignee or subtenant to properly and successfully operate its business in the Premises (or subleased premises, as applicable) and meet the financial and other obligations of this Lease (if Tenant is proposing an assignment) or the proposed sublease (if Tenant is proposing a sublease), and (4) the creditworthiness and financial stability of the proposed assignee or subtenant in light of the responsibilities involved. In any event, Landlord may withhold its consent to any assignment or sublease, if (i) the proposed assignment or sublease requires alterations, improvements or additions to the Premises or portions thereof which would materially reduce the value of the existing leasehold improvements in the Premises or are otherwise structural in nature, or (ii) the portion of the Premises proposed to be sublet is irregular in shape and/or does not permit safe or otherwise appropriate means of ingress and egress, or does not comply with governmental safety and other codes, or (iii) the proposed
subtenant or assignee is either a governmental or quasi-governmental agency or instrumentality thereof, or (iv) Landlord or Landlord’s agent has shown space in the Building to the proposed assignee or subtenant or its agent or has responded to any inquiries from the proposed assignee or subtenant or its agent concerning availability of space in the Building, at any time within the preceding nine (9) months, or (v) the proposed subtenant or assignee is a tenant in the Building (provided that Landlord will not withhold its consent solely because the proposed subtenant or assignee is an occupant of the Building if Landlord does not have space available for lease in the Building that is comparable to the space Tenant desires to sublet or assign within six (6) months of the proposed commencement of the proposed sublease or assignment). In no event may Tenant advertise the Premises for sublease at a Rent that is less than seventy-five percent (75%) of Rent Landlord is then charging for comparable space in the Building.
D. Requirements; Landlord’s Options. In the event Tenant contemplates an assignment or sublease, Tenant shall give Landlord thirty (30) days' prior written notice thereof (the “Transfer Notice”), and together with said Transfer Notice shall (i) identify the assignee or subtenant, (ii) deliver to Landlord a completed sublease application on a form to be supplied by Landlord (iii) deliver to Landlord a complete copy of the proposed lease assignment and assumption agreement or the proposed sublease, (iv) deliver to Landlord the last two (2) full years’ current financial statements and the most recent last two (2) years’ federal tax returns of the proposed assignee or subtenant (with the understanding that Landlord may be requested to execute a nondisclosure agreement), and (v) deliver to Landlord the sum of $1,500 to be applied to the processing fee described below (collectively, the “Transfer Documentation”). Upon Landlord’s receipt of the Transfer Notice and Transfer Documentation, Landlord by written notice to Tenant given within thirty (30) days thereafter, shall elect one of the following: (a) for reasonable cause, refuse to consent to the proposed sublease or assignment, or (b) in the case of a proposed assignment, elect to terminate this Lease, or (c) in the case of a proposed sublease which results in more than fifty percent (50%) of the Premises being sublet for substantially all of the remaining Term, terminate this Lease as it pertains to the portion of the Premises so proposed by Tenant to be subleased, or (d) approve Tenant's proposal; subject in all cases to Landlord's subsequent written approval (not to be unreasonably withheld) of the final agreement between Tenant and the proposed assignee or subtenant, and which agreement shall require, among other things, that the sublease or assignee maintain insurance for the benefit of Landlord in accordance with the requirements of this Lease. The terms of this Paragraph 28 shall not apply to a Permitted Transfer. If Landlord fails to respond to the Transfer Notice within thirty (30) days following Landlord’s receipt of the Transfer Notice and required Transfer Documentation, Tenant shall have the right to provide Landlord with a second written notice (“Second Transfer Notice”), which Second Transfer Notice shall also include the Transfer Documentation. Tenant’s Second Transfer Notice must specifically and conspicuously state that Landlord’s failure to respond within a period of ten (10) consecutive days following Landlord’s receipt of such Second Transfer Notice shall be deemed to be an approval by Landlord. If Landlord’s failure to respond continues for ten (10) consecutive days after its receipt of Tenant’s Second Transfer Notice and Transfer Documentation, and the proposed sublease results in fifteen percent (15%) or less of the Premises in total being subject to a sublease, the Transfer for which Tenant has requested consent shall be deemed to have been approved by Landlord.
If this Lease is terminated pursuant to the foregoing with respect to less than the entire Premises, Base Monthly Rent and Tenant's Share shall be adjusted on the basis of the number of rentable square feet retained by Tenant, and this Lease as so amended shall continue thereafter in full force and effect; provided that Tenant shall pay all costs in connection with the physical subdivision of any portion of the Premises.
E. Recapture. Upon Landlord’s election to terminate this Lease as to all or a portion of the Premises as set forth above, this Lease (in its entirety or as it pertains to said portion, as the case may be) shall terminate as of the date the proposed sublease was to commence or the proposed assignment was to take place. Tenant shall thereupon vacate and surrender to Landlord all or such portion of the Premises and the provisions of this Lease applicable to termination upon expiration of the Term shall apply to all or to such portion of the Premises. Such termination shall not relieve Tenant from liability for any breach or default with respect to all or such portion of the Premises occurring prior to termination. In addition, in the event Landlord elects to terminate this Lease, then Landlord shall have the right to negotiate directly with Tenant’s proposed assignee or subtenant and to enter into a direct lease or
occupancy agreement with such party on such terms as shall be acceptable to Landlord in its sole and absolute discretion, and Tenant hereby waives any claims against Landlord related thereto, including, without limitation, any claims for any compensation or profit related to such lease or occupancy agreement.
F. Permitted Transfers. Notwithstanding anything to the contrary contained in this Lease, (i) an assignment or subletting of all or a portion of the Premises to an affiliate of Tenant (an entity which is controlled by, controls, or is under common control with, Tenant as of the date of this Lease (each, an “Affiliate”), (ii) a sale of corporate shares of capital stock in Tenant in connection with an initial public offering of Tenant's stock on a nationally-recognized stock exchange, (iii) an assignment of the Lease to an entity which acquires all or substantially all of the stock or assets of Tenant, or (iv) an assignment of the Lease to an entity which is the resulting entity of a merger or consolidation of Tenant during the Term, shall not be deemed a Transfer requiring Landlord's consent under this Paragraph 28 (any transfer described in items (i) through (iv) of this Paragraph 28.F herein referred to as a “Permitted Transfer”, any such assignee or sublessee described in items (i) through (iv) of this Paragraph 28.F herein referred to as a "Permitted Transferee"), provided that (A) Tenant notifies Landlord at least fourteen (14) days prior to the effective date of any such assignment or sublease and promptly supplies Landlord with any documents or information reasonably requested by Landlord regarding such Transfer or Permitted Transferee as set forth above (provided that, if prohibited by confidentiality in connection with a proposed purchase, merger, consolidation, IPO, or reorganization, then Tenant shall give Landlord written notice within ten (10) days after the effective date of the proposed purchase, merger, consolidation, IPO, or reorganization), (B) Tenant is not in default, beyond the applicable notice and cure period, and such assignment or sublease is not a subterfuge by Tenant to avoid its obligations under this Lease, (C) such Permitted Transferee shall be of a character and reputation consistent with the quality of the Building, (D) excepting Affiliates, such Permitted Transferee shall have a tangible net worth (not including goodwill as an asset) computed in accordance with generally accepted accounting principles ("Net Worth") at least equal to the greater of (1) the Net Worth of Original Tenant on the date of this Lease, and (2) the Net Worth of Tenant on the day immediately preceding the effective date of such assignment or sublease, (E) no assignment or sublease relating to this Lease, whether with or without Landlord's consent, shall relieve Tenant from any liability under this Lease, and (F) the liability of such Permitted Transferee under either an assignment or sublease shall be joint and several with Tenant. An assignee of Tenant's entire interest in this Lease who qualifies as a Permitted Transferee may also be referred to herein as a "Permitted Transferee Assignee." "Control," as used in this Paragraph 28.F, shall mean the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, of more than fifty percent (50%) of the voting interest in, any person or entity.
G. No Release. In all events, if this Lease is assigned or all or any portion of the Premises is subleased, Tenant shall continue to be primarily liable under this Lease and in the event or an assignment, the assignee shall execute an agreement by which it assumes and agrees to be jointly and severally liable for the complete performance by Tenant of all of its obligations hereunder.
H. Default. In the event all or a portion of the Premises is subleased, if the Lease is thereafter terminated as a result of the default of Tenant or for any other reason, then (notwithstanding anything to the contrary contained in the sublease) (i) the sublease and term thereof shall expire and come to an end as of the effective date of such termination, and the subtenant shall vacate the subleased premises no later than such date, and if the subtenant does not so vacate, Landlord shall be entitled to all of the rights and remedies available to a landlord against a tenant holding over after the expiration of a term, or (ii) Landlord, at its sole option and without being obligated to do so, may require the subtenant to attorn to Landlord in which event (A) Landlord shall undertake the obligations of Tenant under the sublease accruing from the time of the exercise of said option, but Landlord shall not be liable for any prepaid rents nor any security deposit paid by the subtenant, nor shall Landlord be liable for any other defaults of Tenant under the sublease, and (B) the subtenant shall fulfill all of its obligations under the sublease, as a direct obligation to Landlord.
I. Additional Terms. The assignment or sublease agreement, as the case may be, after approval by Landlord, shall not be amended or terminated without Landlord’s prior written consent, and if a sublease, shall contain a provision directing the subtenant to pay the rent and other sums due thereunder directly to Landlord upon receiving written notice from Landlord that Tenant is in default under this Lease with respect to the payment of Rent. In the event that, notwithstanding the giving of such notice, Tenant collects any rent or other sums from the subtenant, then Tenant shall hold such sums in trust for the benefit of Landlord and shall immediately forward the same to Landlord. Landlord’s collection of such rent and other sums shall not constitute an acceptance by Landlord of attornment by such subtenant. Accordingly, Tenant irrevocably assigns to Landlord, as security for the performance of Tenant's obligations under this Lease, all rent from any sublease of all or any part of the Premises. A receiver for Tenant, appointed on Landlord's application, may collect such rent and apply it toward Tenant's obligations under this Lease except that, until the occurrence of an act of default by Tenant, Tenant shall have the right to collect such rent.
J. No Further Transfers Without Consent. Notwithstanding anything in this Lease to the contrary, in the event Landlord consents to an assignment or subletting by Tenant in accordance with the terms of this paragraph, Tenant’s assignee or subtenant shall have no right to further assign this Lease or any interest therein or thereunder or to further sublease all or any portion of the Premises. In furtherance of the foregoing, Tenant acknowledges and agrees on behalf of itself and any assignee or subtenant claiming under it (and any such assignee or subtenant by accepting such assignment or sublease shall be deemed to acknowledge and agree) that no sub-subleases or further assignments of this Lease shall be permitted at any time without Landlord’s consent, which consent shall not be unreasonably withheld, conditioned or delayed.
K. Net Profits. Any net profits earned by Tenant from subleasing or from an assignment of this Lease shall be divided and paid fifty percent (50%) to Landlord and fifty percent (50%) to Tenant. Net profits shall be determined by subtracting from the rent and other consideration paid by the subtenant or assignee, the rent and other sums due to Landlord under this Lease for the applicable space and applicable period; provided however that Tenant shall be entitled to reimbursement, out of such net profits, for any reasonable amount expended by Tenant in connection with the transfer, including broker’s commissions, attorneys’ fees, and tenant improvement costs or allowances, which amount shall be amortized over the remaining term of the Lease. This paragraph shall not be applicable to Permitted Transfers.
L. Landlord’s Costs. Tenant shall pay to Landlord the amount of Landlord's cost of processing every proposed assignment or sublease (including, without limitation, the cost of reasonable attorneys' and other professional fees and the administrative, accounting, and clerical time of Landlord), and the amount of all direct and indirect expenses incurred by Landlord arising from any assignee's or subtenant's taking occupancy (including, without limitation, the expenses of freight elevator operation for the moving of furnishings, trade fixtures and other personal property, security service, janitorial and cleaning service, and rubbish removal service). Notwithstanding anything to the contrary contained in this Lease, Landlord shall have no obligation to process any request for its consent to assignment or sublease prior to Landlord's receipt of payment by Tenant of the amount of Landlord's estimate of the processing costs and expenses and all other direct and indirect costs and expenses of Landlord and its authorized representatives arising from such matter, and in no event shall the processing fee charged hereunder be less than $2,000. This paragraph shall not be applicable to Permitted Transfers.
M. Remedies. Tenant acknowledges and agrees that the restrictions, conditions and limitations imposed by this Lease on Tenant’s ability to Transfer this Lease or any interest herein, including limitations on assignments and subleasing, or to allow any other person to occupy or use the Premises or any portion thereof, are, for the purposes of California Civil Code Section 1951.4, as amended from time to time, and for all other purposes, reasonable at the time that this Lease was entered into, and shall be deemed to be reasonable at the time that Tenant seeks to assign or transfer this Lease or any interest herein, to sublet the Premises or any part thereof, to transfer or assign any right or privilege appurtenant to the Premises, or to allow any other person to occupy or use the Premises or any portion thereof. In the event of any dispute shall arise as to Landlord’s consent or failure to consent to a
proposed Transfer, Tenant’s remedy shall be an action for injunctive relief, and in no event shall Tenant have the right to terminate this Lease nor shall Landlord be liable for damages suffered by Tenant in the event it is determined that Landlord acted unreasonably in withholding its consent. Accordingly, Tenant specifically waives any claim for damages or right to terminate the Lease pursuant to California Civil Code Section 1995.310 or otherwise.
N. Alternative Dispute Resolution. Notwithstanding anything to the contrary contained herein, if Landlord fails to give consent to a proposed Transfer, then any resulting dispute as to whether such failure by Landlord to give consent to such proposed Transfer was unreasonable may, at Tenant’s option, be resolved as provided in this Paragraph. The Alternative Dispute Resolution provisions contained herein shall not be available for any other dispute under this Lease. As an initial matter, the parties agree to negotiate in good faith between them informally to resolve whether Landlord unreasonably withheld consent. In the event they are unable to resolve whether Landlord unreasonably withheld consent through informal negotiations within ten (10) calendar days, then the parties shall submit their dispute to arbitration before a sole arbitrator. The parties will select the sole arbitrator from JAMS/Endispute’s then current roster of San Francisco County, California Panelists. If the JAMS/Endispute panel exists, arbitration shall be conducted before a sole, retired judge from the American Arbitration Association (“AA”) panel of retired judges, selected as described above. In the event neither the JAMS/Endispute panel nor the AAA panel of retired judges exists, the parties shall resolve their dispute through litigation, rather than arbitration. With the exception of California Code of Civil Procedure §§ 1281.6 and 1283.05, the arbitration shall be conducted pursuant to the current version of Sections1280-1294.2 of the California Code of Civil Procedure. Unless the parties otherwise agree, no discovery shall be permitted, except that the parties shall exchange documents relevant to the matters at issue in the arbitration. The arbitration shall be conducted at a mutually convenient location San Francisco, California. Judgment may be entered on the arbitration award in the San Francisco County Superior Court, or any other court of competent jurisdiction. The parties acknowledge that in agreeing to arbitration, they are waiving certain important rights, including but not limited to, the right to a trial by jury, the right to appeal, and the right to have their claims adjudicated under the rules of evidence embodied in the California Evidence Code.
29. TRANSFER BY LANDLORD
In the event Landlord shall sell or transfer the Building, or shall assign its interest as Landlord in and to this Lease, then, from the effective date of such sale, assignment or transfer, Landlord shall be released from all further liability to Tenant, express or implied, under this Lease, provided that, any successor pursuant to a voluntary, third-party transfer (but not as part of an involuntary transfer resulting from a foreclosure or deed in lieu thereof except as otherwise provided in any applicable non-disturbance agreement) shall have assumed Landlord’s obligations under this Lease either by contractual obligation, assumption agreement or by operation of law, and Tenant agrees to look solely to the successor in interest of Landlord in and to the Building or this Lease, except as to any matters of liability that have accrued and remain unsatisfied as of the date of such sale, assignment or transfer. It is intended that the covenants and obligations contained in this Lease on the part of Landlord shall be binding upon Landlord and its successors and assigns only during their respective periods of ownership of the fee or leasehold estate, as the case may be. If any security is given by Tenant to secure the faithful performance of all or any part of the terms, covenants and conditions of this Lease on the part of Tenant, Landlord may transfer and deliver the security to the successor in interest of Landlord, and thereupon Landlord shall be discharged from any further liability in reference thereto. Landlord may enter into any transaction described in this Paragraph 29 without the consent of Tenant.
30. DAMAGE
A. General. Except as hereinafter set forth, in the event the Premises or the Building is damaged from any cause, Landlord shall forthwith repair such damage and this Lease shall remain in full force and effect. Provided such damage was not caused by Tenant's, or by its agent’s, employee’s, contractor’s, invitee’s or licensee’s, negligent or willful act, Tenant shall be entitled to a proportionate reduction of Rent commencing from the date of damage and Tenant’s ceasing to use the Premises and continuing while such repairs are being made and that is in the same proportion to the Rent as the
rentable area of the portion of the Premises so damaged and is unusable bears to the total rentable area of the Premises.
B. Landlord’s Option. In the event the cost of repairing such damage is not fully covered by Landlord's insurance (or would not be fully covered by such insurance if Landlord’s insurance met the requirements of this Lease), or in the event the cost of repairs exceeds the insurance proceeds paid to Landlord or payable to Landlord so long as Landlord has maintained the insurance coverage expressly required by this Lease), Landlord may elect, at its option, not to make such repairs, in which event this Lease may be terminated at Landlord’s option upon the giving of notice to Tenant. If Landlord has the right to terminate this Lease pursuant to this Paragraph 30, Landlord agrees to exercise such right in a nondiscriminatory fashion among leases affecting the Building. Consideration of the following factors in arriving at its decision shall not be deemed discriminatory: length of term remaining on this Lease, time needed to repair and restore, costs of repair and restoration not covered by insurance proceeds, Landlord's plans to repair and restore common areas serving the Premises, Landlord's plans for repair and restoration of the Building, and other relevant factors of Landlord's decision as long as they are applied to Tenant in the same manner as other tenants.
C. Termination. In the event Landlord determines that the Premises shall be rendered untenantable for more than two hundred seventy (270) days as a result of any such damage, Landlord or Tenant may elect to terminate this Lease provided written notice thereof is given to the other party hereto within thirty (30) days following the date Landlord notifies Tenant that such damage may not be repaired within said two hundred seventy (270) day period (provided that Tenant’s right to terminate shall be null and void and of no force or effect if Tenant or any of its agents, employees, contractors or vendors caused the casualty event by their negligence or willful misconduct).
D. Waivers. Landlord shall under no circumstances be required to repair any damage to the property of Tenant, or to any improvements installed in, on or about the Premises by Tenant. Tenant hereby specifically waives the provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California Civil Code.
E. Last Year of Term. In the event the Building is damaged to the extent of more than twenty percent (20%) of the then replacement cost thereof (whether the Premises are damaged or not), or the casualty event occurs during the final twelve (12) months of the Term, Landlord may elect to terminate this Lease. A total destruction of the Building shall terminate this Lease without liability to Landlord or Tenant. In addition, Tenant shall have the right to terminate this Lease if all of the foregoing occur: (i) a material portion of the Premises is rendered untenantable by fire or other casualty and Landlord’s completion estimate provides that such damage cannot reasonably be repaired (as reasonably determined by Landlord) within sixty (60) days following the date such damage occurred; (ii) there is less than twelve (12) months of the Term remaining on the date of such casualty; (iii) the casualty was not caused by the gross negligence or willful misconduct of Tenant or any of its employees or vendors; and (iv) Tenant provides Landlord with written notice of its intent to terminate within thirty (30) days after the date of Landlord’s completion estimate.
31. CONDEMNATION
A. Definition. As used throughout this Lease, the word "condemn" is coextensive with the phrase "right of eminent domain", i.e., the right of people or government to take property for government or public use, and shall include the intention to condemn expressed in writing as well as the filing of any action or proceeding for condemnation.
B. Landlord’s Option. In the event any action or proceeding is commenced for the condemnation of the Premises or any part thereof, or of the Building or any part thereof, or if Landlord is advised in writing by any agency, entity or body having the right or power of condemnation of its intention to condemn the same, then and in any of said events, Landlord may:
(1) Without any obligation or liability to Tenant, and without affecting the validity and existence of this Lease other than as hereinafter provided, agree to sell or convey to the condemnor the part or portion of the Premises or Building sought by the condemnor free from this Lease and the rights of Tenant hereunder. Such agreement may be made without first requiring that any action or proceeding be instituted, or if such action or proceeding shall have been instituted, without requiring any trial or hearing thereof, and Landlord is expressly empowered to stipulate to judgment therein.
(2) Terminate this Lease and all rights of Tenant hereunder if a portion of the Premises is condemned.
(3) Continue this Lease in full force and effect, provided that such condemnation does not result in a taking of the Premises. In the event this Lease is continued in full force and effect and by reason of the condemnation an alteration of the Building is required, and such alteration materially interferes with Tenant's business in the Premises, then Tenant shall be entitled to a reasonable abatement in Rent during the period of such modification or alteration to the extent such work interferes with Tenant's business.
C. Permanent Taking. In the event a portion of the Premises is permanently condemned and taken, and such condemnation and taking materially affects Tenant's business in the Premises, then Tenant shall have the option of either terminating all of its obligations under this Lease or continuing this Lease in full force and effect with respect to such portion of the Premises not taken. In such latter event, Rent for the remainder of the Term shall be reduced in the proportion which the rentable square footage of the Premises taken bears to the total rentable square footage of the original Premises.
D. Partial Taking. If, as a result of any such condemnation proceedings, a leasehold interest or right of possession only is so condemned or taken for a period of time less than the then unexpired Term of this Lease, this Lease shall continue in full force and effect and any condemnation award shall be payable to Landlord and shall be credited by Landlord against the Rent payable by Tenant for said period. If the amount received by Landlord is in excess of said Rent, Tenant shall be entitled to receive such excess, and, if the amount so received by Landlord is less than said Rent, then Tenant shall pay the amount of such deficiency to Landlord. If such condemnation is for a period of time extending beyond the expiration of the Term of this Lease, the foregoing provisions shall apply only up to the date of expiration of the Term. Upon said expiration, Landlord shall receive all awards thereafter payable, and no accounting shall be made to Tenant for such period extending beyond said expiration.
E. Compensation. All compensation and damages awarded for the taking of the Premises, Building, or any portion or portions thereof, shall, except as otherwise herein provided, belong to and be the sole property of Landlord, and Tenant shall not have any claim or be entitled to any award for diminution in value of its leasehold interest hereunder or for the value of any unexpired Term of this Lease; provided, however, Tenant shall be entitled to any separate award that may be made for the taking of or damage to, or on account of any cost or damage Tenant may sustain in the removal of, Tenant's merchandise, fixtures, trade fixtures, equipment and furnishings.
F. Termination. If this Lease is terminated, in whole or in part, pursuant to any of the provisions of this paragraph, all Rent and other charges payable by Tenant to Landlord hereunder and attributable to the Premises taken shall be paid up to the date upon which actual physical possession shall be taken by the condemnor, and the parties shall thereupon be released from all further liability in relation thereto.
G. Waiver. This Paragraph 31 sets forth Tenant's sole and exclusive remedies in the event of a taking or condemnation. Each of Landlord and Tenant hereby waives the provisions of Sections 1265.130 and 1265.150 of the California Code of Civil Procedure and the provisions of any successor or other law of like import.
32. SUBORDINATION TO ENCUMBRANCES
This Lease, and the leasehold estate created hereby, shall at all times be subordinate to all liens and encumbrances, and replacements thereof, in any amount whatsoever now existing or hereafter placed on or against the Building or any part thereof, or against Landlord's interest or estate therein, without the necessity of having further instruments executed on the part of Tenant to effectuate such subordination. Tenant shall, however within ten (10) business days following Landlord’s request, execute and deliver a commercially appropriate document in recordable form as may be required by such parties, including a subordination, non-disturbance and attornment agreement in a commercially reasonable form in order to confirm or effect the subordination or priority of this Lease related thereto as Landlord’s lender may request. In addition, Tenant shall, upon demand, attorn to the purchaser at any foreclosure sale or pursuant to the exercise of any power of sale, in which event Tenant shall automatically be and become the Tenant of said purchaser and, at such purchaser's option, Tenant shall enter into a new lease for the balance of the Term upon the same terms, covenants and conditions as are contained in this Lease. Notwithstanding the foregoing, within a reasonable time following the mutual execution and delivery of this Lease, Tenant shall execute and deliver to Landlord a Subordination, Nondisturbance and Attornment Agreement on the form attached here to as Exhibit G (the “SNDA”), provided Tenant may negotiate commercially reasonable revisions with Landlord’s lender. Landlord shall cause the same to be fully executed and tender the same to Tenant no later than sixty (60) days from the date Tenant so tenders to Landlord the SNDA executed by Tenant. Tenant shall be liable for all reasonable and out of pocket costs and expenses arising in connection with obtaining the SNDA. In addition to the foregoing, upon written request by Tenant, Landlord will use commercially reasonable efforts to obtain a non-disturbance, subordination and attornment agreement from any future Landlord’s mortgagee on such Landlord’s mortgagee’s then current standard form of agreement. “Reasonable efforts” of Landlord shall not require Landlord to incur any cost, expense or liability to obtain such agreement, it being agreed that Tenant shall be responsible for any fee or review costs charged by the mortgagee. Upon request of Landlord, Tenant will execute the mortgagee’s form of non-disturbance, subordination and attornment agreement and return the same to Landlord for execution by the mortgagee. Landlord's failure to obtain a non-disturbance, subordination and attornment agreement from any future mortgagee for Tenant shall have no effect on the rights, obligations and liabilities of Landlord and Tenant or be considered to be a default by Landlord hereunder.
33. INTENTIONALLY OMITTED
34. MISCELLANEOUS
A. Effect of Exercise of or Failure to Exercise Privilege by Landlord. Neither the exercise of nor failure to exercise any right, option, or privilege hereunder by Landlord shall exclude Landlord from exercising any and all other rights, options, or privileges hereunder at any other time, nor shall such exercise or nonexercise relieve Tenant from Tenant's obligation to perform each and every term, covenant and condition to be performed by Tenant hereunder, or from damages or other remedy for failure to perform or meet its obligations under this Lease.
B. Waiver. The purported waiver by Landlord or Tenant of any performance or breach of any term, covenant or condition contained herein shall not be deemed to be a waiver of such term, covenant or condition, or of any subsequent or continuing breach of the same, or of any other term, covenant or condition contained herein, unless such waiver is specifically made in writing. Nor shall any custom or practice that may arise between the parties in the administration of the provisions of this Lease be deemed a waiver of, or in any way affect, the right of Landlord or Tenant to insist upon the performance by the other in strict accordance with the provisions of this Lease. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease other than Tenant's breach in failing to pay the particular Rent so accepted regardless of Landlord's knowledge of such additional preceding breach at the time of the acceptance of such Rent.
C. Labor Relations. Tenant agrees to conduct its labor relations and its relations with its employees in such a manner as to attempt to avoid all strikes, picketing, and boycotts of, on, or about the Premises or the Building. Tenant further agrees that if any of its employees strike in front of the Building
or if a picket line is established, conducted or carried out against Tenant or its employees, or any of them in front of the Building, then Tenant, on Landlord's request, shall (if such disturbance has not ceased within two (2) business days) forthwith cease operations in and upon the Premises and remain closed until the disturbance has ended.
D. Notices. All notices required or permitted hereunder, except for routine bills or invoices for Rent which Landlord may elect to deliver by personal delivery to the Premises or by first class U.S. mail, shall be contained in a writing personally delivered or sent by United States certified or registered mail, or by recognized overnight courier such as Fed Ex, postage prepaid, return receipt requested, and addressed: if to Tenant, at the Premises or at such other address as Tenant may from time to time designate by giving written notice thereof to Landlord under this paragraph; and if to Landlord, at the Building office or at such other address(es) as Landlord may from time to time designate by giving written notice thereof to Tenant under this paragraph. Mailed notice shall be deemed given on the date of delivery as shown on the return receipt or five (5) business days after mailing in the case delivery is not accepted. Tenant further agrees to give the beneficiary of any mortgage or deed of trust covering the Building, by registered or certified mail, a copy of any default notice served upon the Landlord, provided that prior to such notice Tenant has been notified in writing of the address of such beneficiary and the requirement to deliver such beneficiary copies of Landlord default notices. If Landlord fails to cure such default within the time provided for in this Lease, then the beneficiary shall have an additional thirty (30) days after the expiration of such cure period within which to cure such default (provided that Tenant notifies the beneficiary concurrently with Tenant's delivery of the default notice to Landlord; otherwise, the beneficiary shall have thirty (30) days from the later of the date on which it receives notice of the default from Tenant and the expiration of Landlord's cure period). If such default cannot be cured by said beneficiary within the cure period, Tenant may not exercise any of its remedies so long as beneficiary has commenced and is diligently pursuing the remedies necessary to cure such default (including, but not limited to, commencement of foreclosure proceedings, if necessary to effect such cure).
E. Entire Agreement; Amendments. This Lease represents the entire agreement of the parties with respect to the parties' rights and duties under this Lease, and no promises or representations, express or implied, whether written or oral, not set forth herein shall be binding upon or inure to the benefit of Landlord or Tenant. Tenant acknowledges that neither Landlord nor any authorized representative of Landlord, or any other person purporting to act on Landlord's behalf, has made any representation, warranty, or statement with respect to the amount of taxes that may or will be assessed against the Premises, the cost of any insurance required to be maintained by Tenant hereunder, or any other matter relating to this Lease that is not expressly covered in this Lease. With respect to such matters, Tenant is relying upon its own independent investigation and sources of information, and Tenant expressly waives any right Tenant might otherwise have to rescind this Lease or to claim damages by reason of Tenant's misunderstanding or mistake. This Lease shall not be amended or modified by any oral agreement, either express or implied; all amendments and modifications hereof shall be in writing and signed by both Landlord and Tenant.
F. Parking. In no event shall Landlord have any liability to Tenant as a result of loss or damage suffered or incurred by Tenant in using the Building parking facility.
G. Light and Air. Tenant covenants and agrees that no diminution of light, air or view by any structure which may hereafter be erected (whether or not by Landlord) shall entitle Tenant to any reduction of Rent hereunder, result in any liability of Landlord to Tenant, or in any other way affect this Lease.
H. Building Security. Notwithstanding the fact that access to the Building may be controlled, Tenant acknowledges and agrees that Landlord does not provide security services or other protection for Tenant's property in the Building. Accordingly, in no event shall Landlord be liable for any theft of property or other damages which may be suffered as the result of any unauthorized entry into Tenant's Premises nor shall Landlord be responsible for any glass breakage within the Premises caused by theft, vandalism, or the negligence of Tenant or Tenant's employees, invitees, agents or independent contractors.
I. Building Telecommunications Systems.
(i) If Tenant desires telephone or other communications or computer connections or installations to, in or about the Premises, the design, installation, repair and maintenance thereof from the point where the telephone company’s or other provider’s service enters the Building shall be at Tenant’s sole cost and expense but shall nonetheless require the prior written approval of Landlord and be within the complete control and authority of Landlord. All such work shall be performed only at locations approved by Landlord and by vendors or contractors set forth on the then effective list of approved contractors, which list is available at Tenant’s request the Building Office. In the event the installation of Tenant’s cabling and equipment results in Tenant exceeding its Building riser allowance of 5 pairs/1,000 rentable square of Premises, Tenant shall rent additional Building riser space from Landlord in accordance with the then applicable riser rent rate schedule. As a condition to obtaining Landlord’s approval, Tenant shall be required to increase its Letter of Credit by an amount reasonably anticipated to cover the cost of removing any wiring, cabling and equipment installed in the Building by Tenant or at Tenant’s request. Under no circumstances shall any communications cabling or wiring within the Premises be surface mounted and Tenant acknowledges that as a result of current Building cabling specifications and other requirements, it is unlikely that Tenant will be able to utilize any existing cabling serving the Premises.
(ii) In no event shall Landlord be responsible for any disruption to or failure of the Building’s or Tenant’s telephone or communications system, unless due to the gross negligence or willful misconduct of Landlord or its employees; but in the event of any such gross negligence or willful misconduct Landlord shall be only responsible for the cost of correcting the actual portions of the system which it or its employees damaged and in no event shall Landlord be liable for damages to other portions of any system, or for other damages suffered by Tenant, including without limitation lost profits and/or consequential damages.
(iii) Tenant further agrees to indemnify, defend, and hold Landlord harmless from and against any and all claims, damages, expenses, and liabilities arising from Tenant’s or its agents’, employees’, invitees’, vendors’, contractors’ or subcontractors’ use of the Premises or Building or work done thereto which interfere in any way or in any manner with the telecommunications system in the Building.
(iv) Upon the expiration or earlier termination of the Lease, Landlord shall have the right at Tenant’s sole cost and expense, to remove all telephone and communications or computer equipment installed by Tenant or at Tenant’s request, together with all associated wiring and cabling, and Tenant shall pay all costs reasonably incurred to remove such items and to restore any damage to the Premises or the Building related thereto.
J. Auctions and Signs. Tenant shall not conduct any auctions in, upon, or from the Premises, affix any signs, awnings, notices, or other advertising matter to the Premises, or issue or circulate any advertising matter in the Building without the prior written consent of Landlord. The design and character of any such signs, awnings, notices, or other advertising matter shall also be subject to Landlord's prior written approval.
K. Execution; Recordation. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for a lease, and this instrument shall not be effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. Tenant shall not record this Lease or any memorandum of this Lease.
L. Financial Information. Tenant will furnish to the Landlord within ten (10) business days following Landlord’s request, copies of true and accurate financial statements reflecting Tenant’s (and if applicable, any Guarantor’s) then current financial condition, and if available, audited, consolidated financial statements, prepared in accordance with generally accepted accounting principles, and certified and audited by independent public accountants of recognized standing. Notwithstanding the foregoing, Landlord shall not request financial statements more than once in each consecutive one (1) year period
during the Term unless (i) Tenant is in default beyond any applicable notice and cure period, (ii) Landlord reasonably believes that there has been an adverse change in Tenant’s financial position since the last financial statement provided to Landlord, or (iii) requested (a) in connection with a proposed financing, sale or transfer of the Building by Landlord, or (b) by an investor of Landlord, any Landlord Party or any lender or proposed lender of Landlord or any Landlord Party. Tenant hereby covenants and warrants to Landlord that all financial information and other descriptive information regarding Tenant's business, which has been or shall be furnished to Landlord, is and shall be accurate and complete at the time of delivery to Landlord. At Tenant’s request, Landlord shall enter into a confidentiality agreement with Tenant, which agreement is reasonably acceptable to Landlord and covers confidential financial information provided by Tenant to Landlord.
M. Limitation of Tenant's Remedies. If any default hereunder by Landlord is not cured within the applicable cure period provided in this Lease, Tenant's exclusive remedies shall be an action for specific performance or an action for actual damages, and Tenant hereby waives the benefit of any laws granting it the right to perform Landlord's obligation, or the right to terminate this Lease or withhold Rent on account of any Landlord default. Tenant shall look solely to Landlord's interest in the Building, and all proceeds actually received by Landlord thereof, for the recovery of any judgment from Landlord. Landlord, or if Landlord is a partnership, its partners whether general or limited, or if Landlord is a limited liability company, its members or managers, or if Landlord is a corporation, its directors, officers or shareholders, shall never be personally liable for any such judgment. Any lien obtained to enforce such judgment and any levy of execution thereon shall be subject and subordinate to any mortgage or deed of trust covering the Building. Notwithstanding any other provision of this Lease to the contrary, in no event shall Landlord be liable to Tenant for any punitive or consequential damages or damages for loss of business by Tenant. Tenant shall not be liable to Landlord for any special, indirect, punitive or consequential damages except for any damages recoverable pursuant to Paragraphs 9.C (Hazardous Materials) and 23 (Holding Over) and provided that Tenant hereby acknowledges and agrees that the foregoing shall not prevent Landlord from recovering any and all damages to which Landlord is entitled in Paragraph 25 of this Lease following a default by Tenant hereunder.
N. Time and Applicable Law. Time is of the essence of this Lease and each and all of its provisions. This Lease shall be construed and interpreted in accordance with the laws of the State of California.
O. Name. Tenant shall not use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises. Landlord shall have the right, exercisable without notice and without liability to Tenant, to change the name and the street address of the Building.
P. Provisions are Covenants and Conditions. All provisions, whether set forth herein as covenants or conditions on the part of Tenant, shall be deemed to be both covenants and conditions.
Q. Severability. The unenforceability, invalidity, or illegality of any provision of this Lease, for any reason, shall not render its other provisions unenforceable, invalid, or illegal. In such an event, this Lease shall be equitably construed as if it did not contain the invalid, illegal, or unenforceable provision to the extent permitted by applicable law, it being the intent of the parties that this Lease shall be enforced to the greatest extent possible.
R. Captions. The table of contents and the headings to the paragraphs of this Lease are for convenience only, are not part of this Lease, and shall have no effect on the construction or interpretation hereof.
S. Successors and Assigns; Joint and Several Liability. The terms, covenants and conditions herein contained shall, subject to the provisions as to assignment and sublease, apply to, inure to the benefit of, and bind the heirs, successors, administrators, executors, and assigns of the parties hereto. If Tenant is comprised of more than one (1) person or entity, the obligations under this Lease imposed on Tenant shall be joint and several.
T. Relationship of Parties. Neither anything contained in this Lease nor any acts of the parties shall be construed to create any relationship between the parties other than that of Landlord and Tenant.
U. Brokers. Except as specifically set forth in the Basic Lease Information, Tenant warrants and represents to Landlord that in the negotiation or making of this Lease neither Tenant nor anyone acting on Tenant's behalf has dealt with any broker or finder who might be entitled to a fee or commission for this Lease. Tenant shall indemnify and hold Landlord harmless from any claim or claims, including costs, expenses and attorneys' fees incurred by Landlord which may asserted by any other broker or finder for a fee or commission based upon any dealings with or statements made by Tenant or Tenants' representatives. Landlord agrees to pay a brokerage commission to Tenant’s Broker in accordance with the terms of a separate written commission agreement to be entered into between Landlord and Tenant’s Broker, provided that in no event shall Landlord be obligated to pay a commission to Tenant’s Broker in connection with any extension of the Term or in connection with any additional space that is leased by Tenant pursuant to the terms of the Lease except as may be specifically provided otherwise in such written agreement or future written agreement between Landlord and Tenant’s Broker.
V. Tenant's Authority. If Tenant is a corporation, partnership, trust, association, limited liability company, or other entity, Tenant hereby covenants and warrants that (i) Tenant is duly incorporated or otherwise established or formed and validly existing under the laws of its state of incorporation, establishment, or formation; (ii) Tenant has and is duly qualified to do business in California; (iii) Tenant has full corporate, partnership, trust, association, limited liability company, or other appropriate power and authority to enter into this Lease and to perform all of Tenant's obligations hereunder; (iv) each person (and all persons if more than one signs) signing this Lease on behalf of Tenant is duly and validly authorized to do so; and (v) when executed by both parties, this Lease and all of the terms and conditions contained herein shall be binding and enforceable against Tenant.
W. Nondisclosure of Lease Terms. From and after the date lease negotiations were entered into and throughout the term of this Lease, Tenant shall not disclose the amount of rent that it is obligated to pay hereunder or any other terms, covenants, conditions or agreements set forth in any letter of intent, this Lease, any amendments hereto, nor provide any copies of the foregoing, to any person, including without limitation any brokers, any other tenants in the Building or any affiliates, agents or employees of such tenants or brokers, except to any accountants of Tenant in connection with the preparation of Tenant’s financial statements or tax returns, to an assignee of this Lease or a sublessee of the Premises, or to an entity or person to whom disclosure is required by applicable law or in connection with any action brought to enforce the terms hereof. Tenant hereby acknowledges that the disclosure of any of the foregoing confidential information or of any of the terms, covenants, conditions and agreements set forth in the letter of intent, this Lease, or any amendment hereto, to any third party would constitute a material non-curable breach of this Lease, would cause material damage to Landlord, and that Landlord shall be entitled to exercise any remedy available to it at law or in equity as a result of any such violation by Tenant. Tenant agrees to indemnify, protect, defend, save and hold Landlord harmless from and against any and all actual and reasonable damages suffered by Landlord which are attributable to any disclosure by Tenant in violation of the terms of this provision.
X. USA Patriot Act and Anti-Terrorism Laws.
(i) Tenant represents and warrants to, and covenants with, Landlord that neither Tenant nor to the best of Tenant’s knowledge, any of its respective constituent owners, affiliates or employees currently are, or shall be at any time during the Term hereof, in violation of any laws relating to terrorism or money laundering (collectively, the “Anti-Terrorism Laws”), including without limitation Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”) and/or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (the “USA Patriot Act”).
(ii) Tenant covenants with Landlord that neither Tenant nor to the best of Tenant’s knowledge, any of its respective constituent owners, affiliates or employees is or shall be during the Term hereof a “Prohibited Person,” which is defined as follows: (i) a person or entity that is listed in the Annex to, or is otherwise subject to, the provisions of the Executive Order; (ii) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity with whom Landlord is prohibited from dealing with or otherwise engaging in any transaction by any Anti-Terrorism Law, including without limitation the Executive Order and the USA Patriot Act; (iv) a person or entity who commits, threatens or conspires to commit or support “terrorism” as defined in Section 3(d) of the Executive Order; (v) a person or entity that is named as a “specially designated national and blocked person” on the then-most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov/offices/eotffc/ofac/sdn/t11sdn.pdf, or at any replacement website or other replacement official publication of such list; and (vi) a person or entity who is affiliated with a person or entity listed in items (i) through (v) above.
(iii) At any time and from time to time during the Term, Tenant shall deliver to Landlord, within ten (10) days after receipt of a written request therefor, a written certification or such other evidence reasonably acceptable to Landlord evidencing and confirming Tenant’s compliance with this Paragraph 34.X.
Y. Sustainability. Tenant shall take reasonable steps to conduct its operations in the Building and within the Premises in accordance with Landlord's intention to operate the Building to promote a healthy environment, to reduce energy and water use, to promote recycling and the facilitation of transportation options, and to comply with any governmental authority that may impose resource reduction requirements on Landlord or the Building. Tenant shall take reasonable steps to comply with Landlord's sustainability programs as required by this Lease and the Rules and Regulations as Landlord may adopt from time to time on a uniform basis in the Building, provided such measures do not impose a material expense on Tenant or materially affect its business operations.
Z. Required Accessibility Disclosures. In accordance with Section 1938 of the Civil Code of the State of California, Landlord hereby provides the following information:
(i) Landlord hereby states that the Premises have not undergone inspection by a Certified Access Specialist (“CASp”).
(ii) A CASp can inspect the Premises and determine whether the Premises comply with all of the construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the Premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making repairs necessary to correct violations of construction-related accessibility standards within the Premises. In furtherance of the foregoing, Landlord and Tenant hereby agree as follows: (a) any CASp inspection requested by Tenant shall be conducted, at Tenant's sole cost and expense, by a CASp designated by Landlord, subject to Landlord's reasonable rules and requirements; (b) Tenant, at its sole cost and expense, shall be responsible for making any improvements or repairs within the Premises (except for improvements or repairs required to the structural components of the Premises or Building Systems, which Landlord shall be responsible for at its sole cost and expense) to correct violations of construction-related accessibility standards; and (c) if anything done by or for Tenant in its use or occupancy of the Premises shall require any improvements or repairs to the Building (outside the Premises) to correct violations of construction-related accessibility standards, except as otherwise provided elsewhere in this Lease, then Tenant shall reimburse Landlord upon demand, as Additional Rent, for the cost to Landlord of performing such improvements or repairs.
AA. Measurement. The term “rentable area” shall mean the rentable area of the Premises or the Building as calculated by Landlord on the basis of the plans and specifications of the Building
including a proportionate share of any common areas. Tenant hereby accepts and agrees to be bound by the figures for the rentable square footage of the Premises and Tenant’s Share shown on the Basic Lease Information; however, Landlord may adjust either or both figures if there is manifest error, addition or subtraction to the Building or any project or complex of which the Building is a part, remeasurement or other circumstance reasonably justifying adjustment. Notwithstanding the foregoing, except in the case of any expansion of the square footage of the Premises, in no event shall any such adjustment in the square footage of the Building increase Base Monthly Rental or Tenant’s Share during the initial Term of the Lease. The term “Building” refers to the structure in which the Premises are located and the common areas (parking lots, sidewalks, landscaping, etc.) appurtenant thereto. If the Building is or becomes part of a larger complex of structures, the term “Building” may include the entire complex, where appropriate (such as shared Expenses or Taxes) and subject to Landlord’s reasonable discretion.
BB. Signatures. The parties hereto consent and agree that this Lease may be signed and/or transmitted by facsimile, e-mail of a .pdf document or using electronic signature technology (e.g., via DocuSign or similar electronic signature technology), and that such signed electronic record shall be valid and as effective to bind the party so signing as a paper copy bearing such party’s handwritten signature. The parties further consent and agree that (1) to the extent a party signs this Lease using electronic signature technology, by clicking “SIGN”, such party is signing this Lease electronically, and (2) the electronic signatures appearing on this Lease shall be treated, for purposes of validity, enforceability and admissibility, the same as handwritten signatures.
CC. Asbestos Disclosures. Landlord has advised Tenant that there is asbestos-containing material in the Building. Attached hereto as Exhibit D is a disclosure statement regarding asbestos in the Building. Tenant acknowledges that such notice complies with the requirements of Section 25915 of the California Health and Safety Code.
DD. Quiet Enjoyment. Landlord covenants that it has full right and power to execute this Lease and lease the Premises herein and so long as Tenant is not in default under this Lease, Tenant shall have the right to possession and quiet enjoyment of the Premises, subject to the terms and provisions of this Lease.
35. ADDITIONAL PROVISIONS
A. Signage. Landlord agrees that Tenant shall be allowed to have standard signage in accordance with the Building Rules and Regulations next to its entry door and the Building directory. Landlord shall pay for initial Building Standard suite and directory signage.
B. Condition of Premises; Landlord’s Work. Except as provided in the Work Letter attached hereto as Exhibit B, Tenant accepts the Premises in its broom clean, vacant and otherwise “AS-IS” condition and Landlord shall have no obligation to make or pay for any improvements in connection with Tenant’s initial occupancy of the Premises.
C. Electrical, Data and Furniture. Tenant shall provide, prior to Lease execution, for Landlord’s approval, an electrical, data and furniture plan for the Premises, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant shall coordinate directly with and IMG at (877) 611-8908 to finalize all of Tenant’s electrical and data wiring. Tenant shall be responsible for the cost of all initial and future Tenant electrical and data work.
D. Supplemental HVAC. Any new or existing supplemental HVAC units in or serving the Premises shall be installed and maintained by Tenant at its sole cost and expense throughout the Term, and upon the request of Landlord shall be removed by Tenant at its sole cost and expense at the end of the Term. Tenant shall install a submeter to measure electricity consumed by any such units and shall reimburse Landlord within thirty (30) days of receipt of invoice (including reasonable backup documentation) for the cost of all electricity consumed by such units. Landlord will not unreasonably withhold, delay or condition its consent to any request to install a supplemental HVAC unit; provided,
however, Landlord may withhold its consent if such installation may or will interfere with the Building’s operations or the Building Systems.
E. Early Access. Tenant shall be permitted to access the Premises without obligation to pay Rent beginning thirty (30) days prior to the anticipated Commencement Date, provided such access shall not delay the date of substantial completion of the Landlord Work or the Tenant Improvements, shall be harmonious with Landlord’s contractors, and shall be for the sole purpose of the installation of cabling, wiring, equipment and Tenant’s personal property. Such early occupancy shall be subject to all of the provisions of the Lease but said early occupancy shall not advance the Commencement Date or Expiration Date of the Term of the Lease. Prior to occupancy, Tenant shall provide to Landlord the certificates of insurance required by the Lease and a copy of all licenses and authorizations that may be required for the lawful operation of Tenant’s business in the Premises, including any city business licenses as may be required.
F. Parking. Tenant shall be entitled to use commencing on the Commencement Date, up to the amount of unreserved parking passes set forth in the Basic Lease Information, which parking passes shall pertain to the parking facility servicing the Building. Tenant's unreserved parking passes shall be without charge (excepting only any parking taxes or other charges imposed by governmental authorities in connection with the use of such parking [as more particularly contemplated below]). Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the renting of such parking passes by Tenant or the use of the parking facility by Tenant. Tenant's continued right to use the parking passes is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking passes are located, including any sticker or other identification system established by Landlord, Tenant's cooperation in seeing that Tenant's employees and visitors also comply with such rules and regulations and Tenant not being in default under this Lease. Landlord specifically reserves the right to change the size, configuration, design, layout and all other aspects of such parking facility at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to time, temporarily close-off or restrict access to the Project parking facility for purposes of permitting or facilitating any such construction, alteration or improvements. Landlord may, at any time, institute valet assisted parking, tandem parking stalls, "stack" parking, or other parking program within such parking facility, the cost of which shall be included in Expenses. Landlord may delegate its responsibilities hereunder to a parking operator in which case such parking operator shall have all the rights of control attributed hereby to the Landlord. In such event, Tenant may be required to enter into a separate written agreement with such parking operator with respect to the parking rights granted herein provided such parking shall still be free of charge. The parking passes rented by Tenant pursuant to this paragraph are provided to Tenant solely for use by Tenant's own personnel and such passes may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlord's prior approval.
G. Approval. Landlord shall not execute this Lease until Landlord’s mortgagee or other such lienholder has approved the terms of this Lease if required pursuant to the terms of the related security documents relating to the subject mortgagee or other lienholder.
H. Right of First Offer.
(1) Provided Tenant is not then in default under the terms, covenants and conditions of this Lease, Tenant shall have a one time right of offer (the “Offer Right”) to lease approximately 10,655 rentable square feet consisting of the entire fifth (5th) floor of the Building (the “Offer Space”) at such time as such Offer Space becomes Available (defined below). The Offer Space is depicted on Exhibit F attached hereto. Tenant’s Offer Right shall be exercised as follows: at any time after Landlord has determined that the Offer Space has become Available, Landlord shall advise Tenant (the “Advice”) of the terms under which Landlord is prepared to lease such Offer Space to Tenant on the terms set forth in the Advice, which terms shall reflect the Prevailing Market (hereinafter defined) rate for the Offer Space as reasonably determined by Landlord. For purposes hereof, the Offer Space shall be deemed to become “Available” when the third-party tenant of the Offer Space will not extend or renew the term of its lease, or
enter into a new lease, for the Offer Space. Tenant may lease such Offer Space in its entirety only, under such terms, by delivering written notice of exercise to Landlord (the “Notice of Exercise”) within seven (7) days after the date of the Advice, failing which Landlord may lease the subject Offer Space to any third party on whatever basis Landlord desires, and Tenant shall have no further rights with respect to such subject Offer Space. Notwithstanding the foregoing, Tenant shall once again have an Offer Right with respect to the subject Offer Space if, within six (6) months following the date of the Advice, Landlord proposes to lease the subject Offer Space to any potential unrelated third party tenant on terms that are substantially different than those set forth in Landlord’s Advice. For purposes hereof, the terms offered to a potential tenant shall be deemed to be substantially the same as those set forth in Landlord’s Advice as long as there is no more than a fifteen percent (15%) reduction in the "bottom line" cost per rentable square foot of the subject Offer Space to the potential tenant when compared with the "bottom line" cost per rentable square foot under Landlord’s Advise, considering all of the economic terms of the both deals, respectively, including, without limitation, the net rent, any tax or expense escalation or other financial escalation and any financial concessions, including, without limitation, improvement allowances and abated rent. If Tenant exercises its Offer Right for the Offer Space in accordance with the terms and conditions of this Paragraph 34.H, effective as of the date Landlord delivers the subject Offer Space, such Offer Space shall automatically be included within the Premises and subject to all the terms and conditions of this Lease, except as set forth in Landlord's notice and as follows:
(a) Tenant's Share shall be recalculated, using the total square footage of the Premises, as increased by the subject Offer Space, as the case may be.
(b) the subject Offer Space shall be leased on an “as is” basis and Landlord shall have no obligation to improve the subject Offer Space or grant Tenant any improvement allowance thereon except as may be provided in Landlord’s Advice.
(2) The term for the subject Offer Space shall commence upon the commencement date stated in the Advice and thereupon such Offer Space shall be considered a part of the Premises, provided that all of the terms stated in the Advice, including the termination date set forth in the Advice, shall govern Tenant's leasing of the Offer Space and only to the extent that they do not conflict with the Advice, the terms and conditions of this Lease shall apply to the Offer Space. Tenant shall pay Base Monthly Rental, Tenant’s Share of Expenses and Taxes and any other Additional Rent for the Offer Space in accordance with the terms and conditions of the Advice.
(3) Notwithstanding anything to the contrary set forth herein, Tenant shall have no such Offer Right with respect to the subject Offer Space, as the case may be, and Landlord need not provide Tenant with an Advice, if: (a) Tenant is in default under this Lease at the time that Landlord would otherwise deliver its Advice for the subject Offer Space as described above; (b) the Premises, or any portion thereof, is sublet at the time Landlord would otherwise deliver its written notice of the subject Offer Right as described above; (c) this Lease has been assigned prior to the date Landlord would otherwise deliver its written notice of the subject Offer Right as described above; (d) Tenant is not occupying the Premises on the date Landlord would otherwise deliver its written notice of the Offer Right as described above; (e) the subject Offer Space is not intended for the exclusive use of Tenant during the Term; or (f) the existing tenant in the subject Offer Space is interested in extending or renewing its lease for such Offer Space or entering into a new lease for such Offer Space.
(4) If Landlord is delayed delivering possession of the subject Offer Space due to the holdover or unlawful possession of such space by any party, Landlord shall use reasonable efforts to obtain possession of such space, and the commencement of the term for the subject Offer Space shall be postponed until the date Landlord delivers possession of the subject Offer Space to Tenant free from occupancy by any party.
(5) The rights of Tenant hereunder with respect to any Offer Space shall terminate on the earlier to occur of: (a) sixty (60) months following the Commencement Date; (b) Tenant's failure to exercise its offer right with respect to such Offer Space within the seven (7) day period provided in Paragraph 34.H(1) above; (c) simultaneously with Tenant’s providing Landlord with a Notice of Exercise;
and (d) the date Landlord would have provided Tenant an Advice with respect to such Offer Space if Tenant had not been in violation of one or more of the conditions set forth in Paragraph 34.H(2) above. In addition, if Landlord provides Tenant with an Advice for any Offer Space that contains expansion rights (whether such rights are described as an expansion option, right of first refusal, right of first offer or otherwise) with respect to any other portion of the Offer Space (such other portion of the Offer Space subject to such expansion rights is referred to herein as the “Encumbered Offer Space”) and Tenant does not exercise its Offer Right to lease such Offer Space, Tenant’s Offer Right with respect to the Encumbered Offer Space shall be subject and subordinate to all such expansion rights contained in the Advice.
(6) If Tenant exercises its Offer Right as to a subject Offer Space, Landlord shall prepare an amendment (an “Offer Amendment”) adding the subject Offer Space to the Premises on the terms set forth in the Advice and reflecting the changes in the Base Monthly Rental, rentable square footage of the Premises, Tenant’s Share and other appropriate terms. A copy of the Offer Amendment shall be sent to Tenant within a reasonable time after Landlord’s receipt of the Notice of Exercise executed by Tenant, and Tenant shall execute and return the Offer Amendment to Landlord within ten (10) days thereafter, but an otherwise valid exercise of the Offer Right shall be fully effective whether or not the Offer Amendment is executed.
(7) For purposes of this Paragraph 34.H, “Prevailing Market” shall mean the annual rental rate per square foot for space comparable to the Offer Space in the Building under leases and renewal and expansion amendments being entered into at or about the time that Prevailing Market is being determined, giving appropriate consideration to tenant concessions, brokerage commissions, tenant improvement allowances, existing improvements in the space in question, and the method of allocating operating expenses and taxes. Notwithstanding the foregoing, space leased under any of the following circumstances shall not be considered to be comparable for purposes hereof: (a) the lease term is for less than the lease term of the subject Offer Space, (b) the space is encumbered by the option rights of another tenant, or (c) the space has a lack of windows and/or an awkward or unusual shape or configuration. The foregoing is not intended to be an exclusive list of space that will not be considered to be comparable.
(signatures on following page)
IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto have executed this Lease as of the date first set forth above.
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LANDLORD
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TENANT
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SIC- MOUNTAIN BAY PLAZA, LLC,
a Delaware limited liability company
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SENTINEL LABS, INC.,
a Delaware corporation
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By:
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The Swig Company, LLC, a Delaware limited liability company as Property Manager
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By:
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/s/ Bob Parker
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Bob Parker
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Chief Financial Officer
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By:
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/s/ Philip Connor Kidd IV
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6/11/2020
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Philip Connor Kidd IV
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Date:
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Executive Vice President and
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Director of Asset Management
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6/12/2020
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Date:
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RULES AND REGULATIONS
1. Tenant shall not obstruct or permit its agents, clerks or servants to obstruct, in any way, the sidewalks, entry passages, corridors, halls, stairways or elevators of the Building or use the same in any other way than as a means of passage to and from the offices of Tenant; bring in, store, test or use any materials in the Building which could cause a fire or an explosion or produce any fumes or vapor other than materials customarily found in office settings provided such materials are used in the manner for which they were intended; make or permit any improper noises in the Building which interfere with other tenants in the Building; smoke in the elevators; throw substances of any kind out of the windows or doors, or down the passages of the Building, or in the hallways or passageways; sit on or place anything upon the window sills; or clean the outside of the windows.
2. Waterclosets and urinals shall not be used for any purpose other than those for which they were constructed; and no sweepings, rubbish, ashes, newspaper or any other substances of any kind shall be thrown into them. Waste and excessive or unusual use of electricity or water is prohibited.
3. The windows, doors, partitions and lights that reflect or admit light into the halls or other places of the Building (outside of the Premises) shall not be obstructed. NO SIGNS, ADVERTISEMENTS OR NOTICES SHALL BE INSCRIBED, PAINTED, AFFIXED OR DISPLAYED, IN, ON, UPON OR BEHIND ANY WINDOWS THAT ARE VISIBLE FROM THE EXTERIOR OF THE PREMISES, except as may be required by Law or agreed upon by the parties; and no sign, advertisement or public notice shall be inscribed, painted or affixed on any doors, partitions or other part of the Building, without the prior written consent of Landlord. If such consent be given by Landlord, any such sign, advertisement or notice shall be inscribed, painted or affixed by Landlord, or a company approved by Landlord, but the actual out-of-pocket cost of the same shall be charged to and be paid by Tenant, and Tenant agrees to pay the same within thirty (30) days following written demand therefor from Landlord accompanied by reasonable documentation of such costs.
4. No contract of any kind with any supplier of towels, water, etc., toilet articles, waxing, rug shampooing, venetian blind washing, furniture polishing, lamp servicing, cleaning of electrical fixtures, removal of waste paper, rubbish or garbage, or other like service shall be entered into by Tenant, nor shall any vending machine of any kind be installed in the Building, or on the Office Complex, without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed.
5. When electric wiring of any kind is introduced, it must be connected as reasonably directed by Landlord, and no stringing or cutting of wires will be allowed, except with the prior written consent of Landlord, and shall be done only by contractors approved by Landlord. The number and location of telephones, electric appliances, call boxes, etc., shall be approved by Landlord. Tenant shall not lay linoleum or other similar floor covering so that the same shall be in direct contact with the floor of the Premises, and if linoleum or other similar floor covering is desired to be used, an interlining of builder's deadening felt shall be first affixed to the floor by a paste or other material, the use of cement or other similar adhesive material being expressly prohibited. Any consent and/or approval required from Landlord pursuant to this Paragraph 5 shall not be unreasonably withheld, conditioned or delayed.
6. Landlord shall have the right to reasonably prescribe the weight, size and position of all safes and other bulky or heavy equipment and all freight brought into the Building by Tenant; and also the times of moving the same in and out of the Building; and all such moving must be done under the supervision of Landlord. Landlord will not be responsible for loss of or damage to any such equipment or freight from any cause; but all damage done to the Building by moving or maintaining any such equipment or freight shall be repaired at the expense of Tenant. All safes shall stand on a base of such size as shall be reasonably designated by Landlord. Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part.
7. No machinery of any kind or articles of unusual weight or size will be allowed in the Building without the prior written consent of Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed. Business machines and mechanical equipment shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient, in Landlord's reasonable judgement, to absorb and prevent vibration, noise and annoyance.
8. No additional lock or locks shall be placed by Tenant on any door in the Building, without prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Landlord acknowledges that Tenant will be required to secure its telecom/server room. Two keys to the Premises per employee of Tenant will be furnished to Tenant by Landlord at no charge; any additional keys requested by Tenant shall be paid for by Tenant at Landlord’s then standard charge, which is currently $6.00 per key. Tenant, its agents and employees, shall not have any duplicate key made and shall not change any locks. All keys to doors and washrooms shall be returned to Landlord at the termination of the tenancy, and, in the event of loss of any keys furnished, Tenant shall pay Landlord the actual cost thereof. Access cards for after hours entrance will be issued by Landlord based on Tenant's initial employee list (but not to exceed 50 initial cards). Additional cards after occupancy will be paid for by Tenant at Landlord’s then standard charge, which is currently $22.00 per card. Replacement cards for lost cards will be charged to Tenant at Landlord’s then standard charge, which is currently $22.00 per card. All access cards shall be returned to Landlord at the termination of the tenancy, and in the event of loss of any access cards furnished, Tenant shall pay Landlord the actual cost thereof.
9. Tenant shall not employ any person or persons other than Landlord's janitors for the purpose of cleaning the Premises, without prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Landlord shall not be responsible to Tenant for any loss of property from the Premises however occurring, or for any damage done to the effects of Tenant by such janitors or any of its employees, or by any other person or any other cause. The janitor's service furnished by Landlord does not include the beating or cleaning of carpets or rugs.
10. With the exception of “service” or “assistive” animals (as defined by the Americans With Disabilities Act, the Fair Employment and Housing Act or other applicable law) (“Service Animals”), no animals, reptiles or birds are permitted in the Building or a tenant’s premises at any time. Service Animals brought into the Building or a tenant’s premises must (i) be dogs who are recognized as Service Animals under Title III of The Americans With Disabilities Act, the Fair Employment and Housing Act or other applicable law, (ii) be individually trained to do work, perform tasks or provide for a person with a recognized disability, and (iii) be registered with the Property Management Office prior to bringing any such dog into the Building. Dogs or other animals, birds or reptiles whose sole function is to provide comfort or emotional support do not qualify as Service Animals under the ADA and are not allowed, except as otherwise required by applicable law. The following terms and conditions shall apply to Service Animals (to the extent enforceable by applicable law):
(a) the use and entry onto the Building or Property of all Service Animals shall at all times comply with all applicable laws;
(b) while in or about the Premises, the Building or the Property all Service Animals must be harnessed, leashed or tethered and under the handler’s control at all times;
(c) any Service Animals brought into and remaining in the Building shall access the Premises through the freight elevator only, which freight elevator is located in the passenger elevator bank;
(d) Service Animals may not be disruptive or aggressive or engage in behavior that endangers the health and safety of others (including, without limitation any Service Animal having fleas or similar infestations);
(e) all Service Animals having access to the Premises and the Building shall be house-trained, vaccinated in accordance with applicable laws and have a current rabies tag or evidentiary paperwork;
(f) Tenant shall be responsible for any additional cleaning costs and all other costs which may arise from the Service Animals’ presence in the Building in excess of the costs that would have been incurred had Service Animals not been allowed in or around the Building;
(g) Tenant shall be liable for, and hereby agrees to indemnify and hold Landlord and all of Landlord Parties harmless from any and all claims arising from any and all acts (including but not limited to biting and causing bodily injury to, or damage to the property of, another tenant, subtenant, occupant, licensee, invitee or an employee of Landlord or any of the Landlord Parties) of, or the presence of, any Service Animal in or about the Premises, the Building or the Property; and
(h) Tenant shall immediately dispose of any animal waste and excrement from the Premises, the Building and the Property. If Landlord reasonably determines that Landlord has incurred or is incurring increased janitorial (interior or exterior) maintenance costs as a result of the Service Animals’ presence, Tenant shall reimburse Landlord for such actual out-of-pocket costs as Additional Rent within thirty (30) days of Landlord’s demand.
11. No bicycles or vehicles of any kind shall be brought into or kept in or about the Premises. A bicycle parking facility is located in the Building Garage. Said facility is available for use by Landlord and its agents and their employees and tenants only on a first come-first served basis and all uses thereof shall be in accordance with applicable Building Rules and Regulations.
12. The requirements of Tenant will be attended to only upon application at the office of the Building. Employees of Landlord shall not perform any work for Tenant or do anything outside of their regular duties, unless under special instructions from the office of Landlord. Landlord agrees to keep Tenant advised at all times of how to contact the Building Manager.
13. The Premises shall not be used for lodging or sleeping purposes, and cooking therein is prohibited. Vending machines for coffee and rolls are permitted, as are microwaves, refrigerators and other kitchen appliances for use by Tenant's employees. If additional electric wiring is needed to accommodate said equipment, the actual out-of-pocket cost thereof will be borne by Tenant.
14. Tenant shall not conduct, or permit any other person to conduct any auction upon the Premises, manufacture or store goods, wares or merchandise upon the Premises, without the prior written approval of Landlord, except the storage of usual supplies and inventory to be used by Tenant in the conduct of its business; permit the Premises to be used for gambling; or permit to be played any musical instrument in the Premises; permit to be played any radio, television, recorded or wired music in such a loud manner as to disturb or annoy other tenants; or permit any unusual odors to be produced upon the Premises. Tenant shall not occupy or permit any portion of the Premises leased to Tenant to be occupied as an office for a public stenographer or typist, or for the possession, storage, manufacture, or sale of intoxicating beverages, narcotics, tobacco in any form, or as a barber or manicure shop. Tenant shall use good faith efforts to comply with Landlord's policy of making the Building a smoke-free environment. Smoking is prohibited except where designated on the outside of the Building.
15. Outside of Business Hours, the Building is closed, and any access to the Building by Tenant during such period shall be subject to and in accordance with the terms and conditions of the Lease. Outside of Business Hours, Landlord reserves the right to exclude from the Building all persons who do not present an access card to the Building issued by Landlord to Building tenants. Tenant shall be responsible for all persons to whom Tenant issues such access cards and shall be liable to Landlord for all acts of such persons.
16. No awnings or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door visible from the exterior of the Premises, without the prior written consent of Landlord. Such curtains, blinds and shades must be of quality, type, design and color and attached in a manner reasonably approved by Landlord.
17. Canvassing, soliciting and peddling in the Building are prohibited, and Tenant shall cooperate to prevent the same.
18. There shall not be used in the Premises or in the Building, either by Tenant or by others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards, and no hand trucks will be allowed in passenger elevators.
19. Tenant, before closing and leaving the Premises, shall ensure that all exterior windows are closed and all entrance doors locked.
20. Landlord shall have the right to prohibit any advertising by Tenant which, in Landlord's opinion, tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from Landlord, Tenant shall refrain from or discontinue such advertising.
21. Tenant, its employees, agents, representatives, invitees and business visitors shall comply promptly and courteously with the reasonable directions of any Building security personnel hired by Landlord, including but not limited to the rights of such security personnel to inspect articles to be taken from the Building (other than those to be taken out in the usual course of business of Tenant).
22. Landlord shall not be responsible to Tenant for the non-observance or violation of any of these Rules and Regulations by any other tenants.
23. Tenant and its employees shall park their cars only in those portions of the parking area reasonably designated by Landlord and shall not park in visitor parking or in areas reserved for use by other tenants. Landlord reserves the right to have vehicles towed at expense of the vehicle owner if the vehicle is in violation of parking rules.
24. [Intentionally Omitted]
25. Tenant shall not store or permit the storage or placement of food, goods, merchandise, pallets, drums, personal property or other materials or equipment of any sort outside of the Premises or in or around the Building or common areas.
26. In the event Tenant generates trash in excess of that typically generated from an office tenant in a Premises of this size, as determined by Landlord in its reasonable discretion, Landlord will have the right to charge, as Additional Rent, the actual out-of-pocket expenses incurred by Landlord which are attributable to the removal of such excess trash. Landlord also reserves the right to charge Tenant, as Additional Rent, for any waste contamination fees and/or additional cost Landlord incurs as a result of Tenant's failure to comply with applicable laws.
27. Landlord reserves the right to expand, modify or otherwise change or amend these Rules and Regulations from time to time with or without notice to Tenant, and such changed rules and regulations shall be complied with by all tenants in the Building; provided that Landlord provide Tenant with reasonable advance notice thereof and that any such change (i) shall not require Tenant to pay Additional Rent, (ii) shall not materially adversely affect Tenant’s rights and obligations under the Lease, and (iii) shall be applied equitably to all tenants of the Building. Each tenant may obtain a copy of the most current Rules and Regulations at the Building Office.
28. In the event the Building contains showers and/or lockers for tenants’ use, Tenant and its employees shall have the non-exclusive right, in common with Landlord and other tenants of the Building, to access and use the same. Tenant acknowledges that Landlord shall have the right, at Landlord’s sole but good faith discretion, to expand, contract, remove, relocate or otherwise modify any such amenities, and no such expansion, contraction, relocation or modification shall entitle Tenant to an abatement or reduction in Rent, or constitute a constructive eviction, or result in a default by Landlord under the Lease. Tenant acknowledges and agrees that Tenant’s and any of Tenant’s employees’ use of such Building
amenities is voluntary and shall be undertaken at the sole risk of Tenant and its employees, and that neither Landlord nor any of the Landlord Parties shall be liable for any claims, demands, injuries, damages, actions or causes of action whatsoever arising out of or connected with the use of such Building amenities by Tenant and/or any of its employees.
29. Tenant shall comply with minimum LEED or WELL (and/or any other certification from any other applicable certification agency in connection with Landlord’s sustainability practices for the Building, including for water use reduction, non-CFC refrigerants, low mercury lighting and PBT source reduction and The International WELL Building Institute practices.
30. Tenant shall comply and cooperate with any conservation, recycling, waste reduction or other similar programs implemented from time to time at the Building.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
EXHIBIT A
PREMISES
EXHIBIT B
WORK LETTER
This Exhibit B (this “Work Letter”) shall set forth the terms and conditions relating to the construction of the initial improvements in the Premises. This Work Letter is essentially organized chronologically and addresses the issues of the construction of the Premises, in sequence, as such issues will arise during the actual construction of the initial improvements in the Premises.
SECTION 1
BASE BUILDING; LANDLORD WORK
1.1 Base Building. Landlord has constructed, at its sole cost and expense, the Base Building (as herein defined). For the purposes of this Work Letter, the term “Base Building” shall include the structural portions of the Building, and the public elevators, exit stairwells and the systems and equipment located in the internal core of the Building on floors on which the Premises is located.
1.2 Landlord Work. Landlord, at its sole cost and expense, shall, in a good and workmanlike manner determined by Landlord in its sole discretion (a) demolish the existing improvements in the Premises and bring the Premises to a “warm shell” condition (i.e., with the floor and ceiling within the Premises exposed and with the points of connection in the Premises to the Base Building fire/life safety, sprinkler main and electrical systems provided and ready to be connected and distributed by Tenant); and (b) provide point of connection in the Premises to the Building’s main HVAC supply and return (provided that Tenant shall be responsible, at Tenant’s cost (subject to application of the Allowance), for HVAC distribution from the point of connection pursuant to the Construction Drawings (as defined below)) (collectively, the “Landlord Work”). The parties hereby acknowledge and agree that, as of the date of this Lease, the Landlord Work has been Substantially Completed.
1.3 Tenant Improvements. Landlord shall construct in the Premises the Tenant Improvements (as defined below) pursuant to the provisions of this Work Letter. Landlord shall construct the Tenant Improvements using building standard finishes in accordance with the Final Construction Drawings (as defined below). Any above building-standard improvements shall be at Tenant’s sole cost and expense as more particularly set forth herein; provided, however, that Tenant may apply the Allowance to any above building-standard improvements.
SECTION 2
IMPROVEMENTS
2.1 Allowance. Tenant shall be entitled to a one-time improvement allowance (the “Allowance”) in the amount of up to $1,288,800.00 (i.e., $120.00 per rentable square foot of the Premises) for the costs relating to the initial design and construction of the improvements in the Premises (the “Tenant Improvements”). In no event shall Landlord be obligated to make disbursements pursuant to this Work Letter in the event that Tenant fails to immediately pay any portion of the Over-Allowance Amount (as defined below), nor shall Landlord be obligated to pay a total amount which exceeds the Allowance. Notwithstanding the foregoing or any contrary provision of this Lease, all Tenant Improvements shall be deemed Landlord's property under the terms of this Lease. Any unused portion of the Allowance remaining three (3) months after the Substantial Completion of the Tenant Improvements and payment to the contractor who performed the Tenant Improvements shall remain with Landlord and Tenant shall have no further right thereto.
2.2 Application of the Allowance. Except as otherwise set forth in this Work Letter, the Allowance shall be applied by Landlord for the following items and costs related to the construction of the Tenant Improvements (each an “Allowance Item” and, collectively, the “Allowance Items”):
2.2.1 Payment of the fees of the Architect and the Engineers (as those terms are defined below), and payment of the fees incurred by, and the cost of documents and materials supplied
by, Landlord and Landlord's consultants in connection with the preparation and review of the Construction Drawings (as defined below);
2.2.2 The cost of any changes in the Base Building when such changes are required by the Construction Drawings (it being agreed that any changes required to the Base Building to make the Premises tenantable for general office shall not be deemed to be an Allowance Item for purposes of this Work Letter and shall be paid for by Landlord unless such changes arise from Tenant Improvements);
2.2.3 The cost of any changes to the Construction Drawings or Tenant Improvements required by all applicable building codes (the “Code”); and
2.2.4 The Landlord Supervision Fee (as defined below);
2.3 Building Standards. Landlord has established or may establish specifications for certain Building standard components to be used in the construction of the Tenant Improvements, which specifications shall be provided to Tenant following Tenant’s request for the same. The quality of Tenant Improvements shall be equal to or of greater quality than the quality of such Building standards, provided that Landlord may, at Landlord’s option, require the Tenant Improvements to comply with certain Building standards. Landlord may make reasonable changes to said specifications for Building standards from time to time; provided that Landlord shall not change Building standards as applicable to Tenant during the performance of the Tenant Improvements.
SECTION 3
CONSTRUCTION DRAWINGS
3.1 Selection of Architect/Construction Drawings. Tenant has retained AP+I Design (the “Architect”) to prepare the Construction Drawings (as defined below). Tenant shall be responsible for all elements of the design of the Construction Drawings (including, without limitation, compliance with law, functionality of design, the structural integrity of the design, the configuration of the Premises and the placement of Tenant’s furniture, appliances and equipment). Landlord shall retain (or cause Contractor to retain) the engineering consultants designated by Landlord (the “Engineer”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing and HVAC work of the Tenant Improvements. The plans and drawings to be prepared by Architect hereunder shall be known as the “Construction Drawings” and shall be in accordance with and a logical extension of the space plan dated May 21, 2020 and attached hereto as Schedule 1 (the “Space Plan”). Landlord hereby conceptually approves the Space Plan; provided, however, that Landlord’s conceptual approval herein shall not otherwise limit Landlord’s review and approval rights of final Construction Drawings. All Construction Drawings shall comply with the drawing format and specifications reasonably determined by Landlord, and shall be subject to Landlord's reasonable approval. Tenant shall send to Landlord for review a completed set of Construction Drawings, which Construction Drawings shall include the mechanical, electrical and mechanical (“MEP”) drawings prepared by the Engineer (which Engineer will work on the MEP drawings concurrently with the Architect) by July 31, 2020 (the “Construction Drawings Due Date”). Tenant covenants and agrees to cause said Construction Drawings to be delivered to Landlord on or before said Construction Drawings Due Date and to devote such time as may be necessary in consultation with said Architect and Engineer to enable them to complete and submit the Construction Drawings within the required time limit. Time is of the essence in respect of preparation and submission of the Construction Drawings. Except to the extent of any actual delays caused solely by the acts or omissions of Engineer, if the Construction Drawings are not delivered to Landlord by the Construction Drawings Due Date, Tenant shall be responsible for one day of Tenant Delay for each day during the period beginning on the day following the Construction Drawings Due Date and ending on the date the Construction Drawings are provided to Landlord. In addition, if Landlord reasonably objects to the Construction Drawings because the Construction Drawings are not consistent with and a natural extension of the Space Plan or because the Construction Drawings are not sufficiently detailed, or if Landlord reasonably objects to the Construction Drawings more than once, any delay caused by such objection shall be deemed a Tenant Delay. Notwithstanding the foregoing, Landlord shall not unreasonably withhold its consent to the Construction Drawings to the extent the Construction Drawings
are consistent with and a logical extension of the Space Plan. The Construction Drawings shall expressly designate what is Building standard and what is above Building standard to enable the parties to easily value engineer the Tenant Improvements. So long as the Construction Drawings provided to Landlord are complete, Landlord shall approve or make comments to the Construction Drawings within seven (7) days following Landlord’s receipt thereof. If Landlord objects to the Construction Drawings or provides comments thereto, Tenant shall cause Architect to revise the Construction Drawings and deliver the revised Construction Drawings to Landlord within three (3) business days. Tenant shall be responsible for one day of Tenant Delay for each day following such three (3) business day period until Tenant delivers to Landlord the revised Construction Drawings. Landlord's review and approval of the Construction Drawings as set forth in this Section 3 shall be for its sole purpose and shall not imply Landlord's review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed and approved by Landlord or its space planner, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord's space planner, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in any Construction Drawings, and Tenant's waiver and indemnity set forth in the Lease shall specifically apply to any Construction Drawings.
3.2 Permits. The Construction Drawings shall be approved by Landlord (the “Approved Construction Drawings”) prior to the commencement of the construction of the Tenant Improvements. On or before July 31, 2020 (the “Required Permit Submittal Date”), the Architect shall submit the Approved Construction Drawings to the City of Mountain View (the “City”) and appropriate municipal authorities for all applicable building and other permits necessary to allow Contractor (as that term is defined below) to commence and fully complete the construction of the Tenant Improvements (the “Permits”). Tenant shall be responsible for one day of Tenant Delay for each day following the Permit Submittal Date until the Architect submits the Approved Construction Drawings to the City; provided, however, that the Required Permit Submittal Date shall be extended on a day for day basis in the event the City is closed due to Covid-19 or is not accepting permit applications due to Covid-19. Notwithstanding anything to the contrary contained herein, Tenant may cause the Architect to submit the Construction Drawings to the City prior to Landlord’s final review and approval of the Construction Drawings solely for the purpose of expediting the Permit process so long as Landlord has previewed and consented, in writing, to the Construction Drawings solely for such purpose; provided, however, that Landlord’s preview and consent to concurrent review of the Construction Drawings for the purposes of expediting the Permit process shall not otherwise limit Landlord’s review and approval rights of final Construction Drawings and such preview and consent shall not be deemed Landlord’s final approval of the Construction Drawings. No changes, modifications or alterations in the Approved Construction Drawings may be made without the prior written consent of Landlord and Tenant, which consent shall not be unreasonably withheld, conditioned or delayed, provided that Landlord may withhold its consent, in its sole discretion, to any change in the Approved Construction Drawings if such change would directly or indirectly delay the Substantial Completion of the Premises unless Tenant agrees with Landlord’s determination of an appropriate Tenant Delay to accommodate such new work. Tenant shall cause Architect to respond to the City’s comments to the Permits, if any, within three (3) business days.
3.3 Time Deadlines. Tenant and Landlord shall use its good faith efforts to cooperate with each other and with the Architect, the Engineers and Tenant’s and Landlord’s other consultants to complete all phases of the plans, obtain the Permits for the Tenant Improvements and approve the Cost Proposal (defined in Section 4.2 below) as soon as possible after the execution of the Lease.
3.4 Electronic Approvals. Notwithstanding any provision to the contrary contained in the Lease or this Work Letter, each party may transmit or otherwise deliver any of the approvals required under this Work Letter via electronic mail to Landlord’s Construction Representative (as identified in Section 6.2 of this Work Letter) or Tenant's Construction Representative (as identified in Section 6.1 of this Work Letter), as applicable, or by any of the other means identified in the Lease.
3.5 Revisions to Approved Construction Drawings. If Tenant requests any revision to the Approved Construction Drawings, Landlord shall provide Tenant with notice approving or reasonably
disapproving such revision, and, if Landlord approves such revision, Tenant shall have such revision made within three (3) business days of Landlord’s approval. Landlord shall notify Tenant of any resulting change in the most recent Cost Proposal, if any, caused by such revisions, whereupon Tenant, within two (2) business days, shall notify Landlord whether it desires to proceed with such revision. If Landlord has commenced performance of the Tenant Improvements, then, in the absence of such authorization, Landlord shall have the option to continue such performance disregarding such revision.
3.6 Removal of Tenant Improvements. Landlord shall notify Tenant within thirty (30) days following Landlord’s approval of the Construction Drawings whether any portion of the Tenant Improvements must be removed prior to the expiration or earlier termination of the Lease. If Landlord fails to notify Tenant within thirty (30) days following Landlord’s approval of the Construction Drawings whether any portion of the Tenant Improvements must be removed prior to the expiration or earlier termination of the Lease, it shall be assumed that Landlord shall require the removal of the Tenant Improvements. Notwithstanding the foregoing, it is agreed that other than voice and data wiring and cabling and any supplemental HVAC and associated duct work at or serving the Premises (which Tenant shall be required to remove and restore), Tenant shall have no obligation to remove that portion of the Tenant Improvements that comprise any standard office improvements such as, without limitation, gypsum board, partitions, ceiling grids and tiles, floor tiles, fluorescent lighting panels, Building standard doors and non-glued down carpeting.
SECTION 4
CONSTRUCTION OF THE TENANT IMPROVEMENTS
4.1 Contractor and Subcontractors.
4.1.1 Contractor. A contractor designated by Landlord (“Contractor”) shall construct the Tenant Improvements.
4.1.2 Subcontractors. Landlord or Contractor shall competitively bid the major trade items for the Tenant Improvements (as determined by Landlord in Landlord’s reasonable discretion) (i.e., mechanical, electrical, plumbing, HVAC, life safety, and sprinkler work) and any item where the cost thereof is estimated to exceed $100,000.00 to at least two (2) subcontractors. So long as each bid is comparable in scope, materials, time, scheduling and other essential elements Landlord shall select the contractor that presents the lowest bid unless Landlord reasonably selects one of the contractors that submits a higher bid and provides Tenant with a written explanation of Landlord’s reasons for such selection. Notwithstanding the foregoing, Landlord’s designated electrical contractor, HVAC contractor and life safety contractor shall perform the electrical, heating, ventilation and air conditioning and life safety portions of the Tenant Improvements (respectively) and Contractor shall not be required to obtain additional bids for such work; provided, however, that such contractors shall charge competitive rates and Landlord shall receive no commission or other compensation for utilizing such contractors.
4.2 Cost Proposal. After the Approved Construction Drawings are signed by Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in accordance with the Approved Construction Drawings, which cost proposal shall include, as nearly as possible, the cost of all Allowance Items to be incurred by Tenant in connection with the design and construction of the Tenant Improvements and shall include documentation confirming that the subcontractor work was competitively bidded in accordance with Section 4.1.2 above (the “Cost Proposal”). Tenant shall approve or disapprove the cost proposal and shall deliver the Cost Proposal to Landlord within fifteen (15) business days of the receipt of the same, and upon receipt of the same by Landlord, Landlord shall be released by Tenant to purchase the approved items set forth in the Cost Proposal and to commence the construction relating to such items. Notwithstanding the foregoing, if Tenant disapproves of any line items of the Cost Proposal, Landlord and Tenant shall work together to value-engineer the Tenant Improvements in an effort to reduce the Cost Proposal. Once Tenant approved the Cost Proposal, the Cost Proposal cannot be changed and the construction costs as reflected in the Cost Proposal cannot increase without Tenant’s consent.
Notwithstanding the foregoing, in no event shall Landlord be liable for any costs in excess of the Allowance and any delays arising in connection with value-engineering the Tenant Improvements shall constitute a Tenant Delay. The date by which Tenant must approve and deliver the Cost Proposal to Landlord shall be known hereafter as the “Cost Proposal Delivery Date”.
4.3 Construction of Tenant Improvements by Contractor under the Supervision of Landlord.
4.3.1 Over-Allowance Amount. Tenant shall deliver to Landlord cash in an amount (the “Over-Allowance Amount”) equal to the difference between (i) the amount of the Cost Proposal and (ii) the amount of the Allowance. The Over-Allowance Amount shall be paid in three (3) installments: (a) 30% within five (5) business days following the Cost Proposal Delivery Date, (ii) 30% within five (5) business days following the date Landlord determines the Tenant Improvements are 75% Substantially Completed; (c) 30% within five (5) business days following Substantial Completion of the Tenant Improvements; and (d) the final 10% within five (5) business days following completion of the punch list items. In the event that, after the Cost Proposal Delivery Date, any revisions, changes, or substitutions shall be made to the Construction Drawings or the Tenant Improvements, any additional costs which arise in connection with such revisions, changes or substitutions or any other additional costs shall be paid by Tenant to Landlord immediately upon Landlord's request as an addition to the Over-Allowance Amount, but only to the extent such revisions, changes or substitutions are required by Legal Requirements, due to material shortfall or unavailability, part of the permit process or requested by Tenant. In addition, if the Final Construction Drawings or any amendment thereof or supplement thereto shall require alterations in the Base Building (as contrasted with the Tenant Improvements), and if Landlord in its sole and exclusive discretion agrees to any such alterations, and notifies Tenant of the need and cost for such alterations, then Tenant shall pay the cost of such required changes in advance upon receipt of notice thereof. Tenant shall pay all direct architectural and/or engineering fees in connection therewith. In the event that Tenant fails to deliver the Over-Allowance Amount as provided in this Section 4.3.1, then Landlord may, at its option, cease work in the Premises until such time as Landlord receives payment of the Over-Allowance Amount (and such failure to deliver shall be treated as a Tenant Delay in accordance with the terms of Section 5.2 below).
4.3.2 Landlord's Retention of Contractor. Landlord shall independently retain Contractor to construct the Tenant Improvements in accordance with the Approved Construction Drawings and the Cost Proposal and Landlord shall supervise the construction by Contractor, and Tenant shall pay a construction supervision and management fee (the “Landlord Supervision Fee”) (payable by Tenant out of the Allowance) to Landlord in an amount equal to $64,440.00. Landlord shall procure a stipulated sum construction contract with the Contractor, which construction contract (and stipulated sum) shall be on Landlord’s standard construction agreement and shall be based upon the bid tendered by the Contractor so long as such bid is applicable at the time Landlord and the Contractor execute such agreement.
4.3.3 Tenant’s Covenants. After completion of construction of the Tenant Improvements, if required by Landlord, Tenant shall cooperate with Landlord in connection with Landlord’s recordation of a Notice of Completion in the office of the County Recorder of the county in which the Building is located in accordance with Section 8182 of the Civil Code of the State of California or any successor statute.
4.3.4 Contractor's Warranties and Guaranties. Landlord shall use commercially reasonable efforts to obtain industry standard commercially reasonable warranties and guaranties from Contractor and major trade subcontractors relating to the Tenant Improvements, (including, if possible, such warranties shall be for a period of no less than one (1) year after Substantial Completion (as defined below) of the Tenant Improvements.
4.3.5 Governmental Compliance. Landlord, at its sole cost and expense (except to the extent properly included in Expenses) and not as part of the Allowance, shall correct any violations of Legal Requirements with respect to the Landlord Work and the Tenant Improvements to the extent in effect (and as enforced) as of the date of Substantial Completion (as defined below) thereof. In addition
to the foregoing, Landlord, at its expense (except to the extent properly included in Expenses) and not as part of the Allowance, shall be responsible for any upgrades or modifications to the path of travel to the Premises, to the extent such upgrades or modifications are required by Title III of the Americans with Disabilities Act and/or similar handicapped access provisions of applicable building codes in effect and as applied as of the date of this Lease, to the extent such upgrades or modifications are required in order to obtain a building permit for the Tenant Improvements (provided that the Tenant Improvements are typical standard office improvements). In either event, Landlord shall have the right to contest any alleged violation of Legal Requirements in good faith, including, without limitation, the right to apply for and obtain a waiver or deferment of compliance, the right to assert any and all defenses allowed by law and the right to appeal any decisions, judgments or rulings to the fullest extent permitted by law. Landlord, after the exhaustion of any and all rights to appeal or contest, will make all repairs, additions, alterations or improvements necessary to comply with the terms of any final order or judgment, provided that if Landlord elects not to contest any alleged violation, Landlord will promptly make all necessary repairs, additions, alterations or improvements. Notwithstanding the foregoing, Tenant, not Landlord, shall be responsible for the correction of any violations that arise out of or in connection with any claims brought under any provision of the Americans With Disabilities Act other than Title III thereof, the specific nature of Tenant's business in the Premises (other than general office use), the acts or omissions of Tenant or its employees, agents, independent contractors and/or invitees, Tenant’s arrangement of any furniture, equipment or other property in the Premises, any repairs, alterations, additions or improvements performed by or on behalf of Tenant (other than the Tenant Improvements) and any design or configuration of the Premises specifically requested by Tenant after being informed that such design or configuration may not be in strict compliance with Legal Requirements.
SECTION 5
COMPLETION OF THE TENANT IMPROVEMENTS;
LEASE COMMENCEMENT DATE
5.1 Substantial Completion. For purposes of this Lease, “Substantial Completion” of the Tenant Improvements shall occur upon the later of (i) the completion of construction of the Tenant Improvements in the Premises pursuant to the Approved Construction Drawings, with the exception of any punch list items and any tenant fixtures, work-stations, built-in furniture, or equipment to be installed by Tenant or under the supervision of Contractor (the definition of Substantial Completion shall also define “Substantially Completed”); or (ii) Landlord’s receipt from the appropriate governmental authorities, with respect to the Tenant Improvements performed by Landlord or its contractors in the Premises, all approvals necessary for the occupancy of the Premises. Landlord shall use commercially reasonable efforts to cause the Tenant Improvements to be Substantially Completed on or before the date that is one hundred eighty (180) days following Landlord’s receipt of Permits, which date of Substantial Completion is estimated to be March 1, 2021.
5.2 Delay of the Substantial Completion of the Premises. Except as provided in this Section 5.2, the Commencement Date shall occur as set forth in the Lease and Section 5.1, above. If there shall be a delay or there are delays (each, a “Tenant Delay”) in the Substantial Completion of the Tenant Improvements or in the occurrence of any of the other conditions precedent to the Commencement Date, as set forth in the Lease, as a direct, indirect, partial, or total result of:
5.2.1 Tenant's or the Architect’s failure to comply with the deadlines set forth in Section 3 above;
5.2.2 Tenant's failure to timely approve any matter requiring Tenant's approval within the time periods set forth in this Work Letter;
5.2.3 A breach by Tenant of the terms of this Work Letter or the Lease;
5.2.4 Changes in any of the Construction Drawings after disapproval of the same by Landlord or because the same do not comply with Code or other applicable laws;
5.2.5 Tenant's request for changes in the Approved Construction Drawings;
5.2.6 Tenant's requirement for materials, components, finishes or improvements which are not available in a commercially reasonable time given the anticipated date of Substantial Completion of the Tenant Improvements, as set forth in the Lease and which are different from, or not included in, Landlord's Building standards;
5.2.7 Changes to the Base Building required by the Approved Construction Drawings;
5.2.8 Tenant's use of specialized or unusual improvements and/or delays in obtaining Permits due thereto if Landlord notifies Tenant at the time it approves the Final Construction Drawings that such improvements are considered specialized or unusual.
5.2.9 Any failure by Tenant to timely pay to Landlord any portion of the Over Allowance Amount; or
5.2.10 Any other acts or omissions of Tenant, or its agents, or employees; then, notwithstanding anything to the contrary set forth in the Lease or this Work Letter and regardless of the actual date of the Substantial Completion of the Tenant Improvements, the Substantial Completion of the Tenant Improvements shall be deemed to be the date the Tenant Improvements would have been Substantially Completed if no Tenant Delay, as set forth above, had occurred. Landlord shall use reasonable efforts to notify Tenant, orally or in writing, of any circumstances of which Landlord is aware that have caused or may cause a Tenant Delay, so that Tenant may take whatever action is appropriate to minimize or prevent such Tenant Delay; provided, however, that Tenant shall not be responsible for any Tenant Delay unless Landlord informs Tenant of such delay. Landlord shall inform Tenant of any such Tenant Delay within two (2) business days following Landlord’s actual knowledge of such delay.
SECTION 6
MISCELLANEOUS
6.1 Tenant's Representative. Tenant has designated Marc Flax as its sole representative (“Tenant’s Construction Representative”) with respect to the matters set forth in this Work Letter (whose e-mail address for the purposes of this Work Letter is marc.flax@trokaygroup.com), who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Work Letter.
6.2 Landlord's Representatives. Landlord has designated Jasmine Pennix (whose e-mail address for the purposes of this Work Letter is jpennix@swigco.com) as the “Project Manager”, who, until further notice to Tenant, shall be responsible for the implementation of all Tenant Improvements to be performed by Landlord in the Premises. Landlord may designate a different Project Manager by providing email notice to Tenant’s Construction Representative. With regard to all matters involving the Tenant Improvements, Tenant shall communicate with the Project Manager rather than with the Contractor. Landlord shall not be responsible for any statement, representation or agreement made between Tenant and the Contractor or any subcontractor. It is hereby expressly acknowledged by Tenant that the Contractor is not Landlord's agent and has no authority whatsoever to enter into agreements on Landlord’s behalf or otherwise bind Landlord. The Project Manager will furnish Tenant with notices of substantial completion, cost estimates for above standard Tenant Improvements, Landlord's approvals or disapprovals of all documents to be prepared by Tenant pursuant to this Work Letter and changes thereto.
6.3 Tenant's Agents. All subcontractors, laborers, materialmen, and suppliers retained directly by Tenant shall all be union labor in compliance with the then existing master labor agreements.
6.4 Time is of the Essence. Time is of the essence under this Work Letter. Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days.
6.5 Meetings. Commencing upon execution of the Lease, Landlord and Tenant’s Construction Representative shall meet on a weekly basis to discuss the design and construction of the Tenant Improvements and Landlord’s progress with respect to the Landlord Work and Tenant Improvements. Such meetings shall be held at a reasonable time and at a location reasonably agreed to by Landlord and Tenant. Tenant shall have the right to attend any construction meetings scheduled to address any particular concerns during the construction process.
6.6 Tenant's Lease Default. Notwithstanding any provision to the contrary contained in the Lease or this Work Letter, if any default by Tenant under the Lease or this Work Letter and after any applicable notice and cure periods (including, without limitation, any failure by Tenant to fund any portion of the Over-Allowance Amount pursuant to this Work Letter) occurs at any time on or before the Substantial Completion of the Tenant Improvements, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to withhold payment of all or any portion of the Allowance and/or Landlord may, without any liability whatsoever, cause the cessation of construction of the Tenant Improvements (in which case, Tenant shall be responsible for any delay in the Substantial Completion of the Tenant Improvements and any costs occasioned thereby) until such time as such event of default is cured (following such cure, Landlord shall again be obligated to apply the Allowance and continue construction of the Tenant Improvements), and (ii) all other obligations of Landlord under the terms of the Lease and this Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease.
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
SCHEDULE 1
SPACE PLAN
EXHIBIT C
COMMENCEMENT DATE MEMORANDUM
THIS CONFIRMATION AGREEMENT is made and agreed upon as of this______day of ____________, by and between SIC-MOUNTAIN BAY PLAZA, LLC, a Delaware limited liability company ("Landlord"), and SENTINEL LABS, INC., a Delaware corporation dba SentinelOne ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant have previously entered into that certain NNN lease agreement dated____________,______ (the "Lease"), covering certain premises located at 444 Castro Street in Mountain View, California, all as more particularly described in the Lease; and
WHEREAS, Landlord and Tenant wish to set forth their agreements as to the commencement of the term of the Lease and certain related matters;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto mutually agree as follows:
1. For the purpose of confirming the establishment of the Commencement Date, as required by the provisions of the Lease, Landlord and Tenant hereby agree that:
a. The date of _________________, _____, is hereby established as the "Commencement Date" referred to in the Lease; and
b. The date of _________________, _____, is hereby established as the "Expiration Date" referred to in the Lease.
2. The Rentable Footage of the Premises is _____________ rentable square feet and the Rentable Square Footage of the Building is 170,499 rentable square feet.
3. Tenant's Share, as defined in the Lease, as of the Commencement Date, is _______ percent (__%). The Lease is a NNN Lease.
4. This Confirmation Agreement and each and all provisions hereof shall inure to the benefit of, or bind, as the case may require, the parties hereto and their respective heirs, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the date and year first written above.
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LANDLORD
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TENANT
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SIC- MOUNTAIN BAY PLAZA, LLC,
a Delaware limited liability company
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SENTINEL LABS, INC.,
a Delaware corporation
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By:
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The Swig Company, LLC, a Delaware limited liability company, as Property Manager
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By:
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DO NOT SIGN
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Its:
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By:
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DO NOT SIGN
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Philip Connor Kidd IV
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Date:
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Executive Vice President and
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Director of Asset Management
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Date:
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
EXHIBIT D
CALIFORNIA ASBESTOS NOTICE
In 1988, California enacted legislation (specifically, Chapter 10.4 of the Health and Safety Code, Section 25915 et seq.) requiring landlords and tenants of commercial buildings constructed prior to 1979 to notify certain people, including each other and their respective employees working within such building, of any knowledge they may have regarding any asbestos containing materials or asbestos-containing construction materials (collectively, “ACM”) in the building.
On July 13, 1995, Title 29, Code of Federal Regulations, Section 1910.1001 and 1910.1101 defined Presumed Asbestos Containing Material (“PACM”) as thermal system insulation and surfacing material found in buildings constructed no later than 1980. Although not considered PACM, asphalt and vinyl flooring installed in buildings constructed no later than 1980 must also be considered asbestos containing. Both PACM and asphalt and vinyl flooring can be shown not to contain asbestos through comprehensive sampling. The federal standard requires the building and/or facility owner to notify contractors and tenants of the present of ACM/PACM. On May 3, 1996, Cal/OSHA adopted the same notification requirements for PACM in Title 8 CCR 5208 and 1529.
This notification is being given to provide the information required under this Legislation in order to help you avoid any unintentional contact with the ACM/PACM, to assure that appropriate precautionary measures are taken before disturbing any ACM/PACM, and to assist you in making appropriate disclosures to your employees and others.
We have engaged qualified asbestos consultants to review previous asbestos surveys, air clearance reports, and conduct a limited inspection of the Building for asbestos. We have no reason to believe, based upon the environmental consultant’s document review and limited asbestos inspection that the ACM/PACM in the Building is currently in a condition to release asbestos fibers which would pose a significant health hazard to the Building’s occupants. This should remain so if such ACM/PACM is properly handled and remains undisturbed. You should take into consideration that our knowledge as to the absence of health risks is based solely upon general information and the information contained in the previous asbestos surveys, and that we have no special knowledge concerning potential health risks resulting from exposure to asbestos in the Building. We are therefore required by the above-mentioned legislations to encourage you to contact local or state public agencies if you wish to obtain a better understanding of the potential impacts resulting from exposure to asbestos.
Because any tenant alternations or other work at the Building could disturb ACM/PACM and possibly release asbestos fibers into the air, we must require that you obtain our written approval prior to beginning such projects. This includes major alterations, but might also include such activities as drilling or boring holes, installing electrical telecommunications or computer lines, sanding floors, removing ceiling tiles or other work which disturbs ACM/PACM. In many cases, such activities will not affect ACM/PACM, but you must check with the property manager in advance, just in case. You should check with the property manager at the address set forth on Schedule A. The property manager will make available such instruction as may be required.
Any such work should not be attempted by an individual or contractor who is not qualified to handle ACM/PACM. In the areas specified in attached Schedule A, you should avoid touching or disturbing the ACM/PACM in any way. If you observe any activity which has the potential to disturb the ACM/PACM, please report the same to the property manager immediately.
In connection with the foregoing, we have adopted the following policies (which shall be considered rules under tenant leases): (1) the owner, and representatives of the owner, including, without limitation, the owner’s ACM/PACM consultant, are entitled to enter into the premises of any tenant to inspect for ACM/PACM, perform air tests and abatement; and (2) any tenant, contractor, or other party must obtain our prior written approval before performing any alterations on any tenant space, or performing any other work at the property that might disturb ACM/PACM or involve exposure to asbestos fibers as described above.
California law also requires persons in the course of doing business whose activities may result in exposure to asbestos and other substances regulated under the Safe Drinking Water and Toxic Enforcement Act of 1986, commonly referred to as Proposition 65, to provide a clear and reasonable warning. Accordingly, you are advised as follows:
WARNING: The areas within the Building that are described in Schedule A below contain a substance known to the State of California to cause cancer.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
ASBESTOS SURVEYS ARE AVAILABLE FOR REVIEW DURING NORMAL BUSINESS HOURS IN THE OFFICE COMPLEX OFFICE, AT THE ABOVE ADDRESS, MONDAY THROUGH FRIDAY EXCEPT LEGAL HOLIDAYS. NO REPRESENTATIONS OR WARRANTIES WHATSOEVER ARE MADE REGARDING THE REPORTS CONCERNING THE SURVEYS (INCLUDING WITHOUT LIMITATION, THE CONTENTS OR ACCURACY THEREOF), OR THE PRESENCE OR ABSENCE OF TOXIC OR HAZARDOUS MATERIALS IN, AT, OR UNDER ANY PREMISES, OFFICE COMPLEX, OR THE PROJECT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
EXHIBIT E
FORM OF LETTER OF CREDIT
L/C DRAFT LANGUAGE
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IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER
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ISSUE DATE:
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ISSUING BANK:
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BENEFICIARY:
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APPLICANT:
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AMOUNT:
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US$855,441.00 (EIGHT HUNDRED FIFTY-FIVE THOUSAND FOUR HUNDRED FORTY ONE AND 00/100 U.S. DOLLARS)
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EXPIRATION DATE:
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ONE YEAR FROM ISSUANCE
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PLACE OF EXPIRATION:
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ISSUING BANK'S COUNTERS AT ITS ABOVE ADDRESS
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DEAR SIR/MADAM:
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO._________IN YOUR FAVOR FOR THE ACCOUNT OF ABOVE REFERENCED APPLICANT IN THE AMOUNT OF US EIGHT HUNDRED FIFTY-FIVE THOUSAND FOUR HUNDRED FORTY-ONE AND 00/100 U.S. DOLLARS ($855,441.00) AVAILABLE BY YOUR DRAFTS DRAWN ON US AT SIGHT IN THE FORM OF EXHIBIT “A” ATTACHED AND ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
1. THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENT(S), IF ANY.
2. BENEFICIARY'S DATED STATEMENT SIGNED BY AN AUTHORIZED SIGNATORY , STATING THE FOLLOWING:
“THIS DRAW IN THE AMOUNT OF _____________________ U.S. DOLLARS ($________________) UNDER YOUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. ________ REPRESENTS FUNDS DUE AND OWING TO US PURSUANT TO THE TERMS OF THAT CERTAIN LEASE BY AND BETWEEN BENEFICIARY, AS LANDLORD, AND APPLICANT, AS TENANT, AND/OR ANY AMENDMENT TO THE LEASE OR ANY OTHER AGREEMENT BETWEEN SUCH PARTIES RELATED TO THE LEASE.”
PARTIAL DRAWS AND MULTIPLE PRESENTATIONS ARE ALLOWED. THIS ORIGINAL LETTER OF CREDIT MUST ACCOMPANY ANY DRAWINGS HEREUNDER FOR ENDORSEMENT OF THE DRAWING AMOUNT AND WILL BE RETURNED TO THE BENEFICIARY UNLESS IT IS FULLY UTILIZED.
IN THE EVENT YOU ELECT TO DRAW UPON LESS THAN THE FULL STATED AMOUNT HEREOF, THE STATED AMOUNT OF THIS IRREVOCABLE STANDBY LETTER OF CREDIT SHALL BE AUTOMATICALLY REDUCED BY THE AMOUNT OF SUCH PARTIAL DRAW.
THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR AN ADDITIONAL PERIOD OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE UNLESS AT LEAST 60 DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE SEND YOU A NOTICE BY REGISTERED MAIL OR OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESS THAT THIS LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE CURRENT EXPIRATION DATE. A COPY OF OUR NOTICE OF NON EXTENSION SHALL BE SENT BY THE SAME METHOD OF DELIVERY: TO: _________________________________________________________________________________________ ________ AND TO: SIC- _______________________________________________________________________ ____________________________________________ HOWEVER LACK OF RECEIPT OF SUCH COPY DOES NOT INVALIDATE OUR NOTICE OF NON EXTENSION TO THE BENEFICIARY. IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND MAY 31, 2028 WHICH IS THE FINAL EXPIRATION DATE OF THIS LETTER OF CREDIT. IN THE EVENT OF SUCH NOTICE OF NON EXTENSION, YOU MAY DRAW HEREUNDER WITH A DRAFT STATED ABOVE AND ACCOMPANIED BY THIS ORIGINAL LETTER OF CREDIT AND AMENDMENT(S), IF ANY, ALONG WITH YOUR DATED STATEMENT SIGNED BY AN AUTHORIZED SIGNATORY, STATING THAT THE APPLICANT HAS FAILED TO PROVIDE YOU WITH AN ACCEPTABLE SUBSTITUTE IRREVOCABLE STANDBY LETTER OF CREDIT IN ACCORDANCE WITH THE TERMS OF THE LEASE AGREEMENT.
THIS LETTER OF CREDIT IS TRANSFERABLE ONE OR MORE TIMES, BUT IN EACH INSTANCE ONLY TO A SINGLE BENEFICIARY AS TRANSFEREE AND ONLY UP TO THE THEN AVAILABLE AMOUNT, ASSUMING SUCH TRANSFER TO SUCH TRANSFEREE WOULD BE IN COMPLIANCE WITH THEN APPLICABLE LAW AND REGULATION, INCLUDING BUT NOT LIMITED TO THE REGULATIONS OF THE U. S. DEPARTMENT OF TREASURY AND U. S. DEPARTMENT OF COMMERCE. AT THE TIME OF TRANSFER, THE ORIGINAL LETTER OF CREDIT AND ORIGINAL AMENDMENT(S), IF ANY, MUST BE SURRENDERED TO US AT OUR ADDRESS INDICATED IN THIS LETTER OF CREDIT TOGETHER WITH OUR TRANSFER FORM ATTACHED HERETO AS EXHIBIT “B” DULY EXECUTED. THE CORRECTNESS OF THE SIGNATURE AND TITLE OF THE PERSON SIGNING THE TRANSFER FORM MUST BE VERIFIED BY BENEFICIARY' S BANK AS PROVIDED FOR IN EXHIBIT “B”, PROVIDED THAT IN LIEU OF SUCH BANK AUTHENTICATION, BENEFICIARY MAY PROVIDE THE ISSUING BANK WITH ALTERNATIVE DOCUMENTATION TO EVIDENCE THE SIGNER'S AUTHORITY TO EXECUTE THE TRANSFER INSTRUMENT ON BEHALF OF THE BENEFICIARY, SUCH AS AN INCUMBENCY CERTIFICATE IN THE FORM OF EXHIBIT “C” ATTACHED OR OTHER DOCUMENTATION AS MAY BE REASONABLY SATISFACTORY TO THE ISSUING BANK. APPLICANT SHALL PAY OUR TRANSFER FEE OF ¼ OF 1% OF THE TRANSFER AMOUNT (MINIMUM US$250.00) UNDER THIS LETTER OF CREDIT. HOWEVER, ANY TRANSFER IS NOT CONTINGENT UPON APPLICANT' S PAYMENT OF, OR ABILITY TO PAY, OUR TRANSFER FEE. EACH TRANSFER SHALL BE EVIDENCED BY OUR ENDORSEMENT ON THE REVERSE OF THE LETTER OF CREDIT AND WE SHALL FORWARD THE ORIGINAL OF THE LETTER OF CREDIT SO ENDORSED TO THE TRANSFEREE.
DRAFT(S) AND DOCUMENTS MUST INDICATE THE NUMBER AND DATE OF THIS LETTER OF CREDIT.
ALL DEMANDS FOR PAYMENT SHALL BE MADE BY PRESENTATION OF THE ORIGINAL APPROPRIATE DOCUMENTS ON A BUSINESS DAY AT OUR OFFICE (THE “BANK'S OFFICE”) AT: SILICON VALLEY BANK, 3003 TASMAN DRIVE, SANTA CLARA, CA 95054, ATTENTION: STANDBY LETTER OF CREDIT NEGOTIATION SECTION. FACSIMILE PRESENTATIONS ARE PERMITTED. SHOULD BENEFICIARY WISH TO MAKE PRESENTATIONS UNDER THIS LETTER OF CREDIT ENTIRELY BY FACSIMILE TRANSMISSION IT NEED NOT TRANSMIT THIS LETTER OF CREDIT AND
AMENDMENT(S), IF ANY. EACH FACSIMILE TRANSMISSION SHALL BE MADE AT ______________ OR ____________ ;AND SIMULTANEOUSLY UNDER TELEPHONE ADVICE TO: _____________ OR ____ _________ ATTENTION: STANDBY LETTER OF CREDIT NEGOTIATION SECTION WITH ORIGINALS TO FOLLOW BY OVERNIGHT COURIER SERVICE. PROVIDED, HOWEVER, THE BANK WILL REVIEW ON THE BASIS OF PRESENTATION BY FACSIMILE ALONE, AND WILL NOT EXAMINE THE ORIGINALS. RECEIPT OF SUCH PHONE CALL OR ORIGINAL SIGHT DRAFT SHALL NOT BE A CONDITION TO PAYMENT HEREUNDER. IN ADDITION, ABSENCE OF THE AFORESAID TELEPHONE ADVICE SHALL NOT AFFECT OUR OBLIGATION TO HONOR ANY DRAW REQUEST.
WE AGREE THAT WE SHALL HAVE NO DUTY OR RIGHT TO INQUIRE AS TO THE BASIS UPON WHICH BENEFICIARY HAS DETERMINED THAT THE AMOUNT IS DUE OR HAS DETERMINED TO PRESENT TO US ANY DRAFT UNDER THIS LETTER OF CREDIT (AND/OR THE ACCURACY THEREOF), IRRESPECTIVE OF WHETHER THE APPLICANT DISPUTES THE CONTENT OF BENEFICIARY'S STATEMENT(S), AND THE PRESENTATION OF SUCH DRAFT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, SHALL AUTOMATICALLY RESULT IN PAYMENT TO THE BENEFICIARY.
WE HEREBY AGREE WITH THE BENEFICIARY THAT THE DRAFTS DRAWN UNDER AND IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL BE DULY HONORED UPON PRESENTATION TO US ON OR BEFORE THE EXPIRATION DATE OF THIS LETTER OF CREDIT OR ANY AUTOMATICALLY EXTENDED EXPIRATION DATE WITHOUT INQUIRY INTO THE EFFECTIVENESS OF BENEFICIARY'S SIGNED STATEMENT AND REGARDLESS OF WHETHER THE APPLICANT DISPUTES THE CONTENT OF SUCH STATEMENT.
IF ANY INSTRUCTIONS ACCOMPANYING A DRAWING UNDER THIS LETTER OF CREDIT REQUEST THAT PAYMENT IS TO BE MADE BY TRANSFER TO YOUR ACCOUNT WITH ANOTHER BANK, WE WILL ONLY EFFECT SUCH PAYMENT BY FED WIRE TO A U.S. REGULATED BANK, AND AND/OR SUCH OTHER BANK MAY RELY ON AN ACCOUNT NUMBER SPECIFIED IN SUCH INSTRUCTIONS EVEN IF THE NUMBER IDENTIFIES A PERSON OR ENTITY DIFFERENT FROM THE INTENDED PAYEE.
THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (ISP98) INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590.
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SILICON VALLEY BANK,
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AUTHORIZED SIGNATURE
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AUTHORIZED SIGNATURE
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IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER
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EXHIBIT "A"
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DATE:
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REF. NO.
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AT SIGHT OF THIS DRAFT
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PAY TO THE ORDER OF
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US$
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US DOLLARS
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DRAWN UNDER SILICON VALLEY BANK, SANTA CLARA, CALIFORNIA, STANDBY
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LETTER OF CREDIT NUMBER NO. __________________ DATED _______________________
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TO:
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SILICON VALLEY BANK
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3003 TASMAN DRIVE
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SANTA CLARA, CA 95054
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(BENEFICIARY'S NAME)
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Authorized Signature
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GUIDELINES TO PREPARE THE DRAFT
1. DATE: ISSUANCE DATE OF DRAFT.
2. REF. NO.: BENEFICIARY'S REFERENCE NUMBER, IF ANY.
3. PAY TO THE ORDER OF: NAME OF BENEFICIARY AS INDICATED IN THE L/C (MAKE SURE BENEFICIARY ENDORSES IT ON THE REVERSE SIDE).
4. US$: AMOUNT OF DRAWING IN FIGURES.
5. USDOLLARS: AMOUNT OF DRAWING IN WORDS.
6. LETTER OF CREDIT NUMBER: SILICON VALLEY BANK'S STANDBY UC NUMBER THAT PERTAINS TO THE DRAWING.
7. DATED: ISSUANCE DATE OF THE STANDBY L/C .
8. BENEFICIARY'S NAME: NAME OF BENEFICIARY AS INDICATED IN THE L/C .
9. AUTHORIZED SIGNATURE: SIGNED BY AN AUTHORIZED SIGNER OF BENEFICIARY.
IF YOU HAVE QUESTIONS RELATED TO THIS STANDBY LETTER OF CREDIT PLEASE CONTACT
US AT ________________.
IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER ________________
EXHIBIT "B"
TRANSFER FORM
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DATE:
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TO:
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SILICON VALLEY BANK
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RE:
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IRREVOCABLE STANDBY LETTER OF CREDIT
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NO.
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ISSUED BY
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SILICON VALLEY BANK, SANTA CLARA
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STANDBY LETTERS OF CREDIT
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L/C AMOUNT:
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GENTLEMEN:
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FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS TO:
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(NAME OF TRANSFEREE)
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(ADDRESS)
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ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF CREDIT UP TO ITS AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS TRANSFER.
BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF CREDIT ARE TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS, WHETHER INCREASES OR EXTENSIONS OR OTHER AMENDMENTS, AND WHETHER NOW EXISTING OR HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED DIRECTLY TO THE TRANSFEREE WITHOUT NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.
THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO ENDORSE THE TRANSFER ON THE REVERSE THEREOF, AND FORWARD IT DIRECTLY TO THE TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF TRANSFER.
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SIGNATURE AUTHENTICATED
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The names(s), title(s), and signature(s) conform to that/those
on file with us for the company and the signature(s) is/are
authorized to execute this instrument.
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(BENEFICIARY’S NAME)
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By:
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Printed Name:
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(Name of Bank)
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Title:
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(Address of Bank)
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(City, State, Zip Code)
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(Print Authorized Name and Title)
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(Authorized Signature)
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(Telephone Number)
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EXHIBIT “C”
SECRETARY'S CERTIFICATE
[COMPANY NAME]
The undersigned, [Name], Secretary of [Company Name] (the "Company"), which is the [Beneficiary] [Applicant] [Other] under that certain [_____________] Letter of Credit Number [________________] hereby certifies the following:
1. This Certificate is given in connection with that certain [___________] Letter of Credit Number [___________________] issued by Silicon Valley Bank in the original amount of $[__________] (the "Letter of Credit").
2. The following persons are now duly elected and qualified officers of the Company holding the offices indicated next to their respective names below, and the signatures appearing opposite their respective names below are the true and genuine signatures of such officers, and each of such officers, acting alone, is duly authorized to execute and deliver on behalf of the Company any certificate or other document to be delivered by the Company related to the Letter of Credit.
IN WITNESS WHEREOF, I have hereunto set my hand on behalf of the Company this ________ day of _________________, 2017.
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[COMPANY NAME]
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Name:
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Secretary
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The undersigned hereby certifies that the person named above is the duly elected, qualified and acting Secretary of each Company, and that the signature appearing above is [his/her] true and genuine signature.
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[COMPANY NAME]
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Name:
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Title:
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Certain identified information has been excluded because it is both not material and is the type that the registrant treats as private or confidential.
EXHIBIT F
OFFER SPACE
EXHIBIT G
FORM OF SUBORDINATION, NON DISTURBANCE AND ATTORNMENT AGREEMENT
Loan No. 000001:
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Space Above This Line for Recorder's Use
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made this day of , , by , a , having its principal office and place of business located at ("Tenant"), and John Hancock Life Insurance Company (U.S.A.), its successors and assigns, having its principal place of business located at ___ _________________________________ ("Lender"), with reference to the following facts:
RECITALS
A. On , , ("Landlord") (either itself or as successor-in-interest to a previous landlord) and Tenant entered into a certain lease as amended on ("Lease") covering certain space ("Premises") in the building located at , which property is more particularly described in the Mortgage (as hereinafter defined) ("Property");
B. Lender granted a loan ("Loan") to Landlord, which Loan is evidenced by a note and secured, inter alia, by a first lien instrument in favor of Lender covering the property and upon the terms and conditions described therein, which has been recorded in the Official Records of County, (said instrument and all amendments, modifications, renewals, substitutions, extensions, consolidations and replacements thereto and thereof, as applicable, are hereinafter collectively referred to as "Mortgage");
C. Tenant has requested of Landlord and Lender that this Agreement be executed.
D. It is a condition precedent to Lender executing this Agreement that (i) the Mortgage be and remain at all times a first lien or charge upon the Property prior and superior to the Lease; (ii) Tenant specifically subordinate the Lease to the lien or charge of the Mortgage and (iii) Tenant attorn to Lender and its successors and assigns in the event of the foreclosure or other proceeding to enforce the Mortgage;
NOW, THEREFORE, in consideration of the mutual benefits accruing to the parties hereto and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce Lender to enter into this Agreement, Lender and Tenant hereby agree as follows:
1. Subordination. The Lease and any extensions, renewals, replacements, consolidations or modifications thereof, and all the right, title and interest of the Tenant in and to the Premises, and all rights of the Tenant thereunder, are and shall be subject and subordinate to the Mortgage and the lien and terms thereof.
2. Lender's Exercise of Remedies. In the event of (a) the institution of any foreclosure, trustee's sale or other like proceeding, (b) the appointment of a receiver for the Landlord or the Property, (c) the exercise of rights to collect rents under the Mortgage or an assignment of rents, (d) the recording by Lender or its successor or assignee of a deed in lieu of foreclosure for the Property, or (e) any transfer or abandonment of possession of the Property to Lender or its successor or assigns in connection with any proceedings affecting Landlord under the Bankruptcy Code, 11 U.S.C. § 101 et seq. (any such foreclosure, recording of a deed in lieu of foreclosure, or transfer or abandonment of the Property referred to in the preceding clauses (a) through (e) is hereinafter called a "Transfer", and Lender or any successor or assignee of Lender taking title to the Property in connection with a Transfer is hereinafter called the "Transferee"), such Transferee shall not: (i) be liable for any damages (including, without limitation, consequential damages) or other relief or be subject to any offsets, defenses or counterclaims of any kind attributable to any event, act omission or default under the Lease, including, but not limited to, a breach of any representation or warranty under the Lease, of Landlord or any prior landlord under the Lease, except for any continuing event, act or omission of which Lender has been provided notice as described in Paragraph 4 below, and if any such offset or defense is expressly provided for in the Lease, (ii) be bound by any prepayment by Tenant of more than one month's installment of rent unless such prepayment is expressly required in the Lease or has been specifically approved in writing by Lender, or be liable or responsible for any security deposit or other sums which Tenant may have paid under the Lease unless such deposit or other sums have been physically delivered to Transferee, or (iii) be bound by any modification or amendment of the Lease, or any waiver of any terms of the Lease unless the same shall have been approved in writing by Lender.
3. Attornment and Non-Disturbance. Provided (a) Tenant complies with this Agreement, (b) Tenant is not in default under the terms of the Lease and no event has occurred which, with the passage of time or the giving of notice or both, would constitute a default under the Lease, and (c) the Lease is in full force and effect, except as set forth in Paragraphs 2 and 5(d) and (e), any default under the Mortgage and any proceeding to foreclose the same will not disturb Tenant's possession under the Lease and the Lease will not be affected or cut off thereby, and notwithstanding any such foreclosure or other Transfer of the Property to Transferee, Transferee will recognize the Lease and will accept the attornment of Tenant thereunder.
Tenant shall attorn to Transferee, including Lender if Lender becomes a Transferee, as the landlord under the Lease. Said attornment is subject to the limitation of Transferee's obligations set forth in Paragraph 2 above and shall be effective and self-operative without the execution of any further instruments upon Transferee’s succeeding to the interest of the landlord under the Lease. Tenant and Lender shall, however, confirm the provisions of this paragraph in writing upon request by either of them.
4. Lender’s Right to Cure. Notwithstanding anything to the contrary in the Lease or this Agreement, Tenant shall provide Lender with written notice of any default of Landlord under the Lease (which can be a copy of the notice provided to the Landlord) if such default is of such a nature as to give the Tenant a right to terminate the Lease, to reduce rent thereunder or to credit or offset any amounts against future rents, and will not seek to terminate the Lease or reduce the rent or credit or offset against rent or claim a partial or total eviction until giving such notice and providing Lender a period of thirty (30) days beyond the time available to Landlord under the Lease in which to cure the breach or default by Landlord, provided, however, as to any breach or default by Landlord the cure of which requires possession and control of the Property or Premises, Lender’s cure period shall continue for such additional time as Lender may reasonably require to either obtain possession and control of the Property or Premises and thereafter cure the breach or default with reasonable diligence, or obtain the appointment of a receiver pursuant to any court proceeding, or otherwise, and give such receiver a
reasonable period of time in which to cure the default. Lender shall have no obligation to cure (and shall have no liability or obligation for not curing) any breach or default by Landlord, except to the extent that Lender agrees otherwise in writing.
5. Miscellaneous.
(a) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their successors and assigns; provided, however, that in the event of the assignment or transfer of the interest of Transferee, all obligations and liabilities of Transferee under this Agreement shall terminate, and thereupon all such obligations and liabilities shall be the responsibility of the party to whom Transferee's interest is assigned or transferred; and provided further that the interest of Tenant under this Agreement may not be assigned or transferred except to the extent the assignment of Tenant's interest in the Lease is permitted under the Lease.
(b) Tenant acknowledges that it has notice that the Lease and the rent and all other sums due thereunder have been assigned to the Lender as part of the security for the note secured by the Mortgage and upon written notice from Lender of a default under the Mortgage, Tenant shall pay its rent and all other sums due under the Lease directly to Lender, and Landlord, by its execution hereof, hereby directs Tenant to make such payment to Lender.
(c) Tenant acknowledges and agrees that it shall not terminate the Lease in the event of a default by Landlord unless Tenant provides Lender written notice and an opportunity to cure as described in Paragraph 4 above. In addition, Tenant agrees that it shall not terminate or cancel the Lease by agreement with the Landlord without Lender’s prior written consent, unless such right to terminate or cancel is expressly set forth in the Lease. In the event such right is expressly set forth in the Lease, Tenant shall pay to Lender any and all termination fees or other consideration to be paid to Landlord in connection with such termination or cancellation and Landlord, by its execution hereof, hereby directs Tenant to make such payments or provide such other consideration to Lender.
(d) 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 Mortgage and is hereby waived and released as against Transferee.
(e) This Agreement is the whole and only agreement between the parties hereto with regard to the subordination of the Lease to the lien or charge of the Mortgage. This Agreement may not be modified in any manner or terminated except by an instrument in writing executed by the parties hereto.
(f) This Agreement shall be deemed to have been made in the state where the Property is located and the validity, interpretation and enforcement of this Agreement shall be determined in accordance with the laws of such state.
(g) In the event any legal action or proceeding is commenced to interpret or enforce the terms of, or obligations arising out of, this Agreement, or to recover damages for the breach thereof, the party prevailing in any such action or proceeding shall be entitled to recover from the non-prevailing party all reasonable attorneys' fees, costs and expenses incurred by the prevailing party.
(h) Any notices or communications required or permitted to be given or made hereunder shall be deemed to be so given or made when in writing and delivered in person or sent by United States registered or certified mail, postage prepaid, or by nationally recognized overnight courier service, directed to the parties at the following addresses or such other addresses as they may from time to time designate in writing:
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Lender:
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Attention:
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Tenant:
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Notices or communications mailed in the U.S. mail shall be deemed to be served on the third business day following mailing, notices or communication served by hand or by overnight courier shall be deemed served upon receipt.
(i) This document may be signed in counterparts which together shall be deemed to be one and the same document. The signature pages from any such counterpart may be attached to another such counterpart to form one complete set of signatures for this document.
(j) The parties hereto represent and warrant that their respective signatories to this Agreement have been duly authorized by the Tenant, Landlord and Lender, as applicable.
IN WITNESS WHEREOF, this Agreement has been signed and delivered as of the date and year first above set forth.
_______________ OF ______________ )
)SS
COUNTY OF ______________ )
On this ______ day of _________ 20 , before me, the undersigned Notary Public, personally appeared _______________________, proved to me through satisfactory evidence of identification, which was/were __________________________, to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he/she signed it voluntarily for its stated purpose(s) as a/an _____________________ for .
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(Seal)
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Signature of Notary
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My commission expires:
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LENDER:
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John Hancock Life Insurance Company (U.S.A.)
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By:
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Name:
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Title:
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duly authorized
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COMMONWEALTH OF MASSACHUSETTS )
)SS
COUNTY OF SUFFOLK )
On this day of , 20 , before me, the undersigned Notary Public, personally appeared , proved to me through satisfactory evidence of identification, which was/were personal knowledge, to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he/she signed it voluntarily for its stated purpose(s) as a/an Assistant Vice President for John Hancock Life Insurance Company (U.S.A.).
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(Seal)
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Signature of Notary
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My commission expires:
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As to Paragraphs 5(b) and (c):
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LANDLORD:
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By:
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Name:
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Title:
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__________________ OF ______________ )
)SS
COUNTY OF _____________________ )
On this ______ day of __________ 20 , before me, the undersigned Notary Public, personally appeared _________________________, proved to me through satisfactory evidence of identification, which was/were __________________________, to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he/she signed it voluntarily for its stated purpose(s) as a/an ______________________ for .
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(Seal)
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Signature of Notary
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My commission expires:
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(Post-Closing)
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of May 28, 2020 (the “Effective Date”) by and between SILICON VALLEY BANK, a California corporation (“Bank”), and SENTINEL LABS, INC., a Delaware corporation (“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.
A. Bank and Borrower have previously entered into that certain Loan and Security Agreement dated as of May 8, 2018 by and between Borrower and Bank, as amended by that certain First Amendment to Loan and Security Agreement dated as of November 8, 2018 by and between Borrower and Bank (as amended, the “Prior Agreement”).
B. Borrower and Bank have agreed to amend and restate, and replace, the Prior Agreement in its entirety. Bank and Borrower hereby agree that the Prior Agreement is amended and restated in its entirety as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP, except with respect to unaudited financial statements (i) for non-compliance with FASB ASC Topic 718 and other non-cash items in the monthly reporting and (ii) for the absence of footnotes and subject to year-end audit adjustments; provided that if at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either Borrower or Bank shall so request, Borrower and Bank shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided, further, that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrower shall provide Bank financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. Calculations and determinations must be made following GAAP; provided, that any obligations of any Person that are or would have been treated as operating leases for purposes of GAAP prior to the issuance by the Financial Accounting Standards Board on February 25, 2016 of an Accounting Standards Update (the “ASU”) shall continue to be accounted for as operating leases for purposes of all financial definitions, calculations and covenants for purpose of this Agreement (whether or not such operating lease obligations were in effect on such date) notwithstanding the fact that such obligations are required in accordance with the ASU (on a prospective or retroactive basis or otherwise) to be treated as capitalized lease obligations in accordance with GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.
2.2 Revolving Line.
(a) Availability. Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount; provided that the initial Advance shall be made on or about the Effective Date and shall be used to repay in full Borrower’s obligations and liabilities under the Prior Agreement (provided that the Prepayment Fee (as defined in the Prior Agreement) shall be waived by Bank and not included in such amount) (the “Prior Obligations”). Borrower hereby authorizes Bank to apply such proceeds to the Prior Obligations as part of the funding process without actually depositing such funds in an account of Borrower. Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.
(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the accrued and unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable.
2.3 Overadvances. If, at any time, the outstanding principal amount of any Advances exceeds the lesser of either the Revolving Line or the Borrowing Base, Borrower shall within three (3) Business Days pay to Bank in cash the amount of such excess (such excess, the “Overadvance”). Without limiting Borrower’s obligation to repay Bank any Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of any Overadvance that is not paid within three (3) Business Days, on demand, at a per annum rate equal to the rate that is otherwise applicable to Advances plus five percent (5.0%) unless Bank otherwise elects from time to time in its sole discretion to impose a smaller increase.
2.4 Payment of Interest on the Credit Extensions.
(a) Interest Rate. Subject to Section 2.4(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the greater of (i) three-quarters of one percent (0.75%) above the Prime Rate and (ii) five percent (5.0%), which interest, in each case, shall be payable monthly in accordance with Section 2.4(d) below.
(b) Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is four percent (4.0%) above the rate that is otherwise applicable thereto (the “Default Rate”) unless Bank otherwise elects from time to time in its sole discretion to impose a smaller increase. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.4(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change.
(d) Payment; Interest Computation. Interest is payable monthly on the Payment Date of each month and shall be computed on the basis of a 360-day year for the actual number of days elapsed. In computing interest, (i) all payments received after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension.
2.5 Fees. Borrower shall pay to Bank:
(a) Commitment Fee. A fully earned, non-refundable commitment fee of One Hundred Twelve Thousand Five Hundred Dollars ($112,500.00), on the Effective Date;
(b) Unused Revolving Line Facility Fee. Payable quarterly in arrears on the last day of each calendar quarter occurring thereafter prior to the Revolving Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the “Unused Revolving Line Facility Fee”) in an amount equal to one-quarter of one percent (0.25%) per annum of the average unused portion of the Revolving Line, as determined by Bank, computed on the basis of a year with the applicable number of days as set forth in Section 2.4(d). The unused portion of the Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and shall equal the difference between (i) the Revolving Line, and (ii) the average for the period of the daily closing balance of the Revolving Line outstanding; and
(c) Bank Expenses. All Bank Expenses (including reasonable and documented attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due (or, if no stated due date, upon demand by Bank).
Unless otherwise provided in this Agreement or in a separate writing by Bank, Borrower shall not be entitled to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder. Bank may deduct amounts owing by Borrower under the clauses of this Section 2.5 pursuant to the terms of Section 2.5(c). Bank shall provide Borrower written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.5.
2.6 Payments; Application of Payments; Debit of Accounts.
(a) All payments to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due. Payments of principal and/or interest received after 12:00 p m. Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
(b) Except as otherwise explicitly set forth in this Agreement, Bank has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied. Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.
(c) Bank may debit any of Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due. These debits shall not constitute a set-off.
2.7 Withholding. Payments received by Bank from Borrower under this Agreement will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority (including any interest, additions to tax or penalties applicable thereto), other than Excluded Taxes. Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder (other than with respect to Excluded Taxes) will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority. Borrower will, upon request, furnish Bank with proof reasonably satisfactory to Bank indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.7 shall survive the termination of this Agreement.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank shall have reasonably requested including, without limitation:
(a) duly executed original signatures to the Loan Documents;
(b) the Operating Documents and a long-form good standing certificate of Borrower certified by the Secretary of State of Delaware and good standing certificates of Borrower certified by the Secretary of State (or equivalent agency) for each jurisdiction in which Borrower is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;
(c) a secretary’s corporate borrowing certificate of Borrower with respect to Borrower’s Operating Documents, incumbency, specimen signatures and resolutions authorizing the execution and delivery of this Agreement and the other Loan Documents to which it is a party;
(d) duly executed signatures to the completed Borrowing Resolutions for Borrower;
(e) certified copies, dated as of a recent date, of Lien searches (including without limitation, UCC searches), as Bank may request, accompanied by written evidence (including any UCC termination statements and other Lien releases) that the Liens indicated in any such financing statements or other filings either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(f) the Perfection Certificate of Borrower, together with the duly executed original signatures thereto;
(g) duly executed signatures to the First Amendment to Pledge Agreement;
(h) a legal opinion (authority and enforceability) of Borrower’s counsel dated as of the Effective Date, together with the duly executed signature thereto;
(i) with respect to the initial Advance, the completion of the Initial Audit;
(j) with respect to the initial Advance, a completed Recurring Revenue Statement (and any schedules related thereto and including any other information requested by Bank with respect to Borrower’s Accounts); and
(k) payment of the fees and Bank Expenses then due as specified in Section 2.5 hereof.
3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit Extension under the Loan Documents, including the initial Credit Extension, is subject to the following conditions precedent:
(a) timely receipt the Credit Extension request and any materials and documents required by Section 3.4;
(b) the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the proposed Credit Extension and/or of the Payment/Advance Form, as applicable, and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in this Agreement remain true, accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and
(c) Bank determines to its reasonable satisfaction that there has not been any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, nor any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.
3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item required to be delivered to Bank under Sections 3.1 and 3.2 of this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrower’s obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.
3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in Sections 3.1 and 3.2 of this Agreement, to obtain an Advance, Borrower (via an individual duly authorized by an Administrator) shall notify Bank (which notice shall be irrevocable) by electronic mail by 12:00 p.m. Pacific time on the Funding Date of the Advance. Such notice shall be made by Borrower through Bank’s online banking program, provided, however, if Borrower is not utilizing Bank’s online banking program, then such notice shall be in a written format acceptable to Bank that is executed by an Authorized Signer. Bank shall have received satisfactory evidence that the Board has approved that such Authorized Signer may provide such notices and request Advances. In connection with any such notification, Borrower must promptly deliver to Bank by electronic mail or through Bank’s online banking program such reports and information, including without limitation, a Recurring Revenue Statement, sales journals, cash receipts journals, accounts receivable aging reports, as Bank may request in its sole but reasonable discretion. Bank shall credit proceeds of an Advance to the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from an Authorized Signer or without instructions if the Advances are necessary to meet Obligations which have become due.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein and by any and all other security agreements, mortgages or other collateral granted to Bank by Borrower as security for the Obligations, now or in the future. The Collateral may also be subject to Permitted Liens.
If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower. In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then at least one hundred five percent (105.0%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one hundred ten percent (110.0%), of the Dollar Equivalent of the face amount of all such Letters of Credit plus, in each case, all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its business judgment), to secure all of the Obligations relating to such Letters of Credit.
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral. The Collateral may also be subject to Permitted Liens. If Borrower shall acquire a commercial tort claim having a value in excess of Five Hundred Thousand Dollars ($500,000.00), Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements and other similar forms, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral in violation of this Agreement, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the
Code. Such financing statements and other similar forms may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization, Authorization; Power and Authority. Borrower is duly organized, validly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any other jurisdiction in which the conduct of its business or its ownership of property and other assets or business which it is engaged in or propose to engage requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled “Perfection Certificate” (the “Perfection Certificate”). Borrower represents and warrants to Bank that, except, in each case, as may have been updated by a notification to Bank in accordance with Section 7.2, (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized or incorporated in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) except as set forth in the Perfection Certificate, Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete in all material respects (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent such updates result from actions, transactions, circumstances or events not prohibited by this Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrower’s organizational identification number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect and filings necessary to perfect Liens granted under the Loan Documents), or (v) conflict with, contravene, constitute a default or breach under, or result in or permit the termination or acceleration of, any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower’s business.
5.2 Collateral. Borrower has good title to, rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien under this Agreement and other Loan Documents, free and clear of any and all Liens except Permitted Liens. Borrower has no Collateral Accounts at or with any bank or financial institution other than Bank or Bank’s Affiliates except for the Collateral Accounts described in the Perfection Certificate delivered to Bank in connection herewith or which Borrower has taken such actions as are necessary to give Bank a perfected security interest therein and, pursuant and to the extent required by the terms of Section 6.8(b). The Accounts are bona fide, existing obligations of the Account Debtors.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate or as permitted pursuant to Section 7.2. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2.
All Inventory is in all material respects of good and marketable quality, free from material defects, subject to ordinary wear and tear in the ordinary course of business.
Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public and other non-material Intellectual Property licensed to Borrower, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate or as otherwise disclosed to Bank pursuant to Section 6.9(b). To Borrower’s knowledge, each Patent which it owns or purports to own and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s business has been judged invalid or unenforceable, in whole or in part. To Borrower’s knowledge, no claim has been made in writing that any part of the Intellectual Property which it owns or purports to own violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on Borrower’s business.
Except as noted on the Perfection Certificate, or as otherwise disclosed to Bank as required pursuant to Section 6.9(b), Borrower is not a party to, nor is it bound by, any Restricted License.
5.3 Customer Accounts. For any customer Account that generates Recurring Revenue, all statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing such customer Accounts are and shall be true and correct and all such invoices, instruments and other documents, and all of Borrower’s Books are genuine and in all respects what they purport to be. All sales and other transactions underlying or giving rise to each customer Account that generates Recurring Revenue shall comply in all material respects with all applicable laws and governmental rules and regulations. Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are customer Accounts that generate Recurring Revenue. To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all customer Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms, except as may be limited by applicable bankruptcy, reorganization, insolvency, moratorium, or similar laws affecting the enforcement of creditors’ rights generally. Borrower is the owner of and has the legal right to sell, transfer, assign and encumber each customer Account, and, there are no defenses, offsets, counterclaims or agreements for which the Account Debtor may claim any deduction or discount.
5.4 Litigation. Except as disclosed in the Perfection Certificate, there are no actions or proceedings pending or, to the knowledge of any Responsible Officer, threatened in writing by or against Borrower or any of its Subsidiaries that could reasonably be expected to result in damages payable by Borrower or any of its Subsidiaries, individually or in the aggregate, in an amount in excess of Five Hundred Thousand Dollars ($500,000.00).
5.5 Financial Statements; Financial Condition. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank by submission to the Financial Statement Repository or otherwise submitted to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations as of the dates and for the periods presented (except with respect to unaudited financial statements, subject to normal year-end adjustments and for the absence of footnotes). There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to the Financial Statement Repository or otherwise submitted to Bank.
5.6 Solvency. The fair salable value of Borrower’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of Borrower’s liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts generally (including trade debts) as they mature.
5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower (a) has complied in all material respects with all Requirements of Law, and (b) has not violated any Requirements of Law the violation of which could reasonably be expected to have a
material adverse effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership, or other ownership interest or other equity securities except for Permitted Investments.
5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except (a) to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor, or (b) if such taxes, assessments, deposits and contributions do not, individually or in the aggregate, exceed One Hundred Twenty-Five Thousand Dollars ($125,000.00).
To the extent Borrower defers payment of any contested taxes, Borrower shall (i) notify Bank in writing of the commencement of, and any material development in, the proceedings, and (ii) post bonds or take any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.” Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower in excess of One Hundred Twenty-Five Thousand Dollars ($125,000.00). Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions as working capital, for general corporate purposes, and to fund its general business requirements and not for personal, family, household or agricultural purposes.
5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in any report, certificate or written statement submitted to the Financial Statement Repository or otherwise submitted to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written reports, written certificates and written statements submitted to the Financial Statement Repository or otherwise submitted, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the reports, certificates or written statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer.
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance.
(a) Except as permitted by Section 7.3, maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, in all material respects, with all laws, ordinances and regulations to which it is subject.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property as provided hereunder. Pursuant to the terms of the previous sentence, Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank.
6.2 Financial Statements, Reports, Certificates. Provide Bank with the following by submitting to the Financial Statement Repository or otherwise submitting to Bank:
(a) within thirty (30) days after the end of each month, and with each request for an Advance, a recurring revenue statement (and any schedules related thereto and including any other information reasonably requested by Bank with respect to Borrower’s Recurring Revenue) including, without limitation, details of Borrower’s Recurring Revenue including, without limitation, total Recurring Revenue, total customers, new subscriptions in process, a SaaS metrics report, and the Advance Rate, together with a detailed accounts receivable ledger (the “Recurring Revenue Statement”);
(b) within thirty (30) days after the end of each month, (i) monthly accounts receivable agings, aged by invoice date, (ii) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (iii) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, general ledger, and detailed Account Debtor listing;
(c) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet and income statement covering Borrower’s and each of its Subsidiary’s operations for such month and in a form acceptable to Bank (the “Monthly Financial Statements”);
(d) within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a completed Compliance Statement, confirming that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants (if any) set forth in this Agreement and such other information as Bank may reasonably request, including, without limitation, a statement that at the end of such month there were no held checks;
(e) as soon as available, within the earlier of (A) thirty (30) days following Board approval and (ii) February 28th of each of Borrower’s fiscal years, and contemporaneously with any updates or amendments thereto, (A) annual operating budgets (including income statements, balance sheets and cash flow statements, by month), and (B) annual financial projections (on a quarterly basis), in each case as approved by the Board, together with any related business forecasts used in the preparation of such annual financial projections;
(f) as soon as available, and in any event within one hundred eighty (180) days following the end of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion (other than a qualification as to going-concern typical for venture backed companies similar to Borrower) on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank;
(g) at least annually, as soon as available, but no later than thirty (30) days after completion, a copy of Borrower’s 409A report;
(h) in the event that Borrower becomes subject to the reporting requirements under the Exchange Act, within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address; provided, however, Borrower shall promptly notify Bank in writing (which may be by electronic mail) of the posting of any such documents;
(i) within five (5) Business Days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders generally or to any holders of Subordinated Debt;
(j) prompt written notice of any changes to the beneficial ownership information set out in Section 14 of the Perfection Certificate. Borrower understands and acknowledges that Bank relies on such true, accurate and up-to-date beneficial ownership information to meet Bank’s regulatory obligations to obtain, verify and record information about the beneficial owners of its legal entity customers;
(k) prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Five Hundred Thousand Dollars ($500,000.00) or more; and
(l) promptly, from time to time, such other information regarding Borrower or compliance with the terms of any Loan Documents as reasonably requested by Bank.
Any submission by Borrower of a Recurring Revenue Statement, Compliance Statement or any other financial statement submitted to the Financial Statement Repository pursuant to this Section 6.2 or otherwise submitted to Bank shall be deemed to be a representation by Borrower that (a) as of the date of such Recurring Revenue Statement, Compliance Statement or other financial statement, the information and calculations set forth therein are true, accurate and correct, (b) as of the end of the compliance period set forth in such submission, Borrower is in complete compliance with all required covenants except as noted in such Recurring Revenue Statement, Compliance Statement or other financial statement, as applicable; (c) as of the date of such submission, no Events of Default have occurred or are continuing; (d) all representations and warranties other than any representations or warranties that are made as of a specific date in Section 5 remain true and correct in all material respects as of the date of such submission except as noted in such Recurring Revenue Statement, Compliance Statement or other financial statement, as applicable; (e) as of the date of such submission, Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9; and (f) as of the date of such submission, no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.
6.3 Accounts Receivable.
(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein. If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s reasonable request, originals) of all contracts, orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos.
(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims involving customer payment obligations relating to Accounts involving an amount, individually or in the aggregate, in excess of Three Hundred Fifty Thousand Dollars ($350,000.00). Borrower may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arm’s-length transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no Event of Default has occurred and is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the lesser of the Revolving Line or the Borrowing Base.
(c) Collection of Accounts. Borrower shall direct Account Debtors to deliver or transmit all proceeds of Accounts into a designated Borrower account at Bank (if such proceeds are in the form of a check), or such other “blocked account” (if such proceeds are in the form of a wire or ACH) as specified by Bank (either such account, the “Cash Collateral Account”). Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of Accounts to the Cash Collateral Account. Subject to Bank’s right to maintain a reserve pursuant to Section 6.3(d), all amounts received in the Cash Collateral Account shall be applied to immediately reduce the Obligations under the Revolving Line (unless Bank, in its sole discretion, at times when an Event of Default exists, elects not to so apply such amounts) with any excess to be transferred to Borrower’s operating account with Bank. Borrower hereby authorizes Bank to transfer to the Cash Collateral Account any amounts that Bank reasonably determines are proceeds of the Accounts (provided that Bank is under no obligation to do so and this allowance shall in no event relieve Borrower of its obligations hereunder).
(d) Reserves. Notwithstanding any terms in this Agreement to the contrary, at times when an Event of Default exists, Bank may hold any proceeds of the Accounts and any amounts in the Cash Collateral Account that are not applied to the Obligations pursuant to Section 6.3(c) above as a reserve to be applied to any Obligations regardless of whether such Obligations are then due and payable.
(e) Returns. Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall hold the returned Inventory in trust for Bank, and immediately notify Bank of the return of the Inventory.
(f) Verifications; Confirmations; Credit Quality; Notifications. Bank may, from time to time, (i) verify and confirm directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, either in the name of Borrower or Bank or such other name as Bank may choose, and notify any Account Debtor of Bank’s security interest in such Account and/or (ii) conduct a credit check of any Account Debtor to approve any such Account Debtor’s credit. Notwithstanding the foregoing, while no Event of Default has occurred and is continuing, Bank will notify and consult with Borrower prior to making direct contact with an Account Debtor.
(g) No Liability. Bank shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be responsible for any of Borrower’s obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence or willful misconduct.
6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations (a) prior to an
Event of Default, pursuant to the terms of Section 6.3(c) hereof, and (b) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in good faith in an arm’s length transaction for an aggregate purchase price of Two Hundred Thousand Dollars ($200,000.00) or less (for all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower’s other funds or property, but will hold such proceeds separate and apart from such other funds and property and in an express trust for Bank. Nothing in this Section 6.4 limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.
6.5 Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.
6.6 Access to Collateral; Books and Records. At reasonable times, on three (3) Business Days’ notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrower’s Books. The foregoing inspections and audits shall be conducted no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall determine is necessary. The foregoing inspections and audits shall be conducted at Borrower’s expense and the charge therefor shall be One Thousand Dollars ($1,000.00) per person per day (or such higher amount as shall represent Bank’s then-current standard charge for the same), commencing as of the date on which such Person or Persons arrive on Borrower’s premises, plus reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an audit more than eight (8) days in advance, and Borrower cancels or seeks to or reschedules the audit with less than eight (8) days written notice to Bank, then (without limiting any of Bank’s rights or remedies) Borrower shall pay Bank a fee of Two Thousand Dollars ($2,000.00), if Bank requests such fee, plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.
6.7 Insurance.
(a) Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Bank may reasonably request. Insurance policies shall be in a form, with financially sound and reputable insurance companies that are not Affiliates of Borrower, and in amounts standard for companies in Borrower’s industry and location and that are reasonably satisfactory to Bank. All property policies shall have a lender’s loss payable endorsement showing Bank as the sole lender loss payee. All liability policies shall show, or have endorsements showing, Bank as an additional insured. Bank shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral.
(b) Ensure that proceeds payable under any property policy are, at Bank’s option, payable to Bank on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to Two Hundred Fifty Thousand Dollars ($250,000.00) individually, and Five Hundred Thousand Dollars ($500,000.00) in the aggregate for all losses under all casualty policies in any one (1) year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Bank has been granted a first priority security interest to the extent the destroyed or damaged property consisted of Collateral, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Bank, be payable to Bank on account of the Obligations.
(c) At Bank’s request, Borrower shall deliver certified copies of insurance policies and evidence of all premium payments. Each provider of any such insurance required under this Section 6.7 shall agree,
by endorsement upon the policy or policies issued by it or by independent instruments furnished to Bank, that it will give Bank thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled. If Borrower fails to obtain insurance as required under this Section 6.7 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.7, and take any action under the policies Bank deems prudent.
6.8 Accounts.
(a) Maintain its and its Subsidiaries’ primary operating accounts, the Cash Collateral Account and excess cash with Bank and Bank’s Affiliates, provided that accounts in the name of Borrower maintained with Bank and Bank’s Affiliates shall represent at least seventy-five percent (75.0%) of the aggregate Dollar value of Borrower’s and such Subsidiaries’ accounts at all financial institutions (excluding accounts maintained in Israel, provided that, for each of Borrower and its Subsidiaries, the aggregate amount of funds in all such accounts maintained in the name of a particular entity do not at any time exceed three (3) months of current, ordinary and necessary operating expenses for such entity). In addition, Borrower shall conduct any new letter of credit banking in the United States with Bank.
(b) In addition to and without limiting the restrictions in (a), Borrower shall provide Bank five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution other than Bank or Bank’s Affiliates. Borrower shall indicate in the Compliance Statement provided to Bank in accordance with Section 6.2(d) above any deposit or securities account it holds at or with any bank or financial institution other than Bank or Bank’s Affiliates and the aggregate value of deposits and/or securities in any such account. In addition, (i) for each account that Borrower at any time opens or maintains in the United States (other than accounts at Bank), Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any such Collateral Account is opened or maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder, which Control Agreement may not be terminated without the prior written consent of Bank and (ii) for each new account that Borrower at any time opens or maintains outside of the United States (including, without limitation, accounts opened or maintained in the State of Israel) with any institution other than Bank, Borrower shall, at Bank’s request and option, pursuant to an agreement in form and substance acceptable to Bank, cause the depository bank or securities intermediary to (A) agree that such account is the collateral of Bank pursuant to the terms hereunder, and (B) sign an agreement, in a form and substance satisfactory to Bank, in which the depository bank or securities intermediary undertakes that upon notice from Bank that an Event of Default has occurred, Bank shall have alongside Borrower, signatory rights in all such accounts, such that no activities on behalf of Borrower shall occur without Bank’s signature and Bank shall have the right, without derogating from any other right of Bank, to inform the depository bank or securities intermediary of the cancellation of Borrower’s signature rights in such a manner that Bank shall have sole signatory rights in such accounts or take such other action(s) pursuant to applicable law as Bank reasonably determines is necessary in order to provide Bank with a first priority perfected security interest in and to, and a first ranking fixed charge over, such account and all monies or securities on deposit therein. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such.
6.9 Financial Covenants.
(a) Adjusted Quick Ratio. Maintain, to be tested as of the last day of each month, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, an Adjusted Quick Ratio of greater than or equal to 1.50 to 1.0.
(b) Minimum Revenue. Maintain, to be tested as of the last day of each month, calculated on a consolidated basis with respect to Borrower and its Subsidiaries and determined in accordance with GAAP, net revenue for each trailing twelve (12) month period ending on such date, of at least the following amounts:
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Trailing Twelve (12) Month Period Ending
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Minimum Net Revenue
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March 31, 2020
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$46,700,000.00
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April 30, 2020
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$48,700,000.00
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May 31, 2020
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$50,900,000.00
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June 30, 2020
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$52,200,000.00
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July 31, 2020
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$54,200,000.00
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August 31, 2020
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$56,200,000.00
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September 30, 2020
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$57,400,000.00
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October 31, 2020
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$59,100,000.00
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November 30, 2020
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$60,600,000.00
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December 31, 2020
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$60,900,000.00
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January 31, 2021
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$62,400,000.00
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With respect to each month ending after January 31, 2021, through and including the Revolving Line Maturity Date, the levels of minimum net revenue shall be set by Bank in its sole discretion after consultation with Borrower, based upon, among other factors, Borrower’s Board-approved operating plan and financial projections (which such operating plan and financial projections shall be acceptable to Bank in its sole discretion and such levels shall reflect year-over-year growth (with respect to the corresponding month in the immediately preceding calendar year) of at least fifteen percent (15.0%)) and Bank’s then current credit underwriting. With respect thereto:
(i) Borrower’s failure to agree in writing (which agreement shall be set forth in a written amendment to this Agreement) on or before February 28, 2021 to any minimum net revenue covenant levels proposed by Bank with respect to any period from February 1, 2021 through and including January 31, 2022 shall result in an immediate Event of Default for which there shall be no grace or cure period;
(ii) Borrower’s failure to agree in writing (which agreement shall be set forth in a written amendment to this Agreement) on or before February 28, 2022 to any minimum net revenue covenant levels proposed by Bank with respect to any period from February 1, 2022 through and including January 31, 2023 shall result in an immediate Event of Default for which there shall be no grace or cure period; and
(iii) Borrower’s failure to agree in writing (which agreement shall be set forth in a written amendment to this Agreement) on or before February 28, 2023 to any minimum net revenue covenant levels proposed by Bank with respect to any period from February 1, 2023 through and including the Revolving Line Maturity Date shall result in an immediate Event of Default for which there shall be no grace or cure period.
6.10 Protection and Registration of Intellectual Property Rights.
(a) (i) Protect, defend and maintain the validity and enforceability of its Intellectual Property material to Borrower’s business; (ii) promptly advise Bank in writing of material infringements of which Borrower is aware or any other event that could reasonably be expected to materially and adversely affect the value of its Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent.
(b) Provide written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement and the other Loan Documents.
6.11 Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.
6.12 Online Banking.
(a) Utilize Bank’s online banking platform for all matters requested by Bank which shall include, without limitation (and without request by Bank for the following matters), uploading information pertaining to Accounts and Account Debtors, requesting approval for exceptions, requesting Credit Extensions, and uploading financial statements and other reports required to be delivered by this Agreement (including, without limitation, those described in Section 6.2 of this Agreement).
(b) Comply with the terms of Bank’s Online Banking Agreement as in effect from time to time and ensure that all persons utilizing Bank’s online banking platform are duly authorized to do so by an Administrator. Bank shall be entitled to assume the authenticity, accuracy and completeness of any information, instruction or request for a Credit Extension submitted via Bank’s online banking platform and to further assume that any submissions or requests made via Bank’s online banking platform have been duly authorized by an Administrator.
6.13 Further Assurances. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement. Deliver to Bank, within fifteen (15) days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.
6.14 Post-Closing Condition. Within thirty (30) days after the Effective Date, Borrower shall provide evidence satisfactory to Bank that the insurance policies and endorsements required by Section 6.7 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank’s prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (including, without limitation, pursuant to a Division) (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any
part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out, surplus or obsolete Equipment that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the ordinary course of business of Borrower; (c) consisting of Permitted Liens and Permitted Investments; (d) consisting of Borrower’s use or transfer of money or Cash Equivalents in the ordinary course of its business for the payment of ordinary course business expenses in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents; (e) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business and licenses that could not result in a legal transfer of title of the licensed property but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discrete geographical areas outside of the United States; and (f) of other immaterial assets (excluding Intellectual Property) in the ordinary course of business not otherwise permitted by this Section 7.1 not to exceed Two Hundred Thousand Dollars ($200,000.00) in the aggregate in any fiscal year.
7.2 Changes in Business, Management, Control, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in (and closely related businesses) by Borrower and such Subsidiary, as applicable, or other businesses reasonably related thereto; (b) liquidate or dissolve; (c) fail to provide notice to Bank of any Key Person departing from or ceasing to be employed by Borrower within ten (10) days after such Key Person’s departure from Borrower; or (d) permit or suffer any Change in Control.
Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Three Hundred Fifty Thousand Dollars ($350,000.00) in Borrower’s assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Three Hundred Fifty Thousand Dollars ($350,000.00) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization. If Borrower intends to add any new offices or business locations, including warehouses, containing in excess of Three Hundred Fifty Thousand Dollars ($350,000.00) of Borrower's assets or property, then Borrower will first receive the written consent of Bank, and the landlord of any such new offices or business locations, including warehouses, shall execute and deliver a landlord consent in form and substance satisfactory to Bank. If Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Three Hundred Fifty Thousand Dollars ($350,000.00) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Bank.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person (including, without limitation, by the formation of any Subsidiary or pursuant to a Division). A Subsidiary (which is not a Borrower) may merge or consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein (provided that the Collateral may also be subject to Permitted Liens), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s Intellectual Property, except (i) as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein and (ii) customary non-assignment or negative pledge arrangements in contracts, provided that such restrictions do not prohibit the granting of a security
interest in Borrower’s or any Subsidiary’s Intellectual Property in favor of Bank and provided further that such contracts do not grant a security interest in Borrower’s or any Subsidiary’s Intellectual Property.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof.
7.7 Distributions; Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock provided that Borrower may (i) convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) pay dividends solely in common stock, and (iii) repurchase the stock of former employees, directors or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of any such repurchase and would not exist after giving effect to any such repurchase, provided that the aggregate amount of all such repurchases does not exceed One Million Five Hundred Thousand Dollars ($1,500,000.00) per fiscal year; or (b) directly or indirectly make any Investment (including, without limitation, by the formation of any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for (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, (ii) reasonable and customary compensation arrangement approved by Borrower’s Board, (iii) bona fide equity and bridge financings with venture capital or private equity investors, so long as any such bridge financing shall constitute Subordinated Debt, and (iv) Permitted Investments and Permitted Indebtedness.
7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Obligations owed to Bank, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject.
7.10 Compliance. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension when due, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date). During the cure period, the failure to make or pay any payment specified under clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.12 or 6.14 or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure periods provided under this section shall not apply to financial covenants or any other covenants set forth in clause (a) above;
8.3 Investor Abandonment. Bank determines in its good faith business judgment that there is a lack of Investor Support, or Investor Support ceases to be provided to Borrower for any reason;
8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary), or (ii) a notice of lien or levy is filed against any of Borrower’s assets by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or
(b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting all or any material part of its business;
8.5 Insolvency. (a) Borrower or any of its Subsidiaries is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent as determined pursuant to Section 5.6; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and is not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Three Hundred Fifty Thousand Dollars ($350,000.00); or (b) any breach or default by Borrower or Guarantor, the result of which could reasonably be expected to have a material adverse effect on Borrower’s or any Guarantor’s business;
8.7 Judgments; Penalties. One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount, individually or in the aggregate, of at least Three Hundred Fifty Thousand Dollars ($350,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower by any Governmental Authority, and the same are not, within ten (10) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or after execution thereof, stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the satisfaction, payment, discharge, stay, or bonding of such fine, penalty, judgment, order or decree);
8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank
or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement or any applicable subordination or intercreditor agreement;
8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any guaranty of the Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.6, 8.7, or 8.8 of this Agreement occurs with respect to any Guarantor, (d) the liquidation, winding up, or termination of existence of any Guarantor; or (e) a material impairment in the perfection or priority of Bank’s Lien in the collateral provided by Guarantor or in the value of such collateral; or
8.11 Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could reasonably be expected to have, a material adverse effect on Borrower’s business or operations, or (ii) materially adversely affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.
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, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;
(c) demand that Borrower (i) deposit cash with Bank in an amount equal to at least (A) one hundred five percent (105.0%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in Dollars remaining undrawn, and (B) one hundred ten percent (110.0%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in a Foreign Currency remaining undrawn (plus, in each case, all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit;
(d) terminate any FX Contracts;
(e) verify the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, and notify any Person owing Borrower money of Bank’s security interest in such funds. Borrower shall collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the Account Debtor, with proper endorsements for deposit;
(f) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in and charges over the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest or charges and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) amount held by Bank owing to or for the credit or the account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit;
(i) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(j) demand and receive possession of Borrower’s Books; and
(k) exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof) or any other applicable law.
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable following the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks, payment instruments, or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) demand, collect, sue, and give releases to any Account Debtor for monies due, settle and adjust disputes and claims about the Accounts directly with Account Debtors, and compromise, prosecute, or defend any action, claim, case, or proceeding about any Collateral (including filing a claim or voting a claim in any bankruptcy case in Bank’s or Borrower’s name, as Bank chooses); (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, or other claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations) have been satisfied in full and the Loan Documents have been terminated. Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and the Loan Documents have been terminated.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.
9.4 Application of Payments and Proceeds. If an Event of Default has occurred and is continuing (or at any time on the terms set forth in Section 6.3(c), regardless of whether an Event of Default exists) Bank shall have the right to apply in any order any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations. Bank shall pay any surplus to Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, directly or indirectly, enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given. Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or any other Loan Document or other remedy available at law or in equity, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.
9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.
10 NOTICES
All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below.
Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.
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If to Borrower:
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with a copy to:
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11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
Except as otherwise expressly provided in any of the Loan Documents, California law governs the Loan Documents without regard to principles of conflicts of law. Except to the extent otherwise set forth in the Loan Documents, Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code
of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure Sections 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure Section 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
This Section 11 shall survive the termination of this Agreement.
12 GENERAL PROVISIONS
12.1 Termination Prior to Maturity Date; Survival. All covenants, representations and warranties made in this Agreement shall continue in full force until this Agreement has terminated pursuant to its terms and all Obligations have been satisfied. So long as Borrower has satisfied the Obligations (other than inchoate indemnity obligations, and any other obligations which, by their terms, are to survive the termination of this Agreement, and any Obligations under Bank Services Agreements that are cash collateralized in accordance with Section 4.1 of this Agreement), this Agreement may be terminated prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Bank. Those obligations that are expressly specified in this Agreement as surviving this Agreement’s termination shall continue to survive notwithstanding this Agreement’s termination.
12.2 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents (other than the Warrant, as to which assignment, transfer and other such actions are governed by the terms thereof).
12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against: (i) all obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses) contemplated by the Loan Documents, except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.
This Section 12.3 shall survive until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.
12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.5 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.6 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties so long as Bank provides Borrower with written notice of such correction and allows Borrower at least ten (10) days to object to such correction. In the event of such objection, such correction shall not be made except by an amendment signed by both Bank and Borrower.
12.7 Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.
12.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.9 Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, “Bank Entities”) provided that such Subsidiaries or Affiliates are bound by similar or the same confidentiality provisions set forth in this Section 12.9; (b) subject to an agreement containing provisions substantially the same as those of this Section 12.9, to any assignee or purchaser of or participant in, or any prospective assignee or purchaser of or participant in, any of Bank’s rights and obligations under this Agreement; (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain (other than as a result of its disclosure by Bank in violation of this Agreement) after disclosure to Bank through no fault of Bank; or (ii) disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.
Bank Entities may use anonymous forms of confidential information for aggregate datasets, for analyses or reporting, and for any other uses not expressly prohibited in writing by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
12.10 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.
12.11 Electronic Execution of Documents. The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
12.12 Right of Setoff. Borrower hereby grants to Bank a Lien, security interest and a right of setoff as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a subsidiary of Bank) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may setoff the same or any part thereof and apply the same to any liability or Obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.13 Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
12.14 Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.
12.15 Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.
12.16 Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.
12.17 Effect of Amendment and Restatement. This Agreement is intended to and does completely amend and restate, without novation, the Prior Agreement, which shall be terminated on the Effective Date of this Agreement. Notwithstanding the foregoing, all security interests granted by Borrower under the Prior Agreement are hereby confirmed and ratified and shall continue to secure all Obligations under this Agreement. Without limiting the foregoing, any warrant(s) to purchase stock (including, without limitation, the Warrant) and all other loan documents issued in connection with the Prior Agreement (to the extent not yet exercised, terminated or amended and restated in connection with this Agreement) shall remain in full force and effect.
13 DEFINITIONS
13.1 Definitions. As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative. As used in this Agreement, the following capitalized terms have the following meanings:
“Account” is, as to any Person, any “account” of such Person as “account” is defined in the Code or any other applicable law with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to such Person.
“Account Debtor” is any “account debtor” as defined in the Code or any other applicable law with such additions to such term as may hereafter be made.
“Administrator” is an individual that is named:
(a) as an “Administrator” in the “SVB Online Services” form completed by Borrower with the authority to determine who will be authorized to use SVB Online Services (as defined in Bank’s Online Banking Agreement as in effect from time to time) on behalf of Borrower; and
(b) as an Authorized Signer of Borrower in an approval by the Board.
“Advance” or “Advances” means a revolving credit loan (or revolving credit loans) under the Revolving Line.
“Advance Rate” is (a) at all times on or prior to the first (1st) anniversary of the Effective Date, six hundred percent (600.0%) and (b) at all times after the first (1st) anniversary of the Effective Date, five hundred percent (500.0%).
“Adjusted Quick Ratio” is, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, the ratio of (a) Quick Assets to (b) Current Liabilities minus the current portion of Deferred Revenue.
“Affiliate” is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“ASU” is defined in Section 1.
“Authorized Signer” is any individual listed in Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of Borrower.
“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus (b) the outstanding principal balance of any Advances.
“Bank” is defined in the preamble hereof.
“Bank Entities” is defined in Section 12.9.
“Bank Expenses” are all documented audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower or any Guarantor.
“Bank Services” are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “Bank Services Agreement”).
“Bank Services Agreement” is defined in the definition of Bank Services.
“Board” is Borrower’s board of directors.
“Borrower” is defined in the preamble hereof.
“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Borrowing Base” is the product of (a) Borrower’s Recurring Revenue for the most recent month, as determined by Bank from Borrower’s most recent Recurring Revenue Statement and financial reporting multiplied by (b) the Advance Rate.
“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s board of directors (and, if required under the terms of such Person’s Operating Documents, stockholders) and
delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary on behalf of such Person certifying (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that set forth as a part of or attached as an exhibit to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed, except if any determination of a “Business Day” shall relate to an FX Contract, the term “Business Day” shall mean a day on which dealings are carried on in the country of settlement of the Foreign Currency.
“Cash Collateral Account” is defined in Section 6.3(c).
“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.
“Change in Control” means (a) at any time, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of forty-nine percent (49.0%) or more of the ordinary voting power for the election of directors of Borrower (determined on a fully diluted basis) other than by the sale of Borrower’s equity securities in a public offering or to venture capital or private equity investors so long as Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction; (b) during any period of twelve (12) consecutive months, a majority of the members of the board of directors or other equivalent governing body of Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (c) at any time, Borrower shall cease to own and control, of record and beneficially, directly or indirectly, one hundred percent (100.0%) of each class of outstanding capital stock of each Subsidiary of Borrower (except for directors’ qualifying shares or other similar shares as required under applicable law) free and clear of all Liens (except Collateral subject to Permitted Liens, including Liens created by this Agreement).
“Claims” is defined in Section 12.3.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.
“Commodity Account” is any “commodity account” as defined in the Code or any other applicable law with such additions to such term as may hereafter be made.
“Compliance Statement” is that certain statement in the form attached hereto as Exhibit B.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
“Control Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code or any other applicable law) over such Deposit Account, Securities Account, or Commodity Account.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
“Credit Extension” is any Advance, any Overadvance, or any other extension of credit under the Loan Documents by Bank for Borrower’s benefit.
“Currency” is coined money and such other banknotes or other paper money as are authorized by law and circulate as a medium of exchange.
“Current Liabilities” are, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, (a) all obligations and liabilities of Borrower and its Subsidiaries to Bank, plus (b) without duplication of (a), the aggregate amount of Borrower’s Total Liabilities that mature within one (1) year.
“Default Rate” is defined in Section 2.4(b).
“Deferred Revenue” is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue.
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
“Designated Deposit Account” is the account number ending 850 (last three digits) maintained by Borrower with Bank (provided, however, if no such account number is included, then the Designated Deposit Account shall be any deposit account of Borrower maintained with Bank as chosen by Bank).
“Division” means, in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including, without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability
Company Act for limited liability companies formed under Delaware law, or any analogous action taken pursuant to any other applicable law with respect to any corporation, limited liability company, partnership or other entity.
“Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.
“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.
“Effective Date” is defined in the preamble hereof.
“Equipment” is all “equipment” as defined in the Code or any other applicable law with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.
“Event of Default” is defined in Section 8.
“Exchange Act” is the Securities Exchange Act of 1934, as amended.
“Excluded Taxes” shall mean (i) taxes imposed on or with respect to Bank’s overall net or gross income or gross receipts, or franchise taxes imposed in lieu of the foregoing, by any jurisdiction in which Bank is resident, has a branch or otherwise has any other former or present connection (other than any connection solely attributable to this Agreement), (ii) branch profits taxes, (iii) any withholding taxes imposed on Bank with respect to the payments it is entitled to receive hereunder pursuant to laws in effect on the date it becomes a party to this Agreement, and (iv) any U.S. federal withholding taxes imposed under FATCA.
“FATCA” means Section 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code, and any applicable intergovernmental agreement with respect thereto and applicable official implementing guidance thereunder.
“Financial Statement Repository” is NorcalEnterpriseReporting@svb.com or such other means of collecting information approved and designated by Bank after providing notice thereof to Borrower from time to time.
“First Amendment to Pledge Agreement” is defined in the definition of Pledge Agreement.
“Foreign Currency” means lawful money of a country other than the United States.
“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
“FRB Letter of Credit” is defined in clause (h) of the definition of Permitted Indebtedness.
“Funding Date” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
“FX Contract” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.
“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
“General Intangibles” is all “general intangibles” as defined in the Code or any other applicable law in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Guarantor” is any Person (if any) providing a guaranty of the Obligations in favor of Bank on behalf of Borrower.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations (as such term is understood under GAAP as in effect on the date of this Agreement), and (d) Contingent Obligations.
“Indemnified Person” is defined in Section 12.3.
“Initial Audit” is Bank’s inspection of Borrower’s Accounts, the Collateral, and Borrower’s Books, which inspection Bank confirms has occurred and the results of which are satisfactory to Bank in its sole and absolute discretion.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Intellectual Property” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how and operating manuals;
(c) any and all source code;
(d) any and all design rights which may be available to such Person;
(e) any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and
(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“Inventory” is all “inventory” as defined in the Code or any other applicable law in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.
“Investor Support” means it is the clear intention of Borrower’s investors to continue to fund Borrower in the amounts and timeframe necessary to enable Borrower to satisfy the Obligations as they become due and payable.
“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Tomer Weingarten as of the Effective Date and (b) Chief Financial Officer, who is Robert Parker as of the Effective Date.
“Letter of Credit” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application, guarantee, indemnity, or similar agreement.
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the Pledge Agreement, the Warrant, the Perfection Certificate, any Control Agreement, any Bank Services Agreement, any other stock pledge agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit of Bank, all as amended, restated, or otherwise modified.
“Monthly Financial Statements” is defined in Section 6.2(c).
“Obligations” are Borrower’s obligations to pay when due any debts, principal, interest, fees, Bank Expenses, the Unused Revolving Line Facility Fee, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents (other than the Warrant), or otherwise, including, without limitation, all obligations relating to Bank Services and interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents (other than the Warrant).
“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
“Overadvance” is defined in Section 2.3.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Payment Date” is the last calendar day of each month.
“Perfection Certificate” is defined in Section 5.1.
“Permitted Indebtedness” is:
(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;
(b) Indebtedness existing on the Effective Date which is shown on the Perfection Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(f) Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of “Permitted Liens” hereunder;
(g) unsecured Indebtedness in connection with corporate credit cards and letters of credit (other than the FRB Letter of Credit) not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate at any time;
(h) Indebtedness in connection with that certain letter of credit with First Republic Bank not to exceed Nine Hundred Forty-Five Thousand Dollars ($945,000.00) at any time (the “FRB Letter of Credit”);
(i) other unsecured Indebtedness not otherwise permitted by Section 7.4 not exceeding Two Hundred Fifty Thousand Dollars ($250,000.00), in the aggregate outstanding at any time; and
(j) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (i) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.
“Permitted Investments” are:
(a) Investments (including, without limitation, Subsidiaries) existing on the Effective Date which are shown on the Perfection Certificate;
(b) Investments consisting of Cash Equivalents;
(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;
(d) Investments consisting of deposit accounts (but only to the extent that Borrower is permitted to maintain such accounts pursuant to Section 6.8 of this Agreement) in which Bank has a first priority perfected security interest to the extent required pursuant to Section 6.8 of this Agreement;
(e) Investments accepted in connection with Transfers permitted by Section 7.1;
(f) Investments (i) by a Borrower in another Borrower or a secured Guarantor, (ii) by Borrower in its Subsidiaries not to exceed Thirty Million Dollars ($30,000,000.00) in the aggregate in any fiscal year for ordinary, necessary and current operating expenses; provided that an Event of Default does not exist at the time of any such Investment and would not exist after giving effect to any such Investment, and (iii) by Subsidiaries (which are not a Borrower or Guarantor) in other Subsidiaries;
(g) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by the Board;
(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 business;
(i) other Investments not otherwise permitted by Section 7.7 in an amount not exceeding Three Hundred Fifty Thousand Dollars ($350,000.00) in the aggregate outstanding at any time; and
(j) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (j) shall not apply to Investments of Borrower in any Subsidiary.
“Permitted Liens” are:
(a) Liens existing on the Effective Date which are shown on the Perfection Certificate or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on Borrower’s Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Fifty Thousand Dollars ($50,000.00) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;
(d) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed One Hundred Thousand Dollars ($100,000.00) and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f) leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non- exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;
(g) non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business, and licenses of Intellectual Property that could not result in a legal transfer of title of the licensed property that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States;
(h) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
(i) Liens in favor of other financial institutions arising in connection with Borrower’s deposit and/or securities accounts held at such institutions, provided that (i) Bank has a first priority perfected security interest in the amounts held in such deposit and/or securities accounts and (ii) such accounts are permitted to be maintained pursuant to Section 6.8 of this Agreement;
(j) Liens consisting of cash collateral held in Borrower’s account ending in 370 maintained at First Republic Bank securing the FRB Letter of Credit;
(k) deposits to secure the performance of bids, trade contracts (other than for borrowed money), contracts for the purchase of property, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case, incurred in the ordinary course of business and not
representing an obligation for borrowed money, in an amount not to exceed Three Hundred Fifty Thousand Dollars ($350,000.00) in the aggregate; and
(l) Liens incurred in the extension, renewal or refinancing of the Indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase.
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
“Pledge Agreement” means that certain Pledge Agreement by and between Borrower and Bank dated as of December 31, 2018, as amended by that certain First Amendment to Pledge Agreement by and between Borrower and Bank dated as of the Effective Date (the “First Amendment to Pledge Agreement”), as may be amended, modified, supplemented or restated from time to time.
“Prime Rate” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement; and provided further that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors); provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Prior Agreement” is defined in the preamble hereof.
“Prior Obligations” is defined in Section 2.2(a).
“Quick Assets” is, on any date, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, Borrower’s and its Subsidiaries’ unrestricted and unencumbered cash and Cash Equivalents maintained with Bank (or that is otherwise maintained in accounts subject to a Control Agreement in favor of Bank, provided that (i) Bank has a first priority perfected security interest in the amounts held in such accounts and (ii) such accounts are permitted to be maintained pursuant to Section 6.8(b) of this Agreement), plus net billed accounts receivable, determined according to GAAP.
“Recurring Revenue” is the difference of (a) Borrower’s committed recurring revenue determined in accordance with GAAP attributable to services, software licenses and any other recurring services earned during the prior month pursuant to a binding, written agreements which arise in the ordinary course of Borrower’s business that (i) meet all of Borrower’s representations and warranties described in Section 5.3 and (ii) are or may be due and owing from Account Debtors deemed acceptable to Bank in its sole discretion minus (b) any discounts, credits, reserves for bad debt, customer adjustments, or other offsets; provided that Bank reserves the right at any time and from time to time to exclude and/or remove any Account, or portion thereof, from the definition of Recurring Revenue, in its sole discretion.
“Recurring Revenue Statement” is defined in Section 6.2(a).
“Registered Organization” is any “registered organization” as defined in the Code or any other applicable law with such additions to such term as may hereafter be made.
“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Reserves” means, as of any date of determination, such amounts as Bank may, after three (3) days prior notice to and consultation with Borrower, from time to time establish and revise in its good faith business judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Bank in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Bank's reasonable belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Bank determines constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.
“Restricted License” is any material license or other material agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with Bank’s right to sell any Collateral.
“Revolving Line” is an aggregate principal amount equal to Forty-Five Million Dollars ($45,000,000.00).
“Revolving Line Maturity Date” May 28, 2023.
“SEC” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
“Securities Account” is any “securities account” as defined in the Code or any other applicable law with such additions to such term as may hereafter be made.
“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor.
“Total Liabilities” is, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
“Transfer” is defined in Section 7.1.
“Unused Revolving Line Facility Fee” is defined in Section 2.5(b).
“Warrant” means, collectively, (a) that certain warrant to purchase stock dated as of the May 8, 2018 between Borrower and Bank and (b) that certain warrant to purchase stock dated as of the May 8, 2018 between
Borrower and WestRiver Mezzanine Loans – Loan Pool V, LLC, in each case, as has been and may be amended, modified, supplemented and/or restated from time to time.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
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BORROWER:
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SENTINEL LABS, INC.
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By
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/s/ Robert Parker
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Name: Robert Parker
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Title: Chief Financial Officer
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BANK:
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SILICON VALLEY BANK
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By
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/s/ Garret Jensen
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Name: Garret Jensen
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Title: Vice President
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Signature Page to Loan and Security Agreement
EXHIBIT A - COLLATERAL DESCRIPTION
The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as provided below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include (i) any rights held under a license that are not assignable by their terms without the consent of the licensor thereof (but only to the extent such restriction on assignment is enforceable under applicable law), (ii) any interest of Borrower as a lessee or sublessee under a real property lease, (iii) any interest of Borrower as a lessee under an Equipment lease if Borrower is prohibited by the terms of such lease from granting a security interest in such lease or under which such an assignment or Lien would cause a default to occur under such lease; provided, however, that upon termination of such prohibition, such interest shall immediately become Collateral without any action by Borrower or Bank, (iv) with respect to stock in Foreign Subsidiaries, more than sixty-five percent (65.0%) of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Borrower of any Foreign Subsidiary which shares entitle the holder thereof to vote for directors or any other matter, or (v) any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property.
EXHIBIT B
COMPLIANCE STATEMENT
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TO:
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SILICON VALLEY BANK
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Date:
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FROM:
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SENTINEL LABS, INC. (“Borrower”)
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Under the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrower and Bank (the “Agreement”), Borrower is in complete compliance for the period ending __________ with all required covenants except as noted below. Attached are the required documents evidencing such compliance, setting forth calculations prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes (and except with respect to unaudited financials for the absence of footnotes and subject to normal year-end adjustments). Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.
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Reporting Covenants
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Required
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Complies
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Monthly consolidated and consolidating financial statements with Compliance Statement
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Monthly within 30 days
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Yes No
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Annual financial statements (CPA Audited)
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FYE within 180 days
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Yes No
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10-Q, 10-K and 8-K
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Within 5 days after filing with
SEC
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Yes No
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A/R & A/P Agings, detailed Account Debtor listing
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Monthly within 30 days
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Yes No
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Recurring Revenue Statement
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(i) with each request for an Advance and (ii) monthly within 30 days
|
Yes No
|
|
Board approved projections
|
Earlier of 30 days after Board approval or February 28th and as amended/updated
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Yes No
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409A Reports
|
At least annually 30 days following completion
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Yes No
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Financial Covenant
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Required
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Actual
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Complies
|
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Maintain as indicated:
|
|
|
|
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Adjusted Quick Ratio
(tested monthly)
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≥ 1.50:1.0
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_____:1.0
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Yes No
|
|
Minimum Revenue
(tested monthly, on a trailing 12 month basis)
|
*
|
*
|
Yes No
|
*As set forth in Section 6.9(b)
The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Compliance Statement.
The following are the exceptions with respect to the statements above: (If no exceptions exist, state “No exceptions to note.”)
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C
JOINDER AND FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
JOINDER AND FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This Joinder and First Amendment to Loan and Security Agreement (this “Amendment”) is entered into this 11th day of March, 2021, by and among (a) SILICON VALLEY BANK, a California corporation (“Bank”), (b) SENTINEL LABS, INC., a Delaware corporation, whose address is ___________________________________________ (“Existing Borrower”), and (c) SCALYR, INC., a Delaware corporation, whose address is _____________________________ ______________ (“New Borrower”; and together with Existing Borrower, jointly and severally, individually and collectively, the “Borrower”).
RECITALS
A. Existing Borrower and Bank have entered into that certain Amended and Restated Loan and Security Agreement dated as of May 28, 2020 (as the same may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).
B. Bank extended credit to Existing Borrower for the purposes permitted in the Loan Agreement.
C. Existing Borrower has requested that Bank amend the Loan Agreement to (i) add New Borrower to the Loan Agreement, and (ii) make certain other revisions to the Loan Agreement as more fully set forth herein.
D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:
1.Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.
2.Joinder to Loan Agreement. The undersigned, New Borrower, hereby joins the Loan Agreement and each of the Loan Agreement and Loan Documents, as if it were originally named a “Borrower” therein. Without limiting the generality of the preceding sentence, New Borrower agrees that it will be jointly and severally liable, together with Existing Borrower, for the payment and performance of all obligations and liabilities of Borrower under the Loan Agreement, including, without limitation, the Obligations. Each Borrower hereby appoints the other as agent for the other for all purposes hereunder. Each Borrower hereunder shall be obligated to repay all Credit Extensions made pursuant to the Loan Agreement, regardless of which Borrower actually receives said Credit Extension, as if each Borrower hereunder directly received all Credit Extensions.
3.Subrogation and Similar Rights. Each Borrower waives any suretyship defenses available to it under the Code or any other applicable law. Each Borrower waives any right to require Bank to: (i) proceed against either Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against either Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability. Notwithstanding any other provision of this Amendment, the Loan Agreement or other Loan Documents, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Bank under the Loan Agreement) to seek contribution, indemnification or any other form of reimbursement from the other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with the Loan Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by either Borrower with respect to the Obligations in connection with the Loan Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.
4.Grant of Security Interest. To secure the prompt payment and performance of all of the Obligations, New Borrower hereby grants to Bank a continuing lien upon and security interest in all of New Borrower’s now existing or hereafter arising rights and interests in such assets of New Borrower as are consistent with the description of the Collateral set forth on Exhibit A of the Loan Agreement (as if such Collateral were deemed to pertain to the assets of New Borrower), whether now owned or existing or hereafter created, acquired, or arising, and wherever located, including, without limitation, all of New Borrower’s assets (excluding Intellectual Property), and all New Borrower’s books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing. New Borrower further covenants and agrees that by its execution hereof it shall provide all such information, complete all such forms, and take all such actions, and enter into all such agreements, in form and substance reasonably satisfactory to Bank that are reasonably deemed necessary by Bank in order to grant a valid, perfected first priority security interest to Bank in the Collateral. New Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions in order to perfect or protect Bank's interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of the Bank under the Code. Such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank's discretion.
5.Representations and Warranties. New Borrower hereby represents and warrants to Bank that all representations and warranties set forth in Section 5 of the Loan Agreement
made on the part of Existing Borrower are true and correct on the date hereof with respect to New Borrower, with the same force and effect as if New Borrower were named as “Borrower” in the Loan Documents in addition to Existing Borrower.
6.Delivery of Documents. New Borrower hereby agrees that the following documents shall be delivered to Bank prior to or contemporaneously with delivery of this Amendment, each in form and substance satisfactory to Bank:
A.duly executed signatures to this Amendment;
B.a duly executed secretary’s corporate borrowing certificate for New Borrower, together with the duly executed signatures thereto;
C.duly executed signatures to the Control Agreement(s), if any;
D.the Operating Documents and long-form good standing certificate of New Borrower certified by the Secretary of State of Delaware as of a date no earlier than thirty (30) days prior to the date hereof;
E.duly executed signatures to the completed Borrowing Resolutions for New Borrower;
F.certified copies, dated as of a recent date, of financing statement searches, as Bank may request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
G.the Perfection Certificate of New Borrower, together with the duly executed signatures thereto; and
H.such other documents as Bank may reasonably request.
7.Amendments to Loan Agreement.
7.1Section 9.8 (Borrower Liability). The Loan Agreement shall be amended by inserting the following new Section 9.8 to appear immediately following Section 9.7 thereof:
“ 9.8 Borrower Liability. Each Borrower may, acting singly, request Credit Extensions hereunder. Each Borrower hereby appoints each other as agent for the other for all purposes hereunder, including with respect to requesting Credit Extensions hereunder. Each Borrower hereunder shall be jointly and severally obligated to repay all Credit Extensions made hereunder, regardless of which Borrower actually receives said Credit Extension, as if each Borrower hereunder directly received all Credit Extensions. Each Borrower waives (a) any
suretyship defenses available to it under the Code or any other applicable law, and (b) any right to require Bank to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has
against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability. Notwithstanding any other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 9.8 shall be null and void. If any payment is made to a Borrower in contravention of this Section 9.8, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.”
7.2Section 14 (Definitions). Section 14.1 is amended by inserting the following new terms and their respective definitions to appear alphabetically therein:
“ “Scalyr” means Scalyr, Inc., a Delaware corporation.”
“ “Sentinel Labs” means Sentinel Labs, Inc., a Delaware corporation.”
7.3Section 14 (Definitions). The following terms and their respective definitions set forth in Section 14.1 is amended in its entirety and replaced with the following:
“ “Designated Deposit Account” is (a) with respect to Sentinel Labs, the account number ending 850 (last three digits), maintained by Sentinel Labs with Bank (provided, however, if no such account number is included, then the Designated Deposit Account shall be any deposit account of Sentinel Labs maintained with Bank as chosen by Bank) and (b) with respect to Scalyr, the account number ending 463 (last three digits), maintained by Scalyr with Bank (provided, however, if no such account number is included, then the Designated Deposit Account shall be any deposit account of Scalyr maintained with Bank as chosen by Bank).”
7.4Post-Closing Deliverables. On or before April 10, 2021, Borrower shall deliver to Bank evidence reasonably satisfactory to Bank that the insurance policies and endorsements required by Section 6.7 of the Loan Agreement are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank.
7.5Exhibit B (Compliance Statement). The Compliance Statement appearing as Exhibit B to the Loan Agreement is deleted in its entirety and replaced with the Compliance Statement attached as Schedule 1 attached hereto.
8.Limitation of Amendments.
8.1The amendments set forth in Section 7, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.
8.2This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.
9.Reserved.
10.Perfection Certificate. New Borrower has delivered a Perfection Certificate in connection with this Amendment dated as of the date hereof (the “New Borrower Perfection Certificate”). Each Borrower hereby agrees that all references in the Loan Agreement to the “Perfection Certificate” shall hereinafter be deemed to be references to the Existing Borrower Perfection Certificate and the New Borrower Perfection Certificate, as applicable.
11.Reserved.
12.Integration. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.
13.Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.
14.Effectiveness. This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto; and (b) Borrower’s payment to Bank of Bank’s legal fees and expenses incurred in connection with this Amendment.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.
BORROWER:
SENTINEL LABS, INC.
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By:
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/s/ David Bernhardt
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Name:
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David Bernhardt
|
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|
|
|
Title:
|
Chief Financial Officer
|
SCALYR, INC.
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By:
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/s/ David Bernhardt
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|
Name:
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David Bernhardt
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|
|
Title:
|
President and Treasurer
|
BANK:
SILICON VALLEY BANK
|
|
|
|
|
|
|
|
By:
|
/s/ Ashlee Kaji
|
|
|
|
|
Name:
|
Ashlee Kaji
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|
|
|
|
Title:
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Director
|
Schedule 1
EXHIBIT B
COMPLIANCE STATEMENT
|
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TO:
|
SILICON VALLEY BANK
|
Date:
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|
FROM:
|
SENTINEL LABS, INC. (“Sentinel Labs”)
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|
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|
|
SCALYR, INC. (“Scalyr”; together with “Sentinel Labs”)
|
|
Under the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrower and Bank (the “Agreement”), Borrower is in complete compliance for the period ending ________________ with all required covenants except as noted below. Attached are the required documents evidencing such compliance, setting forth calculations prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes (and except with respect to unaudited financials for the absence of footnotes and subject to normal year-end adjustments). Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.
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Reporting Covenants
|
Required
|
Complies
|
|
|
|
|
|
Monthly consolidated and consolidating financial statements with Compliance Statement
|
Monthly within 30 days
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Yes No
|
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Annual financial statements (CPA Audited)
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FYE within 180 days
|
Yes No
|
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10-Q, 10-K and 8-K
|
Within 5 days after filing with
SEC
|
Yes No
|
|
A/R & A/P Agings, detailed Account Debtor listing
|
Monthly within 30 days
|
Yes No
|
|
Recurring Revenue Statement
|
(i) with each request for an Advance and (ii) monthly within 30 days
|
Yes No
|
|
Board approved projections
|
Earlier of 30 days after Board approval or February 28th and as
amended/updated
|
Yes No
|
|
409A Reports
|
At least annually 30 days following completion
|
Yes No
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Financial Covenant
|
Required
|
Actual
|
Complies
|
|
|
|
|
|
|
Maintain as indicated:
|
|
|
|
Adjusted Quick Ratio
(tested monthly)
|
>1.50:1.0
|
______:1.0
|
Yes No
|
|
Minimum Revenue
(tested monthly, on a trailing 12 month basis)
|
*
|
*
|
Yes No
|
*As set forth in Section 6.9(b)
The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Compliance Statement.
The following are the exceptions with respect to the statements above: (If no exceptions exist, state “No exceptions to note.”)
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Schedule 1 to Compliance Statement
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Agreement, the terms of the Agreement shall govern.
Dated:________________________
I. Adjusted Quick Ratio (Section 6.9(a))
Required: Maintain, to be tested as of the last day of each month, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, an Adjusted Quick Ratio of greater than or equal to 1.50 to 1.0.
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Actual:
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A.
|
Aggregate value of Borrower’s and its Subsidiaries unrestricted and unencumbered cash and Cash Equivalents maintained with Bank (or that is otherwise maintained in accounts subject to a Control Agreement in favor of Bank, provided that (i) Bank has a first priority perfected security interest in the amounts held in such accounts and (ii) such accounts are permitted to be maintained pursuant to Section 6.8(b) of this Agreement)
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$
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B.
|
Aggregate value of the net billed accounts receivable
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$
|
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C.
|
Quick Assets (the sum of lines A through B)
|
$
|
|
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D.
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Aggregate value of all obligations and liabilities of Borrower and its Subsidiaries to Bank
|
$
|
|
|
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|
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E.
|
Aggregate value of liabilities of Borrower and its Subsidiaries (including all Indebtedness) that matures within one (1) year
|
$
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|
|
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|
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F.
|
Current Liabilities (the sum of lines D and E)
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$
|
|
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|
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G.
|
Aggregate value of all amounts received or invoiced by Borrower in advance of
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$
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|
|
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performance under contracts and not yet recognized as revenue
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|
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H.
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Line F minus line G
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$
|
|
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I.
|
Adjusted Quick Ratio (line C divided by line H)
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Is line I greater than or equal to 1.50:1:0?
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No, not in compliance
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Yes, in compliance
|
II. Minimum Revenue (Section 6.9(b)
Required. Maintain, to be tested as of the last day of each month, calculated on a consolidated basis with respect to Borrower and its Subsidiaries and determined in accordance with GAAP, net revenue for each trailing twelve (12) month period ending on such date, of at least the following amounts:
|
|
|
|
|
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|
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Trailing Twelve (12) Month Period Ending
|
Minimum Net Revenue
|
|
March 31, 2020
|
$46,700,000.00
|
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April 30, 2020
|
$48,700,000.00
|
|
May 31, 2020
|
$50,900,000.00
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June 30, 2020
|
$52,200,000.00
|
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July 31, 2020
|
$54,200,000.00
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|
August 31, 2020
|
$56,200,000.00
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September 30, 2020
|
$57,400,000.00
|
|
October 31, 2020
|
$59,100,000.00
|
|
November 30, 2020
|
$60,600,000.00
|
|
December 31, 2020
|
$60,900,000.00
|
|
January 31, 2021
|
$62,400,000.00
|
*See Section 6.9(b) for periods after January 31, 2021
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No, not in compliance
|
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Yes, in compliance
|
Subsidiaries of SentinelOne, Inc.
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Name of Subsidiary
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Jurisdiction
|
|
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Scalyr, Inc.
|
|
Delaware
|
|
Sentinel Labs Israel Ltd
|
|
Israel
|
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form S-1 of our report dated May 15, 2021, relating to the financial statements of SentinelOne, Inc. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
June 3, 2021
Forrester Research Inc.
Citation Agreement and Consent
Subject to the terms and conditions set forth herein, Forrester Research, Inc. (“Forrester”) hereby consents to the quotation by Sentinel Labs, Inc. (“Requester”), in the Registration Statement on Form S-1 to be filed by Requester with the U.S. Securities and Exchange Commission (the “Filing”), of the following Forrester information that has been published in print (the “Forrester Information”):
“Delivers rapid time to value. By deploying our Singularity Platform, customers can receive a return on investment of 353% over three years, and a payback period of less than 3 months according to a 2020 Total Economic Impact™ study that we commissioned that was conducted by Forrester Consulting. Our Singularity Platform can be quickly and easily deployed in the diverse IT environments of our customers, and without extensive configuration or maintenance.”
In consideration of Forrester’s consent as set forth above, Requester hereby agrees that:
(1) the Forrester Information will be presented in the Filing as representing data, research opinion or viewpoints published by Forrester and not as a representation of fact;
(2) Forrester disclaims all warranties, express or implied, statutory or otherwise, including without limitation any implied warranties of merchantability or fitness for a particular purpose, and warranties as to accuracy, completeness or accuracy of the Forrester Information;
(3) the Forrester Information speaks as of its original publication date (and not as of the date of the Filing) and that the opinions expressed in the Forrester Information are subject to change without notice;
(4) Forrester shall have no liability for errors, omissions or inadequacies in the Forrester Information or for any interpretations of the Forrester Information;
(5) Forrester does not assume responsibility for any third parties’ reliance on any information contained in the Filing, including the Forrester Information; and
(6) where applicable, Forrester is not an “expert” within the meaning of Section 509 of Regulation S- K promulgated under the Securities Exchange Act of 1934, as amended.
Requester agrees to indemnify and hold harmless Forrester, and its directors, officers, shareholders, employees and agents, from and against any and all claims, liabilities, demands, causes of action, damages, losses and expenses (including reasonable attorney’s fees and costs) arising, directly or indirectly, and without limitation, out of or in connection with the Filing.
Forrester’s consent set forth above shall not be deemed effective until Forrester shall have received a countersigned copy of this document from Requester.
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|
Sentinel Labs, Inc.
|
|
Forrester Research, Inc.
|
|
|
|
|
|
|
|
By:
|
/s/ Daniel Bernard
|
|
By:
|
/s/ Naomi Sager
|
|
Name:
|
Daniel Bernard
|
|
Name:
|
Naomi Sager
|
|
Title:
|
Chief Marketing Officer
|
|
Title:
|
Manager, Citations
|
|
Date:
|
3/12/2021
|
|
Date:
|
3/14/21
|
